CSLB Law & Business ExamContract Requirements and ExecutionEasy
Under California law, what is the maximum down payment a contractor may collect on a home improvement contract before beginning any work?
- A$1,000 or 10% of the contract price, whichever is less
- B25% of the total contract price
- C$1,000 or 10% of the contract price, whichever is greater
- DThere is no statutory limit if the homeowner agrees in writing
Show answer & explanationAnswer & explanation
Correct answer: A. $1,000 or 10% of the contract price, whichever is less
Business and Professions Code Section 7159.5 caps the down payment on a home improvement contract at $1,000 or 10% of the contract price, whichever amount is LESS, to protect consumers from excessive upfront payments.
Why the other options are wrong
- B. 25% is far above the legal limit and would violate the code.
- C. This inverts the rule; the law uses whichever is less, not greater.
- D. Contractors cannot waive this consumer protection limit by agreement.
Down Payment Limit
California law limits the down payment on a home improvement contract to $1,000 or 10% of the contract price, whichever is less.
- Applies to home improvement contracts under B&P Code 7159.5
- Protects consumers from large upfront losses
- Cannot be waived by mutual agreement
Memory trick: Think 'Lesser wins' when it comes to down payments.