Down Payments
The number of consumer complaints filed with CSLB for solicitation or receipt of a down payment
in excess of the legal limit has doubled in the past four years. Remember, it is illegal to request or
receive a down payment larger than 10 percent of the contract price or $1,000, whichever is less.
Failure to adhere to of the Business and Professions Code section
7159(a)(3) is punishable by up to $5,000 in administrative fines or
criminal penalties of up to $5,000 and/or up to one year in county jail.
Not paying now could cost you later
Before you begin work on any building project, you must check with your city or county building
department to determine if your project requires a permit. Permits help ensure that work is performed
according to established state and local building codes, and safety standards.
While disciplinary actions from building departments vary by jurisdiction, licensees can also
be responsible for any fine issued to a property owner and the cost of complying with code
requirements. Under Business and Professions Code sections and 7110, CSLB has the authority to assist in regulating
building and safety laws and discipline any licensee who violates the law. This includes
civil penalties of up to $5,000 per citation and/or suspension or revocation of a
contractor license.
Complaints of unpermitted construction work are increasing among licensees. CSLB encourages you to
report any violators,
whether licensed or unlicensed.
More on Referral Fees
The Winter-Spring 2011 edition of the California Licensed Contractor
newsletter included a reminder article that referral fees are violations of state contracting laws.
Whereas the article was accurate, CLC editorial staff wants to point out that
this law pertains to contractors paying any type of inducement to other contractors. This law does
not include people who are not contractors. Below is an abbreviated reprint of the article:
No matter what you call it—a referral fee, incentive, inducement, or kick-back, any time a fee is requested or
required for referring contracting work, a state law is being violated and you risk having disciplinary action
taken against your license.
CSLB is aware that referral fees in the disaster response industry are prevalent and are becoming more of
a concern during the difficult economic times. There is evidence that such referral fees result in the artificial
inflation of charges to homeowners and to the insurance companies called upon to reimburse homeowners
for the costs. Contractors who abide by the law and refuse to pay these referral fees are losing out on business
and are victims of an uneven playing field.
California Business and Professions Code Section
7157(d) Prohibited Inducement, says referral fees are considered to be illegal inducements, a violation of Contractors
State License Law. If, after investigation, a license is found to be in violation of the law, CSLB may take a formal administrative
disciplinary action and/or refer the matter to the local authorities for criminal prosecution.
Penalties for Home Improvement Inducements
The first offense could result in a citation with civil penalties ranging from $100 to $1,000. Subsequent
violations will prompt an accusation that could result in further penalties, up to revocation of your
contractor license.
