California’s 10% Deposit Rule: What It Actually Says

What California’s 10% Deposit Rule Actually Says

This comes from California Business & Professions Code Section 7159, subdivision (d)(1). The exact language:

“The contractor shall not require a downpayment in excess of $1,000 or 10 percent of the contract price, whichever is less.”

That’s it. No ambiguity. No wiggle room. The deposit cap applies to any home improvement contract in California, and it’s been on the books for years.

The key phrase is “whichever is less.” That means the cap isn’t always $1,000. On smaller jobs, it’s lower. Here’s how the math works.

Real Numbers, Real Scenarios

We get a lot of calls from Sacramento homeowners confused about this. So let’s walk through some actual scenarios — the kind of jobs we see every day in the senior home safety space.

The max deposit is always whichever is less: $1,000 or 10%. Once a project hits $10,000, the cap is locked at $1,000 no matter how big the job gets.

You can run these numbers yourself with our Deposit Cap Calculator. Notice the $8,000 bathroom remodel. The max deposit is $800, not $1,000. We’ve heard from homeowners who were told “it’s $1,000 or 10%” as if those are the same thing. They aren’t. The law says “whichever is less.”

Exceptions to the Rule

Service and repair contracts

If you’re calling someone for a repair job (not a home improvement), and the total is under $750, the deposit rule doesn’t apply under B&P Code 7159(a)(6). Think of this as the “fix the leaky faucet” exception. A quick repair, not a planned improvement.

But here’s the thing: most senior home safety work — grab bar installations, ramp construction, tub replacements — these are home improvements, not repairs. The exception rarely applies.

Bonded contractors

A contractor who files a blanket performance and payment bond with the CSLB can collect larger deposits. This is uncommon. Most contractors carry the standard $25,000 contractor’s bond, not a blanket performance bond. If a contractor claims this exemption, ask them for the bond number and verify it with the CSLB.

What’s NOT an exception

“We need to order special materials.” Not an exception. “The manufacturer requires payment upfront.” Not an exception. “That’s just how we do it.” Definitely not an exception. The law doesn’t care about the contractor’s cash flow preferences.

The 3-Day Right to Cancel

This is a separate law, but it comes up every time we talk about deposits. Under California Civil Code 1689.5 and 1689.6, you have 3 business days to cancel any home improvement contract that was signed at your home or anywhere other than the contractor’s main office.

The contractor is required to give you two copies of a “Notice of the Three-Day Right to Cancel” form at the time you sign. If they don’t? Your cancellation window stays open indefinitely until they provide it.

If you cancel within the 3-day window, the contractor has to refund your deposit within 10 days. All of it. No restocking fee, no administrative charge, no deductions. The full amount back. Sacramento seniors over 65 get even stronger cancellation protections under AB 2471.

Red Flags to Watch For

We’ve been tracking contractor complaints in Sacramento since we started this site. We wrote a full breakdown of real deposit scam cases in Sacramento if you want the details. These are the deposit-related red flags that come up again and again:

“We need 50% upfront.” This is a flat violation of B&P 7159. Walk away.

“We need the full deposit in cash.” California law (B&P 7159(d)(2)) says the contract must tell you that you don’t have to pay in cash. You can pay by check or credit card. Cash payments are harder to dispute later.

“Let’s skip the written contract.” For any job over $500, a written contract is required by law. The deposit limit only applies to contracts that fall under Section 7159 — but that covers basically every home improvement project. No contract means no legal protections for you.

The deposit amount changes after signing. If you signed a contract with one deposit amount and the contractor now wants more before starting, that’s a red flag. The deposit is set in the contract.

How to Report a Violation

If a contractor collects a deposit over the legal limit, you can file a complaint with the Contractors State License Board. Here’s how:

Online: Go to cslb.ca.gov and click “File a Complaint.” It takes about 15 minutes.

By phone: Call 1-800-321-CSLB (1-800-321-2752). Available Monday through Friday, 8am to 5pm.

In Sacramento: The CSLB headquarters is actually here in Sacramento at 9821 Business Park Drive. You can walk in.

The CSLB takes deposit violations seriously. They can suspend or revoke a contractor’s license, order restitution, and impose fines. A first-time deposit violation can result in disciplinary action against the license. Before hiring anyone, verify their CSLB license status yourself.

Already Paid Too Much?

Yes, you can get it back. File a complaint with the CSLB, claim against the contractor’s surety bond, or take them to small claims court. If you’ve already handed over a deposit that exceeds the legal limit, here are your specific options:

1. File a CSLB complaint. This starts the formal process. The CSLB can order the contractor to refund the excess.

2. Claim against the contractor’s bond. Every licensed contractor in California carries at least a $25,000 surety bond. You can file a claim against this bond to recover money.

3. Small claims court. For amounts up to $10,000, Sacramento County Small Claims Court is at the Gordon D. Schaber Courthouse, 720 9th Street. Filing fee is $30-$75 depending on the amount.

4. Contact a consumer attorney. For larger amounts, a lawyer who handles contractor fraud cases may take your case on contingency. Some Sacramento attorneys specialize in this.

Bottom Line

The deposit cap is $1,000 or 10% of the contract, whichever is less. Not whichever is more. Not “about 10%.” The lesser of the two. Period.

Before you sign anything, run the contract through our Contract Auditor to check for red flags. Every contractor in our directory knows this law. If the one you’re talking to doesn’t, or pretends they don’t, that tells you something about how the rest of the job is going to go.