The customer said yes on Tuesday. The cabinets are a special order with a six-week lead time, you have penciled in a crew for the second week of next month, and you have not been paid a cent. If they change their mind in week five you own the cabinets, the gap in the schedule and the conversation about whose fault that is.
A deposit is the normal answer to that, and almost every homeowner expects one. The questions are when it is appropriate, how much, and what the law in your state says about the number, because in some states the law is specific.
When a deposit is normal
A deposit is justified when you are taking on a cost or a commitment before the work starts. Three cases cover most of it:
- Materials you have to order. Custom cabinets, a specific tile, a unit that is not on the shelf. You are buying something you cannot return for a job that has not happened yet.
- A date you are holding. A crew booked for three days in a month's time is three days you have turned other work away from.
- A big job. Anything that runs weeks is normally paid in stages, and the deposit is stage one.
A deposit is not normal on a service call, a repair quoted after diagnosis, or anything you can do this week with what is on the truck; for those, charge the fee at the door and the balance on completion.
How much
Enough to cover what you would lose if the job fell through tomorrow, and no more. In practice that means the non-returnable materials plus something for the held time. Write the deposit down as a number, not a percentage, on the quote and in the contract.
Then check your state, because the ceiling may not be yours to set.
States that cap the deposit
California is the strictest and the most specific. The Contractors State License Board's guidance on contracts says a home improvement down payment "should never exceed 10 percent of the contract price or $1,000, whichever is less", that there must be a written contract for any home improvement job over $500, and that the contract must carry the contractor's license number. The same page notes an exception for contractors who hold a blanket performance and payment bond with the board, which most small operators do not. The remaining money is collected as the work goes in, which means the cabinets problem in the opening paragraph is handled with a payment schedule, not a bigger deposit.
Maryland caps it at a third. The Home Improvement Commission's contract rules say a contractor "cannot accept more than 1/3 of the contract price as a deposit", may not accept any payment until the contract is signed, and must put their MHIC license number in the contract.
Other states have their own numbers, and some have none; look yours up on the licensing board's site, and if you work across a state line, check both. A deposit over the cap is not just a refund waiting to happen; in licensing states it is a complaint against the license.
Deposit, progress payments, final payment
For anything beyond a day's work, the deposit is the first line of a payment schedule, and the schedule is what protects you where the cap is low:
- Deposit on signing, within the state limit.
- Progress payments tied to visible milestones: rough-in passed, drywall up, cabinets installed. Tied to work done, never to dates.
- Final payment on completion, with a short punch-list walk before it.
Write the schedule into the contract with amounts; a homeowner who can see when each payment falls pays on time far more often than one surprised by an invoice.
Say it in three places
The policy goes on the quote, in the contract, and once on the website, in a sentence: "Projects carry a deposit on signing, within state limits, with the balance in stages as the work completes." It also needs a refund rule for the case where the customer cancels before materials are ordered; the free cancellation policy generator writes one in plain words.
Scheduled appointments are a smaller version of the same problem. If you take bookings for service visits online, a small deposit at booking cuts the no-shows, and how to cut no-shows with deposits covers that end; in Webkio the booking deposit is set per service, fixed or percent, and paid into your own Stripe account.
FAQ
Is it normal for a contractor to ask for a deposit?
Yes, when materials have to be ordered or a crew is being held for a date. It is not normal on a service call or a same-week repair. Most homeowners expect a deposit on a project and are reassured by a written payment schedule around it.
How much deposit should a contractor charge?
Enough to cover the non-returnable materials and the held time, and never more than your state allows. California limits home improvement down payments to the lesser of 10 percent or $1,000; Maryland allows up to a third. Elsewhere, check your board.
Can I take a deposit before the contract is signed?
Not in states such as Maryland, which prohibit any payment before signing, and it is bad practice everywhere. Sign first, then take the deposit, and give a receipt that references the contract.