California Home Improvement Contract Requirements

California has some of the most detailed home improvement contract requirements in the country. Under Business and Professions Code Section 7159, every home improvement project over $500 in combined labor and materials requires a written contract with specific provisions. A handshake deal or a one-page estimate does not meet the legal standard.

Getting this wrong is not just a paperwork issue. A contract that fails to comply with Section 7159 can be voided by the homeowner, and the CSLB can take disciplinary action against the contractor's license.

When a Written Contract Is Required

Any home improvement project exceeding $500 in combined labor and materials must have a written contract signed by both parties before work begins. "Home improvement" covers remodeling, repairs, renovations, additions, and modifications to existing residential property, including ADUs.

For projects under $500, a written contract is not legally required but is still a good practice.

Required Contract Provisions

A compliant home improvement contract must include all of the following:

The contractor's name, address, license number, and license classification.
The total contract price in dollars and cents.
The start date and estimated completion date.
A description of the work to be performed and the materials to be used.
A payment schedule listing each progress payment in dollars and cents, tied to a specific phase of work. The schedule must describe the type and amount of work in each phase.
The down payment amount, which cannot exceed $1,000 or 10% of the contract price, whichever is less. See our deposit rules guide for details.
A notice about the homeowner's right to cancel the contract, including the cancellation timeframe and method.
A "Notice to Owner" about mechanics' liens. This warns the homeowner that unpaid subcontractors and suppliers can place liens on the property even if the homeowner has paid the general contractor in full.
A statement about whether subcontractors will be used. As of January 1, 2026, under SB 517, contractors must provide subcontractor names, license numbers, classifications, and contact information upon request.

Look Up a Contractor's License

Cancellation Rights

Homeowners have a right to cancel a home improvement contract within three business days of signing. For homeowners 65 or older, the cancellation period is five business days. For contracts related to disaster repairs, it is seven business days.

As of January 1, 2026, under AB 1327, homeowners can cancel by email in addition to mail or hand delivery. Contractors must include an email address for cancellation notices and a phone number for assistance in the contract.

If the contractor does not include the required cancellation notice in the contract, the homeowner's cancellation right remains open indefinitely until properly noticed.

What Is Not Allowed

Several contract structures that are common in other states are illegal for home improvement work in California:

Time-and-materials contracts: T&M contracts do not state a total contract price or payment schedule in dollars and cents, which are both required under Section 7159. The CSLB has published guidance stating that T&M contracts are not legal for home improvement.
Cost-plus contracts: Same problem. A cost-plus contract cannot state a fixed total price at signing.
Verbal agreements: Not enforceable for projects over $500.

These restrictions exist because homeowners cannot reasonably evaluate an open-ended financial commitment. The law requires the total price and each payment milestone to be fixed before work begins.

Change Orders

If the scope of work changes after the contract is signed, a written change order is required. The change order must describe the additional work, the added cost, and how it affects the payment schedule. Both parties must sign the change order before the additional work is performed.

Verbal change orders are a frequent source of disputes. "The homeowner told me to go ahead" is not sufficient documentation if the added work leads to a payment disagreement.

Consequences of Non-Compliance

A home improvement contract that does not meet Section 7159 requirements can be voided by the homeowner. This means the homeowner can cancel the contract at any point and potentially recover payments made. The contractor may also face CSLB disciplinary action, including citation, fine, or license suspension.

Violations of deposit and payment provisions under Section 7159.5 are misdemeanors. Contractors found in violation may also be placed on the Public Utilities Commission Watch List.

At minimum, a compliant California home improvement contract runs about six pages. If your contract is shorter than that, it is likely missing required provisions. The CSLB's Contracting for Success brochure provides a reference for what should be included.

For homeowners, understanding what belongs in a contract helps you spot contractors who are cutting corners before they start cutting drywall. For more on evaluating a contractor before hiring, see our license verification guide.