10 min read · Guide
Most homeowners read a contractor's contract looking for the number. California's legislature wrote a longer list. Business and Professions Code §7159 sets out, element by element, what a home improvement contract must contain, and §7159.5 caps what can be collected before work starts and governs every payment after. These are not best practices or industry norms — they are statute, they apply to any home improvement contract over $500, and a contract that omits them is defective regardless of how reasonable the price looks. This guide walks the requirements in plain language so you can check a contract yourself in ten minutes, including the one genuine exception that a lot of consumer advice leaves out.
It has to be in writing, and signed before work starts
The foundational rule in B&P §7159(d) is short: *"A home improvement contract and any changes to the contract shall be in writing and signed by the parties to the contract prior to the commencement of work."* Two halves matter equally. The **contract** in writing before work — obvious, and widely observed. And **any changes** in writing and signed before that changed work begins — routinely not observed, and the source of most disputes we hear about. A verbal 'while we're in there, we'll also...' is not a change order. When it later appears on an invoice, the paperwork that would have settled the question does not exist. On our own projects, changes are written and signed before the crew acts on them, and the honest reason is self-interested as much as legal: it is the only version of the conversation that has a record.
The elements the contract must contain
§7159(d) enumerates what has to be on the document. The contractor's **name, business address and licence number** (d)(1) — check that number at the CSLB rather than trusting the letterhead. A **"Home Improvement" heading in 10-point boldface** (d)(3), which sounds trivial and is a useful tell: a contract that has never been reviewed against the statute usually does not have it. The **contract price** stated clearly (d)(5). A **description of the project and the materials and equipment** to be used (d)(7) — this is where a vague scope becomes a legal problem as well as a practical one. An **approximate start date** (d)(10) and an **approximate completion date** (d)(11). And a **schedule of progress payments** describing the specific phase each payment corresponds to (d)(9). Read that last one carefully: a schedule that says '50% at start, 50% at completion' does not describe phases of work, and §7159.5 has more to say about it below.
The notices that must be attached
Subdivision (e) requires a set of notices, and their absence is a signal worth acting on. **Commercial general liability insurance** information, or a statement that the contractor carries none (e)(1). **Workers' compensation** insurance notice (e)(2). The **mechanics lien warning** (e)(4) — the disclosure explaining that unpaid subcontractors and suppliers can place a lien on your home even if you paid your contractor in full; our mechanics lien homeowner guide covers how that actually plays out. **Contractors State License Board** information (e)(5). And **cancellation rights** (e)(6): three business days for most contracts, **five** where the buyer is a senior citizen, and (e)(7) **seven** days for repairs after a declared disaster — a longer window the legislature added precisely because post-disaster homeowners are the most pressured; see our avoiding contractor scams after a disaster guide.
The down payment limit, stated exactly
This is the number to remember. B&P §7159.5(a)(3): *"The downpayment shall not exceed one thousand dollars ($1,000) or 10 percent of the contract amount, whichever amount is less."* Read the last four words. On a $60,000 re-side, ten percent would be $6,000 — but $1,000 is less, so **$1,000 is the limit**. The cap is not a percentage that scales with the job; on any project over $10,000 it is effectively a flat $1,000. A contractor asking for 'a third down' on a $60,000 exterior project is asking for twenty times what the statute allows. That request is the single most useful red flag in the industry, because it is unambiguous, it requires no expertise to spot, and a contractor who does not know it is telling you how much of the rulebook they have read. Our deposit and payment schedule guide covers how legitimate payment structures work instead.
The exception most consumer advice leaves out
Here is the part that gets flattened in most articles, and being accurate about it matters. §7159.5(a)(8) exempts contractors who have furnished an **approved performance bond and payment bond** covering the full contract amount from the down-payment and progress-payment restrictions. That is a real exception, not a loophole: those bonds exist so that if the contractor fails to perform or fails to pay their suppliers, a surety covers it — which is precisely the risk the deposit cap protects against. So a bonded contractor asking for more up front is not automatically violating the statute. What you should do is ask to see the bonds, verify them, and understand that 'we're bonded' in the ordinary marketing sense — meaning the $25,000 contractor's licence bond every licensee carries — is **not** the same thing as a project performance and payment bond. If someone cites this exception, the bonds should exist and be produceable.
The payment rule that runs through the whole job
Two more provisions govern what happens after the deposit. **§7159.5(a)(5)**: *"The contractor shall neither request nor accept payment that exceeds the value of the work performed or material delivered."* Payment follows work, not the calendar and not the contractor's cash-flow needs. And **§7159.5(a)(4)** requires the schedule of payments to be *"in dollars and cents specifically referencing the amount of work or services to be performed and any materials and equipment to be supplied."* Together those make front-loaded payment schedules — large draws early, small ones at the end — legally problematic as well as commercially unwise. The structural point for a homeowner is that your remaining leverage on a project is the money you have not paid yet. A schedule that leaves a meaningful balance at completion is not distrust; it is how the statute contemplates the transaction working. **§7159.5(a)(6)** adds that on payment requests, a contractor must obtain and furnish releases from potential lien claimants for the completed portion.
A ten-minute check before you sign
Run the document against this list. Is the **licence number** on it, and does it check out at the CSLB with an active status and the right classification? Is there a **"Home Improvement" heading in bold**? Is the **scope** specific enough that you could tell whether it had been done — materials named, elevations named, what is included and excluded? Are there **approximate start and completion dates**? Is the **payment schedule** tied to phases in dollars and cents, rather than percentages against nothing? Is the **deposit $1,000 or less** — or, if more, has the contractor produced performance and payment bonds? Are the **notices** there: liability insurance, workers' comp, mechanics lien, CSLB, cancellation rights? And is there a **written change-order process** you both sign before changed work begins? A contract that passes all eight is not a guarantee of a good job, but a contract that fails several of them is a reliable predictor of a bad one. Our choosing a siding contractor guide covers the rest of the evaluation.
What this guide is not
We are a siding contractor, not a lawyer, and this page explains a statute rather than advising you on your contract. If you are in a dispute, if a lien has been recorded against your property, or if you are being asked to sign something you do not understand, that is a question for an attorney or for the CSLB's consumer services — both of which are better placed than any contractor's website, including this one. What we can tell you is that these requirements are not obscure. Any contractor doing residential work in California at any volume knows them, and a contract that ignores them was not written by someone who does.
The contract check, statute by statute
| What to look for | Where it comes from | Fails if |
|---|---|---|
| Written contract, signed before work | B&P §7159(d) | Work started on a handshake |
| Licence number on the document | B&P §7159(d)(1) | Absent, or does not check out at the CSLB |
| 'Home Improvement' heading, 10-pt bold | B&P §7159(d)(3) | Missing — a tell that the form was never checked |
| Specific scope and materials | B&P §7159(d)(7) | You could not tell whether it had been done |
| Approximate start and completion dates | B&P §7159(d)(10)–(11) | No dates at all |
| Payment schedule tied to phases | B&P §7159(d)(9) · §7159.5(a)(4) | Percentages against nothing |
| Deposit at or under $1,000 | B&P §7159.5(a)(3) | More, without performance and payment bonds |
| Written change orders | B&P §7159(d) | Changes agreed verbally on site |
Key takeaways
- B&P §7159(d): the contract AND any change to it must be in writing and signed before that work commences. A verbal change order is not a change order.
- Required elements include licence number, a bold 'Home Improvement' heading, the price, a specific scope and materials, approximate start and completion dates, and a phase-referenced payment schedule.
- Required notices: liability insurance, workers' comp, the mechanics lien warning, CSLB information, and cancellation rights — 3 days, 5 for seniors, 7 after a declared disaster.
- §7159.5(a)(3): the down payment may not exceed $1,000 OR 10% of the contract, WHICHEVER IS LESS. On any job over $10,000 that is effectively a flat $1,000.
- The genuine exception: §7159.5(a)(8) exempts contractors who furnish approved performance AND payment bonds. That is not the same as the $25,000 licence bond every licensee carries.
- §7159.5(a)(5): a contractor may not request or accept payment exceeding the value of work performed or material delivered. Payment follows work.
FAQ
Quick Answers
Under B&P §7159.5(a)(3), the down payment may not exceed $1,000 or 10 percent of the contract amount, whichever amount is less. Because it is whichever is less, on any project above $10,000 the limit is effectively a flat $1,000 — so on a $60,000 re-side the cap is $1,000, not $6,000. The one exception is a contractor who has furnished an approved performance bond and payment bond for the full contract amount.
B&P §7159(d) requires that a home improvement contract and any changes to it be in writing and signed by the parties before the work commences. A conversation on site is not a change order, and when the amount later appears on an invoice there is no document to resolve the disagreement. Get changes written and signed before the crew acts on them — it protects both sides.
Among other things: the contractor's name, business address and licence number; a 'Home Improvement' heading in 10-point boldface; the contract price; a description of the project and the materials and equipment; an approximate start date and an approximate completion date; and a schedule of progress payments referencing the specific phases of work. Notices covering liability insurance, workers' compensation, mechanics liens, the CSLB and cancellation rights are also required.
Three business days for most home improvement contracts, five business days where the buyer is a senior citizen, and seven days for repairs following a declared disaster. The longer disaster window exists because homeowners in that situation are under the most pressure and are targeted most aggressively.
Possibly, but ask for specifics. §7159.5(a)(8) exempts a contractor who has furnished an approved performance bond and payment bond covering the full contract amount. That is different from the $25,000 contractor's licence bond every California licensee carries, which is what 'we're bonded' usually means in marketing. If someone cites the exception, the project bonds should exist and they should be able to produce them.
§7159.5(a)(5) says a contractor shall neither request nor accept payment exceeding the value of the work performed or material delivered, and (a)(4) requires the schedule to be in dollars and cents against specific work. A schedule with large early draws and a small final payment is at odds with both. Practically, the money you have not paid yet is your remaining leverage, and a meaningful balance at completion is how the statute contemplates the job working.
Sources
Authoritative references
- California Business & Professions Code §7159 — home improvement contract requirements
- California Business & Professions Code §7159.5 — down payment and progress payment limits
- CSLB — home improvement contracts and down payment limits
- Contractors State License Board — verify a California contractor
External links to government, code, and manufacturer sources. Sierra Siding is not affiliated with these organizations; references are provided for verification.