A homeowner contracts with a Tennessee residential contractor for a $45,000 home addition. Under state law, what is the maximum down payment the contractor may legally request?
Correct Answer
B) $13,500 (30%)
Tennessee residential contractor law limits down payments to 30% of the total contract value or $1,000, whichever is less, but for contracts over $3,333, the 30% rule applies.
Why This Is the Correct Answer
Tennessee law limits residential contractor down payments to 30% of the total contract value for contracts exceeding $3,333. For a $45,000 contract, 30% = $13,500. This cap protects homeowners from contractors who collect large upfront payments and then fail to perform.
Why the Other Options Are Wrong
Option A: $22,500 (50%)
50% ($22,500) significantly exceeds the legal cap. Collecting 50% upfront from a residential client would violate Tennessee contractor law and could subject the contractor to disciplinary action or license revocation.
Option C: $4,500 (10%)
10% ($4,500) is lower than the legal maximum, so while a contractor could accept this amount, it is not the maximum allowed. This answer confuses the legal cap with a more conservative practice.
Option D: $9,000 (20%)
20% ($9,000) is also below the 30% statutory maximum. Some states use a 10% or 20% limit, but Tennessee's residential contractor statute sets the cap at 30% for larger contracts.
Memory Technique
Remember: Tennessee takes a Third (30% ≈ 1/3) as the maximum down. On a $45,000 job, one-third is $15,000 — but the law says 30% = $13,500. Think '30% cap, never more than 3/10 upfront.'
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