California home improvement contract requirements

When the rules apply

Section 7159 covers any agreement between a contractor and an owner or tenant for a home improvement where the total price for labor, services and materials is more than $500. "Home improvement" is broad: remodels and repairs, but also driveways, pools, patios, fences, landscaping, solar energy systems and garages. It counts even if the deal is oral, which is why the law demands a writing.

The lighter track is a service and repair contract under § 7159.10: $750 or less, the homeowner called you, you sell only what fixes the problem, and nothing is paid until the work is done. Miss any condition and the full § 7159 rules apply.

What the contract must say

• Who you are: name, business address and license number, plus the name and registration number of any home improvement salesperson who sold the job.
• The heading "Home Improvement" in at least 10-point bold; all text at least 10-point.
• On the first page: the date the buyer signed; the name, address and email address where the Notice of Cancellation can be sent; and a phone number the buyer can call for help filling it out.
• "Contract Price" in dollars and cents, and a separate "Finance Charge" if there is one.
• "Description of the Project and Description of the Significant Materials to be Used and Equipment to be Installed." Pools also need a plan and scale drawing.
• "Approximate Start Date" and "Approximate Completion Date", with a statement of what counts as substantial commencement.
• "Note About Extra Work and Change Orders" with the statutory paragraph.
• A subcontractor question with Yes and No boxes and, if Yes, the disclaimer that you'll give the homeowner each subcontractor's name, contact details, license number and classification on request.
• A lien release promise: after each satisfactory payment, and before the next, a full and unconditional release for the work paid for.
• Near the signatures: a notice that the owner may require a performance and payment bond, and the 12-point bold statement that they're entitled to a completely filled-in copy, signed by both of you, before work starts.

The notices that go with it

Section 7159(e) adds a Commercial General Liability Insurance (CGL) notice saying whether you carry it and how to check; a Workers' Compensation Insurance notice; a notice on extra work and change orders; the Mechanics Lien Warning, word for word as the statute writes it; and the Information about the Contractors State License Board notice in at least 12-point type. Then comes the right to cancel.

Three, five or seven days to cancel

• Three-Day Right to Cancel is the default for contracts not negotiated at your place of business.
• Five-Day Right to Cancel applies when the buyer is a senior citizen, 65 or older under § 7150.
• Seven-Day Right to Cancel applies to repairing a home damaged by a sudden or catastrophic event under a declared state or local emergency.

The notice must be in 12-point bold, sit right next to the owner's signature space, be signed and dated by the owner, and match the language of the sales pitch, so a pitch in Spanish needs a Spanish notice. You may attach it instead if the contract carries a 12-point bold checkbox statement the owner initials. It comes with a completed Notice of Cancellation in duplicate that's easy to detach, and the clock starts when the buyer receives the signed copy.

Down payment and progress payments

• The down payment can't exceed $1,000 or 10 percent of the contract amount, whichever is less: $800 on an $8,000 bathroom, $1,000 on anything from $10,000 up. The contract repeats the cap in 12-point bold.
• After that, money follows the work. You can't request or accept more than the value of work done or materials delivered, including advance payment from a lender.
• Each progress payment is tied to a phase, stated in dollars and cents, under the bold warning that collecting for work not yet completed is against the law.
• Releases on request. After any payment, if asked, you must furnish an unconditional release for the work paid for, and the owner may hold further payments until you do.
• The bond exception. With an approved performance and payment bond, lien and completion bond, bond equivalent or joint control, the down payment and progress payment limits don't apply.

Change orders

Under § 7159.6, an extra work or change order isn't enforceable against the buyer unless it states the scope, the amount added or subtracted, and the effect on progress payments or the completion date, and § 7159(c)(5) says it joins the contract only once it's written and signed before that work starts. If you checked Yes for subcontractors, the disclaimer goes on every change order too. See how to write a change order.

Licensing and penalties

• License number everywhere. Section 7030.5 requires it on all construction contracts, subcontracts, bids and advertising.
• No license, no lawsuit. Under § 7031 an unlicensed contractor can't sue to collect for licensed work, and the customer can sue to recover everything paid.
• Discipline. Leaving out a required item, notice or disclosure is cause for discipline by the Contractors State License Board.
• Criminal exposure. Breaking the written-contract, down payment or pay-ahead rules in § 7159.5 is a misdemeanor: a fine of $100 to $5,000, up to a year in county jail, or both. In a declared disaster area the court must impose the maximum fine.

Signing it electronically

Nothing in § 7159 requires ink, and California's UETA and the federal ESIGN Act give e-signatures the same effect as handwritten ones (see e-signature law in California). The care points are delivery and consent: the homeowner needs a copy signed by both of you before work starts, and a notice the law requires in writing can go out electronically only after the consumer consents to electronic records (15 U.S.C. § 7001(c)). The duplicate, detachable Notice of Cancellation was written for paper, so many contractors also leave two printed copies.

Setting it up in SignMaster

1. 1

   Make one template per notice

   Save three templates from your compliant contract: three-day, five-day for buyers 65 and older, and seven-day for disaster repairs. The board's sample contract makes a good checklist.

2. 2

   Place the fields the statute asks for

   A date signed field beside the buyer's signature on page one, an initials field on the right-to-cancel checkbox statement, a signature and date on each notice, and currency fields for the down payment and progress payments.

3. 3

   Sign at the kitchen table

   Use Sign in person on your phone or iPad, then countersign. Everyone gets the signed PDF by email the moment it's complete: the filled-in copy the law wants them to have before you start.

4. 4

   Keep change orders separate

   A change order template with scope, amount and schedule fields, sent before the extra work begins. The audit trail records when each was signed.