California construction law regulates almost every paid building project in the state, from a bathroom remodel to a highway bridge, through a layered framework that covers who can do the work, how the contract must be written, how workers and suppliers get paid, and what happens when something goes wrong. The rules live in the Business and Professions Code, the Civil Code, and the Code of Civil Procedure, and they bind sole-proprietor handymen and large general contractors alike. A single misstep, like a lapsed license during a job or a missed lien deadline, can wipe out the right to be paid or expose a contractor to criminal penalties.
When a Contractor’s License Is Required
The Contractors State License Board (CSLB) requires a license for virtually all construction work in California. As of January 1, 2025, Assembly Bill 2622 raised the minor-work exemption from $500 to $1,000, but the exemption is narrow: the project cannot require any building permit, and the unlicensed person cannot hire any workers to assist.1Contractors State License Board. CSLB Industry Bulletin – AB 2622 Implementation A project under $1,000 that needs a permit or involves any employees still requires a license in the appropriate classification. Larger projects cannot be split into smaller pieces to slip under the threshold.2Contractors State License Board. Before Applying for a License When No Exam is Required
Licenses come in three broad classes. Class A (General Engineering) covers infrastructure projects such as roads, bridges, and utility systems. Class B (General Building) covers projects involving two or more unrelated building trades. Class C (Specialty Contractor) covers more than 40 individual trades, each limited to the scope of its own classification, including plumbing (C-36), roofing (C-39), concrete (C-8), and HVAC (C-20).
Penalties for Unlicensed Work
Working without a required license is a misdemeanor under Business and Professions Code section 7028. A first conviction carries up to six months in county jail and a fine of up to $5,000. A second conviction brings a mandatory minimum of 90 days in jail and a fine equal to 20% of the contract price or $5,000, whichever is greater. A third or subsequent conviction raises the maximum fine to $10,000 or 20% of the contract price, with 90 days to one year of imprisonment.3California Legislative Information. California Code Business and Professions Code 7028
The civil consequences cut deeper. Under Business and Professions Code section 7031, an unlicensed contractor cannot sue to collect payment for work performed, no matter how well the work was done. The property owner can also sue to recover every dollar already paid.4California Legislative Information. California Code Business and Professions Code 7031 Courts enforce the rule strictly. Even a brief lapse in an otherwise valid license during the project can trigger disgorgement of the entire contract price.
Bonding and Insurance a Legitimate Contractor Must Carry
Before the CSLB will issue, reactivate, or renew an active license, the contractor must have a $25,000 contractor’s bond on file. Contractors organized as limited liability companies face an additional $100,000 LLC employee/worker bond, bringing their total bonding requirement to $125,000.5Contractors State License Board. Bond Requirements These bonds give the public a source of recovery when a contractor fails to perform or pay its obligations.
California is also phasing in a universal workers’ compensation insurance requirement for all licensed contractors, even those with no employees. Several high-risk trades, including concrete (C-8), HVAC (C-20), asbestos abatement (C-22), tree service (D-49), and roofing (C-39), have been required to carry workers’ compensation since 2023. SB 216 would extend the mandate to all remaining classifications, and SB 1455 pushed the full compliance deadline to January 1, 2028. Until then, the only fully exempt contractors are joint ventures with no employees that have filed a certificate of exemption with the CSLB.
Home Improvement Contract Rules
Home improvement work gets extra scrutiny because of the power imbalance between homeowners and contractors. Any home improvement contract where the total price exceeds $500 must be in writing and signed by both parties before work begins. The written contract must include the contractor’s name and license number, a detailed description of the work and materials, approximate start and completion dates, and a payment schedule tied to project milestones.6California Legislative Information. California Code Business and Professions Code 7159 The $500 written-contract threshold is separate from the $1,000 licensing exemption: a $750 project may be license-exempt under narrow conditions but still requires a written contract if a licensed contractor performs it.
The maximum down payment a contractor can collect is $1,000 or 10% of the contract amount, whichever is less.7California Legislative Information. California Code Business and Professions Code 7159.5 Any change in scope must be documented through a written change order with a fixed price, signed by both the owner and contractor before the extra work begins. The contract must also promise that, upon receiving payment for completed work, the contractor will furnish unconditional lien releases from subcontractors and material suppliers. Missing provisions can make the contract voidable and expose the contractor to CSLB discipline.
A simpler contract format exists for small-scale service and repair work initiated by the homeowner. To qualify, the total price cannot exceed $750, the homeowner must have contacted the contractor first, no payment can be collected until all work is complete, and the contractor cannot upsell beyond what the homeowner specifically requested.
The Homeowner’s Right to Cancel
Unless the home improvement contract is negotiated at the contractor’s place of business, the homeowner has three days to cancel after signing. The contractor must include a notice of this right with the contract. Cancellation requires only written notice to the contractor, and if the homeowner cancels within the window, the contractor must return all payments and restore the property to its prior condition.8Contractors State License Board. Warnings and Exceptions Homeowners aged 65 and older get five business days instead of three. The three-day cancellation right ends the moment a qualifying service and repair contract is signed and work begins.
Mechanics Liens and Stop Payment Notices
California’s mechanics lien system lets contractors, subcontractors, and material suppliers secure payment by recording an interest in the property itself, enforceable by foreclosure like a mortgage. The deadlines are unforgiving, and missing one by a day can destroy the claim.
Preliminary Notice
Almost everyone other than laborers and direct contractors must serve a preliminary notice before recording a lien, serving a stop payment notice, or claiming against a payment bond. The notice goes to the property owner, the direct contractor, and any construction lender, and must be served within 20 days of the claimant’s first day of furnishing work or materials.9California Legislative Information. California Code CIV 8204 A claimant with a direct contract with the owner only needs to notify the construction lender, if there is one.10California Legislative Information. California Code CIV 8200
A late preliminary notice doesn’t erase lien rights, but it shrinks them. A claimant who serves the notice late can only claim a lien for work performed within 20 days before the notice was served and anything after.9California Legislative Information. California Code CIV 8204 Everything furnished before that lookback window is gone.
Recording and Enforcing the Lien
How long a claimant has to record the lien with the county recorder depends on whether the owner files a notice of completion. If one is recorded, direct contractors have 60 days to record their lien; subcontractors and suppliers have 30. If no notice of completion is filed, every claimant gets 90 days from the date of completion.
Recording is only half the job. The claimant must file a lawsuit to foreclose on the lien within 90 days of recording. Miss that deadline and the lien expires automatically and becomes unenforceable.11California Legislative Information. California Code CIV 8460 The only exception is a written credit extension between the claimant and property owner, recorded within 90 days of the lien recording. Once a lien expires, the owner can petition the court to have it removed from title.
Public Projects: Stop Payment Notices
Mechanics liens cannot attach to public property, so California provides an alternative on government jobs: the stop payment notice. The notice is served on the public entity or construction lender, directing them to withhold enough from payments due to the direct contractor to cover the claimant’s unpaid amount. A bonded notice, backed by a surety bond, generally carries stronger withholding rights and priority than an unbonded one.
Prompt Payment and Retention
California’s prompt payment statutes attach real penalties to sitting on money that should move downstream. On private projects, a direct contractor who receives a progress payment from the owner must pay each subcontractor’s share within 10 days. Wrongful withholding triggers a 2% per-month penalty on the amount improperly held, and the prevailing party in a collection action can recover attorney’s fees.
Retention, the slice of each progress payment that owners typically hold back until completion, carries its own deadlines. On private projects, the owner must release retention to the direct contractor within 45 days of the date of completion. The direct contractor then has 10 days after receiving the retention to pass each subcontractor’s share along.12California Legislative Information. California Code CIV 8814 On public projects, the public entity has 60 days after completion to release retention, and the direct contractor must pay each subcontractor’s share within seven days of receiving it. Where a genuine dispute exists, the withholding party can hold back up to 150% of the disputed amount; everything else must still flow on schedule.
New Home Defects and the Right to Repair Act
For new residential homes, California’s Right to Repair Act (Civil Code sections 895 through 945.5) replaced much of the old common-law framework with a function-based system. The Act applies to original construction intended to be sold as individual dwelling units, and it covers builders, general contractors, subcontractors, material suppliers, and design professionals.13California Legislative Information. California Code CIV 896
Rather than relying on vague “workmanlike” standards, the Act spells out what each building component must actually do. Roofs, windows, and doors must not allow unintended water intrusion. Foundations and slabs cannot permit water or vapor to enter in a way that damages other components. Plumbing, electrical, and mechanical systems must function as designed. Structural components must not deviate from code in ways that compromise load-bearing capacity. The standards also reach soil and grading, fire protection, ceramic tile, and painting.13California Legislative Information. California Code CIV 896 A homeowner can bring a claim for a violation even if the defect hasn’t yet caused visible property damage; the violation itself is the actionable event.
The Mandatory Prelitigation Process
Before a homeowner can file suit under the Act, both sides must work through a structured prelitigation process. The homeowner starts by sending the builder a written notice of the claimed defects by certified mail, overnight delivery, or personal service. The builder must acknowledge receipt in writing within 14 days. If the builder wants to inspect, the initial inspection and testing must be completed within 14 days of that acknowledgment. A second inspection, if reasonably needed, must wrap up within 40 days of the first.14Justia. California Code CIV 910-938 – Prelitigation Procedure
Within 30 days of the last inspection, the builder may offer in writing to repair the defects. The homeowner has 30 days to accept or reject. If accepted, repair must begin within 14 days on a mutually agreeable date. The builder’s offer must also include an offer to mediate any remaining dispute, with mediation to occur within 15 days of a request. If the builder fails to acknowledge the claim, complete inspections, or make a timely repair offer, the homeowner can skip the rest of the process and go straight to court.14Justia. California Code CIV 910-938 – Prelitigation Procedure
How Long You Have to Sue
Every construction defect claim in California runs up against two separate clocks, and confusing them is one of the most common mistakes claimants make. The statute of limitations starts when the defect becomes apparent. The statute of repose sets an absolute outer boundary measured from substantial completion, regardless of when anyone noticed a problem.
For patent defects, meaning problems visible or readily discoverable through reasonable inspection, the statute of limitations is four years from substantial completion. If an injury occurs during the fourth year, the claimant gets one additional year to file, but no claim can be brought more than five years after substantial completion. This four-year limit does not apply to owner-occupied single-unit residences.
For latent defects, meaning hidden problems not discoverable through reasonable inspection, the statute of repose is 10 years from substantial completion. Substantial completion is measured for each trade individually, and the 10-year clock runs from whichever occurs first: final inspection by the relevant public agency, recordation of a valid notice of completion, use or occupation of the improvement, or one year after work on the improvement ceases. The 10-year cap does not apply to claims based on willful misconduct or fraudulent concealment, and it does not cap personal injury or wrongful death claims arising from latent defects.15California Legislative Information. California Code CCP 337.15
These deadlines interact with the Right to Repair Act’s prelitigation process in ways that trap the unwary. A homeowner who finds a defect near the end of the limitations period needs to start the prelitigation notice process right away, because the back-and-forth of inspections and repair offers can eat up months. Wait too long to start, and the statute can run out before the homeowner is even legally permitted to file.