According to B&P Code Section 7159, what is the maximum amount a Home Improvement Contractor may collect as a down payment for a home improvement contract?
Correct Answer
A) $1,000 or 10% of the contract price, whichever is less
B&P Code Section 7159.5 limits home improvement contractors to collecting no more than $1,000 or 10% of the contract price as a down payment, whichever is less. This protection prevents contractors from collecting excessive payments before beginning work on residential projects.
Why This Is the Correct Answer
B&P Code Section 7159.5 explicitly caps the down payment for home improvement contracts at $1,000 or 10% of the contract price, whichever is less. This consumer protection rule prevents contractors from collecting large upfront sums before performing work on residential projects.
Why the Other Options Are Wrong
Option B: $500 or 5% of the contract price, whichever is less
$500 or 5% is too restrictive — the law sets the threshold at $1,000 or 10%, not a lower amount. This option may seem plausible as a 'safer' consumer protection but does not match the statutory language.
Option C: $2,500 or 15% of the contract price, whichever is less
$2,500 or 15% significantly exceeds the legal limit. Accepting this amount as a down payment would constitute a violation of B&P Code Section 7159.5 and could subject the contractor to disciplinary action.
Option D: $5,000 or 20% of the contract price, whichever is less
$5,000 or 20% is far above the statutory cap and would be a serious violation. This figure might be confused with bond amounts or other financial thresholds, but it is not the down payment limit.
Memory Technique
Think '10% or $1,000, whichever is LESS' — the homeowner gets the better deal. Visualize a homeowner holding a $1,000 bill saying 'this is all you get upfront.'
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