A well-structured payment schedule protects both parties. A front-loaded schedule protects only the contractor.
California Deposit Limits
California Business and Professions Code limits residential improvement deposits to the lesser of $1,000 or 10 % of the contract price. This is law, not a guideline. Contractors asking for 30–50 % to start are either unaware of the law or disregarding it.
Milestone-Based Payments
Best practice: a small legal deposit at signing, progress draws tied to defined milestones (permit approval, rough framing, rough inspections, substantial completion), and a final holdback of 10–15 % held until you have walked through and approved all punchlist items. The holdback is your primary leverage for completion.
What to Avoid
Payment schedules tied to dates instead of milestones, no defined final holdback, requests for payment before milestone work is visibly complete.