Undertaking a home improvement project in California involves more than just choosing paint colors and materials. The use of well-drafted and legally compliant contracts is not only sound business practice and recommended to protect the rights and interests of both homeowners and contractors—it is required for most home improvement projects.
When is a Home Improvement Contract Required in California?
California law mandates that home improvement contracts exceeding $500 must be in writing. A written contract serves to establish clarity and avoid potential disputes. In the case of home improvement projects, it also serves to provide disclosures to and protect the interests of the homeowner.
What is a Home Improvement Contract in California?
A home improvement project is defined broadly as any “repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property […].” “Home improvement” also includes the installation of home improvement goods or the furnishing of home improvement services. [Cal. Bus. & Prof. Code § 7151.]
California law also mandates that contracts governing home improvement projects exceeding $500 contain certain terms and legal notices.
California Home Improvement Contract Requirements
In California, any home improvement contract over $500 must be in writing and signed by both the homeowner and contractor. The contract must be legible, easy to understand, and include specific details like the contractor’s information, a detailed project description, a payment schedule, and an approximate start and completion date. Additionally, the contract must contain specific disclosures, such as a “Mechanic’s Lien Warning” and a “Notice of Right to Cancel,” to protect the homeowner’s rights. The down payment is legally capped at either $1,000 or 10% of the total contract price, whichever is less.
9 Key Requirements for Home Improvement Contracts in California:
While the list in the previous section provides a general overview, a legally compliant home improvement contract in California must be far more detailed. Here is a closer look at the key requirements to protect both the homeowner and the contractor, including elements that are often overlooked.
- Contractor and Homeowner Information: The contract must clearly state the contractor’s full name, business address, and contractor license number. It should also include the homeowner’s full name, address, and contact information.
- Detailed Project Description: The contract must contain a detailed description of the project, including the scope of work and the significant materials to be used and the equipment to be installed. It should also include a list of documents to be incorporated into the contract, such as plans and specifications, including materials, finishes, dimensions, and any other relevant details
- Project Timeline: The contract must specify an approximate start date and an estimated completion date. It should also include a statement that defines what constitutes the substantial commencement of work.
- Payment Terms: The contract must outline the total project cost and a clear schedule of progress payments that specifically describes the work to be performed at each phase. The contract value should be specified as a lump sum value. If there are any circumstances under which additional charges may apply, such as change orders or unforeseen circumstances, disclose those as well. The down payment cannot exceed $1,000 or 10% of the contract amount, whichever is less. A contractor can only be paid for work that has been completed or for materials that have been delivered to the site, except for the down payment. So-called time and materials-based contracts are not allowed for home improvement contracts.
- Extra Work and Change Orders: The contract must include a section on extra work and changeorders, stating that they must be in writing and signed by both parties before the new work begins.
- Mechanics’ Lien Warning: The contract must also include a “Mechanic’s Lien Warning” containing the required statutory language. In essence, this warning serves to inform homeowners about the potential filing of mechanics liens by contractors or subcontractors if payment disputes arise.
- Right to Cancel: The contract should inform the homeowner of their right to cancel within three business days after signing. This three-day notice requirement is increased to five business days when the homeowner is a senior citizen.
- Release of Liens: Upon making satisfactory progress payments, the contractor must provide the homeowner with an unconditional release from any potential lien claimant. A preliminary notice may be served to the homeowner to inform them that a person has a right to file a mechanics lien.
- Signature and Date: The contract must be signed and dated by both the homeowner and contractor. The contractor is also legally required to provide a fully executed copy to the homeowner before any work starts. The homeowner also has the right to require a performance and payment bond.
A legally sound contract is the foundation for a successful project. We help both homeowners and contractors draft and review contracts that not only meet all legal requirements but also clearly outline expectations and responsibilities, preventing costly disputes down the line.
Every Home Improvement Contract Has Different Needs
It is important to note that this list provides a general overview of the key requirements for a home improvement contract in California. Depending on the specifics of the project and other factors, additional provisions and disclosures may be necessary. It is always recommended to consult with legal professionals familiar with California Home Improvement Laws like us for comprehensive and up-to-date guidance. Contact us for a consultation here.
Home improvement contracts in California play a crucial role in ensuring a successful and legally compliant project. By understanding the importance of a written contract, including essential components, providing necessary disclosures and notices, complying with legal requirements, and seeking legal guidance when needed, homeowners and contractors can navigate the complexities of home improvement projects with confidence. A well-drafted and legally compliant contract serves as a foundation for a transparent and mutually beneficial relationship between the parties involved.
If you have any questions regarding home improvement projects in California, please contact us by filling out our online form and submit a request for consultation with one of our experienced construction law attorneys.
