Quick Answer: California law (Business & Professions Code §7159) limits contractor deposits to the lesser of 10% of the total contract price or $1,000. Progress payments are tied to specific

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Contractor Payment Schedule California Law — What You Need to Know

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Quick Answer: California law (Business & Professions Code §7159) limits contractor deposits to the lesser of 10% of the total contract price or $1,000. Progress payments are tied to specific completed milestones (not calendar dates) and must be detailed in the written contract. A typical Bay Area project payment schedule: 10% deposit, 25% at foundation complete, 25% at framing/rough-in, 25% at drywall/insulation, 10% at substantial completion, and 5% withheld until final sign-off. Never pay more than 10% upfront regardless of what a contractor requests — this is one of the most common contractor fraud warning signs.

Sample Bay Area Renovation Payment Schedule

MilestonePayment %What This Covers
Signed contract + permit submittal10% (max)Materials deposit, permit fees
Foundation complete + inspected20–25%Foundation labor and materials
Framing, roof, rough MEP inspected20–25%Framing, rough electrical/plumbing
Insulation + drywall complete20–25%Insulation, drywall, taping
Finishes complete (cabinets, flooring)15–20%Finish work
Final inspection passed + punch list done5–10%Final retention

Question: What happens if I withhold final payment from a contractor in California? Under California law, a contractor can file a mechanics lien on your property if you withhold payment without legal justification. A mechanics lien is a claim against your home’s title that prevents sale or refinancing until resolved. However, if the contractor did not complete the work as specified, you have the legal right to withhold the proportionate amount. You must: (1) provide written notice of the deficiency, (2) give a reasonable cure period, and (3) document all deficiencies in writing. We recommend mediation before litigation in almost all cases — the CSLB offers free mediation services for licensed contractor disputes.

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