Legal Question in Construction Law in California

A contractor cannot ask for a material deposit in excess of the statutory limits before or at the time a contract is signed. However, if the contractor has a bonafide need for a cash deposit in order to place a materials order, there is nothing to preclude them from presenting an invoice with appropriate back-up such a supplier's invoice or other proof that an order has been or will be placed and the amount of deposit required to place the order, and asking the owner to pay that invoice to fund the order. The bottom line is that anything above the statutory limit must be to directly pay a cost incurred by the contractor. Also, be suspicious of a contractor who does not have enough free cash flow and/or credit to get a project started. There may be legitimate reasons, but it is a red flag to watch billing and payments on the job very carefully.