How Much Deposit for a Contractor: Caps and Lien Waivers

Two lines under Payment terms on a residential estimate: 50% on signing so we can order the equipment, balance on completion. Two payments, no dates, no description of what the first one buys. It reads like a normal deposit for a contractor to ask for, and across much of the country that is exactly what it is.

Then you look up the statute for the state the house sits in, and in five states those two lines describe a payment a contractor is not allowed to accept.

What follows is a comparison of documents, not legal advice. I hold no licence, I do not go into houses, and I have never filed or released a lien. What I can do is open the sections that get quoted at homeowners, read them next to each other, and show you which one governs the sheet in your hand. Every section quoted below was read on 9 September 2026, on the state's own server except for the three noted underneath the table, where that server would not answer and the text came from a reprint. Statutes get amended, sometimes in ways that reverse the answer, so the date matters more here than in almost anything else on this site. If money is already in dispute, this article is not a substitute for someone who can read your contract and carries insurance for being wrong about it.

Half up front is routine in much of the country and unlawful in five states

There are two entirely different regimes and no way to tell which one you are under except by looking.

Look at the range in that middle column. California and Nevada draw the line at a thousand dollars on a job that might be forty thousand. Massachusetts, Pennsylvania and Maryland draw it at a third. New York does not limit the number at all and attacks the risk from the other end, by keeping the money somewhere the contractor cannot spend it.

Three of those six rows are reprints rather than originals, and it is only fair to say which. The Nevada text is quoted from the Contractors Board's own handbook because the legislature's server would not accept a connection; the Board is the agency that enforces the section, and its reprint carries the statutory language and history line. The Massachusetts and Pennsylvania rows come from commercial reprints for the same reason. The Maryland row is not a statute at all but the licensing commission's own statement of what its Home Improvement Law requires, which is why the wording in that cell reads like a pamphlet and not like a legislature.

Pennsylvania is also where the citation everyone passes around is wrong, which is worth a paragraph of its own. The section usually named is 73 P.S. 517.7, the Home Improvement Consumer Protection Act's list of what a contract must contain. Open it and there is no cap in it. What 517.7(a)(9) actually requires is that the contract include "the amount of any down payment plus any amount advanced for the purchase of special order materials," and that "the amount of the down payment and the cost of the special order materials must be listed separately." That is a disclosure rule, not a limit. The limit lives one aisle over, in the prohibited-acts list at 517.9, and it only bites above $5,000. The practical difference matters: on a $4,000 bathroom job in Pennsylvania a 50 percent deposit is not prohibited by that paragraph, and on a $40,000 one it is.

A practical note about the two ten-percent states. The cap applies to home improvement contracts with a homeowner, not to every arrangement a contractor might sign, and California draws a further line underneath it. A "service and repair contract" under B&P 7159.10 is one where the contract amount is $750 or less, the buyer initiated the contact, the contractor does not sell beyond what is reasonably necessary to fix the problem that prompted the call, and "no payment is due, or accepted by the contractor, until the work is completed." That is the emergency call-out on a Sunday. Under that form of contract the permitted deposit is not ten percent. It is zero.

The exception that makes a large deposit lawful again

Here is where a cap that reads as absolute stops being absolute, and it is the part almost nobody mentions.

California's 7159.5(a)(8) exempts a contractor "furnishing a performance and payment bond, lien and completion bond, or a bond equivalent or joint control approved by the registrar covering full performance and payment" from paragraphs (3), (4) and (5) of the same subdivision, and it need not print the downpayment statement, the progress-payment details or the Mechanics Lien Warning that Section 7159 otherwise requires in the contract. Read the three paragraph numbers rather than the summary, because the third one is the surprise: (5) is the rule in the next section of this article, the one that forbids collecting ahead of the value delivered. The same passage says such a contractor "may accept payment prior to completion." Nevada reaches the same place in fewer words: the $1,000 rule does not apply "if the residential contractor has filed with the Board a bond solely for the protection of consumers in the amount of $100,000 or has been granted relief by the Board pursuant to subsection 5 of NRS 624.270."

So a Californian contractor asking for 40 percent up front is either breaking the rule or holding an instrument that suspends it, and those two situations look identical on the estimate. The question has a documentary answer.

Ask for the bond. Not the certificate of insurance, not the licence bond every licensee carries, but the performance and payment bond or joint control agreement covering this job. It has a surety's name, a bond number, and a penal sum on it. If it exists, the contractor can produce it in an afternoon, because the surety issued it and keeps a copy. If the answer that comes back is a version of "we're bonded and insured," you have been handed the wrong document, by habit or on purpose. The licence bond and the payment bond are separate instruments protecting different people, which is the same distinction that catches people out when they look up a licence, bond, and complaint record before signing.

California adds one more sentence worth carrying. If the contract provides for a joint control, "the contractor shall not have any financial or other interest in the joint control." A funds-control company recommended by the contractor is not automatically disqualified by that, but the sentence tells you the relationship is something the legislature thought about.

The sentence that governs the middle of a job

Deposit caps get the attention. The sentence that decides what happens after the deposit is duller, applies to a far bigger share of the money, and, in California, is one of the three that the bond in the last section switches off.

California, 7159.5(a)(5): "Except for a downpayment, the contractor shall neither request nor accept payment that exceeds the value of the work performed or material delivered." And the boldface that has to appear in the contract, from 7159(d)(9)(C): "IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED. HOWEVER, A CONTRACTOR MAY REQUIRE A DOWNPAYMENT."

Read that as a test you can apply on an ordinary Tuesday afternoon. The question is never "have we reached payment three on the schedule." It is "is the value of what has been performed and delivered at least equal to what has been paid." Those two questions give different answers more often than you would think, because schedules are written from an optimistic calendar and work happens on a real one.

The statute also says what a schedule has to look like before it counts as one. Under 7159(d)(9)(B) each progress payment "shall be stated in dollars and cents and specifically reference the amount of work or services to be performed and materials and equipment to be supplied." Massachusetts, from the other end of the country, requires "a time schedule of payments to be made under said contract and the amount of each payment stated in dollars," then adds a sentence that does a great deal of work: "No final payment shall be demanded until the contract is completed to the satisfaction of the parties thereto." New York gets to the same test through its escrow section: under Lien Law 71-a(4)(e) a contractor may not draw from the escrow account more than the schedule shows, and "the amount of any such progress payments shall bear a reasonable relationship to the amount of work to be performed, materials purchased, or expenses for which the contractor would be obligated."

Set those against the two lines at the top of this article. 50% on signing, balance on completion. It states two amounts as percentages rather than dollars and cents, and it references no quantity of work at all. In two of the six jurisdictions in that table it would not qualify as a payment schedule even if the percentages were legal.

A schedule that survives these tests looks like the job rather than like the calendar. On a changeout: a figure released when the equipment is physically on site and the model numbers on the cartons match the ones on the bid, a figure at rough-in with the line set run and the condensate routed, a figure at start-up, and the balance after the inspection is signed off. On a re-roof: tear-off and dry-in, then load and install, then flashing and final. Each stage described in a sentence that somebody standing in the driveway could verify without a meter.

And each stage priced in dollars, not percentages, so the payment does not silently follow a contract price that a change-order clause has quietly reopened.

Why someone you never hired can register a claim against your house

Now the harder half, and the reason payment timing is more than a cash-flow preference.

A mechanic's lien, spelled variously (California's code says "mechanics lien," Florida's says "construction lien"), is a claim recorded against your title by someone who supplied labour or materials to the improvement. That person usually has no contract with you. The plumber's supplier does not know your name. Your leverage over them is nil, and your general contractor's failure to pay them lands on your title anyway.

Florida wrote the consequence into the contract you sign. Section 713.015 requires any direct contract over $2,500 on a dwelling of up to four units to carry a notice in no less than 12-point capitalised boldface, signed and dated by the owner:

IF YOUR CONTRACTOR OR A SUBCONTRACTOR FAILS TO PAY SUBCONTRACTORS, SUB-SUBCONTRACTORS, OR MATERIAL SUPPLIERS, THOSE PEOPLE WHO ARE OWED MONEY MAY LOOK TO YOUR PROPERTY FOR PAYMENT, EVEN IF YOU HAVE ALREADY PAID YOUR CONTRACTOR IN FULL.

The same notice tells you what to do about it: "TO PROTECT YOURSELF, YOU SHOULD STIPULATE IN THIS CONTRACT THAT BEFORE ANY PAYMENT IS MADE, YOUR CONTRACTOR IS REQUIRED TO PROVIDE YOU WITH A WRITTEN RELEASE OF LIEN FROM ANY PERSON OR COMPANY THAT HAS PROVIDED TO YOU A 'NOTICE TO OWNER.'"

Which raises the obvious question of how you are supposed to know who those people are. That is what the preliminary notice system exists to answer. In California, Civil Code 8200 requires a claimant to give preliminary notice to the owner, to the direct contractor, and to the construction lender before it may record a lien claim, give a stop payment notice, or claim against a payment bond, and states plainly that "compliance with this section is a necessary prerequisite to the validity of a lien claim or stop payment notice under this title." Two exceptions sit at the end of it: a labourer need not give preliminary notice, and a claimant who contracted directly with you need only notify the construction lender. Florida runs the same machinery under a different name, the Notice to Owner, and puts a clock on it. Service must happen "before commencing, or not later than 45 days after commencing, to furnish his or her labor, services, or materials," and failure to serve it in time "is a complete defense to enforcement of a lien by any person."

Texas fixes a documentary condition at the other end of the same problem. To fix a lien on a homestead, Property Code 53.254 requires a written contract "executed before the material is furnished or the labor is performed," signed by both spouses if the owner is married, and filed with the county clerk of the county where the homestead sits. A claimant who skipped those steps is arguing about a lien that was never fixed, which is a different argument from whether the work was any good.

That is why the envelope you nearly threw away matters. A preliminary notice looks like junk mail, arrives from a company you have never heard of, often through a service bureau, and says in dense type that it is not a lien and does not mean anything is wrong. All of that is true. What it actually is, is a name being added to the list of people who can lien your house, and it is the only such list you will ever be handed.

Keep them. Every one, in a single folder, with the date received written on the front. That folder becomes the roster you check the releases against at the end, and if the notices go in the bin you have destroyed your own index. What usually gets offered in place of the roster is the general contractor's own signed release, on the reasonable-sounding theory that he cannot release more than he holds. He cannot, and that is exactly the point: a waiver binds the party who signs it and nobody else, so a general contractor's release says nothing whatsoever about his framing sub's lumber yard. California puts that in a section of its own, and it appears further down.

Four waiver forms, and the two that pay you nothing

California is unusually helpful here because it prints the four forms in the code and makes a waiver "null, void, and unenforceable" unless it is "in substantially the following form." The four map onto a two-by-two grid: progress or final, conditional or unconditional.

The statutes are drafted to protect the person signing rather than the person paying, so the warnings are addressed to the wrong party from your point of view and are still the clearest description of what the paper does. The conditional progress form opens with this: "NOTICE: THIS DOCUMENT WAIVES THE CLAIMANT'S LIEN, STOP PAYMENT NOTICE, AND PAYMENT BOND RIGHTS EFFECTIVE ON RECEIPT OF PAYMENT. A PERSON SHOULD NOT RELY ON THIS DOCUMENT UNLESS SATISFIED THAT THE CLAIMANT HAS RECEIVED PAYMENT." The unconditional forms carry a blunter one, headed NOTICE TO CLAIMANT and ending: "THIS DOCUMENT IS ENFORCEABLE AGAINST YOU IF YOU SIGN IT, EVEN IF YOU HAVE NOT BEEN PAID. IF YOU HAVE NOT BEEN PAID, USE A CONDITIONAL WAIVER AND RELEASE FORM." Both statutes require that notice to be set in type at least as large as the largest type otherwise in the form, so it is not something that can be shrunk into a footer.

Read those two notices as the paying party and the sequence follows from the text. At the moment a cheque changes hands nobody has yet been paid, which is the state of affairs the conditional form is drafted for and the state of affairs in which the unconditional form's own notice tells the signer not to use it. After the cheque clears, the unconditional version describes what has actually happened, and under 8124 it is the version that does not require you to hold separate evidence of payment.

There is a detail in the forms that shows how carefully the drafters separated an instalment from the end. Sections 8132 and 8134 both include a "Through Date" field, because a progress waiver covers work up to a moment in time. Neither final form has one. Section 8136 asks only for claimant, customer, job location and owner, and 8138 says flatly that "the claimant has been paid in full." There is nothing after the end to carve out. So a final release with a through date typed into it is a progress form under the wrong heading, and the difference between them is the tail of the job.

Two further sections decide whether any of this holds together.

Section 8122 kills the shortcut. "An owner, direct contractor, or subcontractor may not, by contract or otherwise, waive, affect, or impair any other claimant's rights under this part, whether with or without notice, and any term of a contract that purports to do so is void and unenforceable unless and until the claimant executes and delivers a waiver and release under this article." A clause in your contract announcing that subcontractors waive their lien rights is worth nothing. Only the claimant's own signature on the right form does it.

Section 8124 then says a claimant's waiver does not release you unless it is "in substantially the form provided in this article," and, for a conditional release, unless there is evidence of payment. Which is where a very old practice acquires a statutory footing.

What a joint cheque actually proves

Section 8124(b) lists exactly two things that count as evidence a conditional release has been triggered: "the claimant's endorsement on a single or joint payee check that has been paid by the financial institution on which it was drawn," or "written acknowledgment of payment by the claimant." Section 8132 assumes the same instrument in passing, describing a waiver given in exchange for "a single payee check or joint payee check."

A joint cheque is written to two payees, typically the contractor together with the supplier or sub who served you a preliminary notice, and it cannot be deposited without both endorsements. The mechanism is close to primitive, and that is its merit: the endorsement is physical evidence, held by a third party with no stake in your dispute, that the money reached the person who could otherwise lien you.

Some limits, because it is not a universal solvent. A joint cheque asks your contractor to accept a public statement that he is not trusted with the money, and a perfectly honest one may push back for reasons that have nothing to do with fraud. It is disproportionate on a small job with two participants and no suppliers of consequence. On a large re-roof or a whole-house repipe it is entirely ordinary, because the material supplier is often the single largest exposure and is precisely the party who sent the preliminary notice. If you use one, ask your bank afterwards for the cleared image. The cleared image is the evidence. The cheque stub is not.

Nevada arrives at the same place by a different route for particular categories of work. For residential pool and spa contracts, NRS 624.935(3) requires that "if satisfactory payment is made for any portion of the work performed, the contractor shall, before any further payment is made, furnish the owner a full and unconditional release from any claim of mechanic's lien for that portion of the work for which payment has been made," with an exception where a payment and performance bond or joint control is in place. California puts a version of this into home improvement contracts generally, at 7159.5(a)(6): on request, the contractor must obtain and furnish a full and unconditional release for any portion of the work already paid for, and "the person contracting for home improvement may withhold all further payments until these releases are furnished."

That last clause deserves underlining. In California you do not have to negotiate for release-before-next-payment. You have to ask for it, and then you may stop paying until it turns up.

Before the last cheque: closing the window on purpose

Final payment is the only moment in the job where you hold everything and owe everything at once, and it is short. Use it.

Reconcile the roster. Lay the preliminary notices you kept next to the releases you have been collecting. Every name on the first list needs a signed release on the second, in the right form, covering the right period. A gap here is not administrative untidiness. It is a person who can still record against your title.

The sworn statement, where the state provides one. Florida does. Under 713.06(3)(d)1 the contractor must give the owner a final payment affidavit stating that all lienors under the direct contract who timely served a notice to owner on both the owner and the contractor have been paid in full, or naming each one who has not and the amount due. The statute puts teeth in it: "The contractor shall have no lien or right of action against the owner for labor, services, or materials furnished under the direct contract while in default for not giving the owner the affidavit," and the affidavit must be delivered at least 5 days before the contractor brings an action to enforce a lien. Subparagraph 2 then tells the owner what to do with a bad answer: where the affidavit recites outstanding bills, the owner may pay those bills directly and deduct what was paid from the contractor's balance, but only "after giving the contractor at least 10 days' written notice" and only if the balance then due covers them. Ten days is the part that gets left out of summaries, and it is the part that determines whether the money can move before closing.

Record a notice of completion if your state has one, and do it quickly. In California 8182 lets an owner record a notice of completion "on or within 15 days after the date of completion," signed and verified by the owner and stating the date of completion. A notice that does not comply with the section "is not effective," and an erroneous completion date is forgiven only where the true date is 15 days or less before recordation. Recording it is what shortens everyone else's clock. Without one, 8412 gives a direct contractor 90 days after completion of the work of improvement to record a claim of lien, and 8414 gives everybody below him the same 90. With one, those become 60 days and 30 days. Three months of exposure becomes one, for the price of a recording fee and a diary entry.

Final payment on an unfinished permit is the one release with no way back. The inspection sign-off is the only line in the entire transaction that a party with no financial interest has to put a name to, and once the money is gone so is the incentive to chase it. That is the same asymmetry that makes unpermitted work follow the house to closing rather than following the contractor who suggested skipping it.

In Texas, holding money back is a duty rather than a preference. Under Property Code 53.101, during the work and for 30 days after it is finished, the owner "shall reserve" 10 percent of the contract price, or 10 percent of the value of the work measured by the proportion done. Section 53.105 supplies the consequence of not doing it: claimants who complied with the notice rules "have a lien, at least to the extent of the amount that should have been reserved from the original contract under which they are claiming." The statement a claimant must include in its notice to a Texas homeowner, prescribed at 53.254(g), spells out both halves: a lien may follow if the owner fails to withhold after written notice of an unpaid claim, or if "during construction and for 30 days after completion of your contractor's work, you fail to reserve 10 percent of the contract price or 10 percent of the value of the work performed by your contractor." Everywhere else that ten percent is a term to settle at signing rather than discover you needed at the end.

Two of those five cost nothing but an afternoon. The notice of completion in particular is the rare piece of paperwork where a homeowner acts first and everyone else's deadline moves.

If a lien is already recorded, read the calendar before the amount

Say it has happened. A claim of lien is recorded against your property, for a figure that may bear no relation to anything you agreed, by a company whose name you half recognise from an envelope.

The first thing to establish is not whether the amount is fair. It is whether the claim sits inside its dates, because the statutes are unforgiving about that in both directions.

Work backwards through the sequence. Did this claimant serve the preliminary notice the statute requires? In California, 8200 makes compliance "a necessary prerequisite to the validity of a lien claim," subject to the labourer and direct-contractor exceptions above. In Florida, late service of the Notice to Owner "is a complete defense to enforcement of a lien by any person." Then check the recording date against 8412 or 8414, and against any notice of completion you recorded. Then check the date the lien itself was recorded against 8460: "The claimant shall commence an action to enforce a lien within 90 days after recordation of the claim of lien. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable." There is an exception where claimant and owner agree to extend credit and record notice of the fact and terms, which is worth knowing about before anyone proposes an informal payment arrangement.

None of that tells you what to do next, and I am not the person to tell you. A recorded lien is one of the few things in home improvement where the cost of proper advice is obviously smaller than the cost of guessing, and title companies, lenders and buyers all treat it as a hard stop rather than a negotiating position. What the dates give you is the shape of the problem before you walk into that conversation, and whether the thing sitting on your title is a live claim or a piece of paper that has already run out of time.

The deposit question you started with and the lien question you may finish with are the same question asked at opposite ends of a job: at this moment, is the money that has left your hands matched by work that has been done and releases that have been signed? Every mechanism set out here, in every state named, is a different way of writing that sentence down. Before you agree a payment schedule at all, run the two bids through the bid comparison worksheet with the payment terms entered as line items, the way you would compare anything else on the sheet. The cheaper bid that wants sixty percent on signing is not the cheaper bid.