June 2, 2023
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. 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.
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.
Key Requirements for Home Improvement Contracts in California Are:
- Contractor Information: The contract should clearly identify the contractor’s full name, business address, phone number, and contractor’s state license number.
- Homeowner Information: The contract should include the homeowner’s full name, address, and contact information.
- Project Description: The contract should provide a detailed and specific description of the work to be performed. This description should cover all aspects of the project, including materials, finishes, dimensions, and any other relevant details.
- Project Timeline: The contract should specify the start date and estimated completion date of the project. If there are significant milestones or deadlines for specific project stages, those should be included as well.
- Payment Terms: The project should clearly outline the payment structure, including the total project cost, deposit requirements, progress payments, and the final payment due upon completion. So-called time and materials-based contracts are not allowed for home improvement contracts. 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. Moreover, the deposit amount should be specified and cannot exceed 10% of the contract amount or $1,000, whichever is less.
- 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.
- Mechanic’s 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.
- Signature and Date: The contract should be signed and dated by both the homeowner and contractor. Moreover, the contractor is legally required to provide a fully executed copy of the contract to the homeowner before commencing any work. The act of providing a fully executed contract to the homeowner triggers the cancellation period (whether three or five business days).
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.