Legal Question in Construction Law in California

What is the maximum amount you can request upon contract signing for a commercial project in california

Asked on 3/13/21, 9:27 pm

1 Answer from Attorneys

Timothy McCormick Haapala, Thompson & Abern, LLP

Unless there has been a recent change in the law that I missed, there is no specific legal limit, other than for home improvement and swimming pool projects. However, a contractor must be conscious of the overall statutory requirement that they not bill or collect payment for labor, material or services not yet provided to the project, and the prohibition on diverting payments from one project to pay for another. That rule doesn't absolutely mean the concrete must be poured or the framing lumber on site, but the general contractor would need to have a contract for the concrete and an invoice, or must have lumber in the contractor's yard that has been specifically identified to the project. Likewise there are costs and expenses that pretty much immediately attach upon signing a contract. If the deposit is reasonably within the total of those amounts, and all the funds received are traced to payments directly attributed to the project, a contractor will not get in trouble. A deposit amount the exceeds payments or expenses directly attributable to the job in the first few weeks, however, could likely result in CSLB discipline if the owner complains. And quite frankly, any contractor who needs more than the immediate start-up costs of a project, shouldn't be in the commercial contracting business. It is an indication that they do not have the financial depth to handle things like delays or having to redo or modify work; they could well be a bankruptcy just waiting to happen.

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Answered on 3/15/21, 1:06 pm

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