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Contractors State License Board Provides Information on New Contracts Requirements

Home Improvement and Service & Repair contract laws take effect January 1, 2006

SACRAMENTO — The Contractors State License Board (CSLB) is reminding all Contractors that new requirements go into effect on January 1, 2006 for certain contracts.

In early October, Governor Arnold Schwarzenegger signed into law a bill that clarifies and streamlines the requirements for both Home Improvement and Service and Repair contracts written in California. Assembly Bill 316 (Nakanishi, R-Lodi) reorganizes the text of Senate Bill 30 (Figueroa, D-Sunol), a law passed in 2004, making contracts easier for both the contractor and consumer to understand and use.

Some of the contract requirements include:

  • Everything must be in writing - contracts and any changes to contracts (no matter the amount).
  • Creation of a separate "Service and Repair Contracts" (Contract is: $750 or less, buyer initiated contact and 3-day right to cancel ends when work starts)
  • General Liability Insurance: A specified notice requirement replaces checklists required under old law
  • "Agreed Consideration for the Work" is now called: "Contract Amount"
  • Workers Compensation - The new notice requires stating that either a contractor is exempt from workers compensation requirements or the contractor has workers compensation insurance because they have employees
  • Finance charges must be listed separately from contract amount
  • Swimming pool contract down payments are now the same as other home improvement contracts - $1,000 or 10% down, whichever is less
  • Lien Release Notice must be furnished to consumer on request after payment is made
  • Right to Cancel - The Three-Day and Seven-Day "Right to Cancel" triggered when buyer receives copy of written agreement
  • Contractors must inform homeowners in writing that if they, the contractor, fail to comply with all "Change Order" requirements, the homeowner may still have to pay for the additional work.

"The Board has worked closely with industry in developing these new contract guidelines," said CSLB Registrar Steve Sands. "Contracts should now be easier to use and understand. This will go a long way to protect both the consumer and contractor from disagreements and misunderstandings."

A new CSLB guide to help explain the new laws is currently in production and should be completed shortly. A new consumer brochure is also being produced and will available for contractors to give to potential clients. The new publications will be posted on the CSLB Web site ( when they are completed.

In the interim, the CSLB encourages all licensees to become familiar with the new requirements. Details are available by visiting the CSLB Web site and clicking on the "New Contract Laws" graphic. Associations and other construction industry groups are encouraged to right click on the graphic below and save. Then, use the graphic on their Web site and to link to:


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