Which states have a limit of how much an initial deposit a contractor can charge to start working on your home?

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An upfront deposit is important in the contracting business. It tells the contractor that you’re serious about working with them, and for the client, they don’t have to pay the entire bill upfront in case something happens.

However, some contractors like to charge a little more than what’s necessary when it comes to deposits. How do you know if you’re paying too much for a deposit?

Limits by State

Some states have certain deposit limits when it comes to residential work. There are nine state that have such limits, and the laws are subject to change, so it’s worth it to see the laws of your own state. These states include:

  • Arizona
  • California
  • Indiana
  • Maine
  • Maryland
  • Massachusetts
  • Nevada, for pools
  • Pennsylvania
  • Tennessee

What Are Those Limits?

Depending on your state, the limits may be more or less restrictive. Tennessee, Massachusetts, Pennsylvania, Maine and Maryland, for example, has the deposit price at no mare than one third the total bill. There are exceptions to these laws as well. In Massachusetts and Pennsylvania, there may be an exception if the materials are special ordered. For Maine, the one-third law may be waived if the contractor and client can come to a deal.

For Tennessee, the exceptions are if the contractor has security guarantees, such as performance and payment bonds. Alternatively, if the contract allows the owner to hold onto the payment until the work is finished, or volunteers to pay more.

Maryland has 1/3rd payment, but has no exceptions to that rule for either side.

For California, the practice is very restrictive. It’s no more than 10 percent of the bill. There are no exceptions to this, either. While the client can rest easy, many contractors do feel like that’s too little depending on the cost of some jobs.

People who work in California and Maryland may make ways to survive with the strict rules. They may start work when the non-refundable materials are put on order. They may come up with ways to ensure their own security.

Negotiating a Better Down Payment

There is a good chance you don’t live in any of those states. If that’s the case, you may need to do a little negotiating if the down payment is a little bit too high. Perhaps you can show your payment history of other contractors to prove you won’t mess them over. Negotiating and coming up with an agreement is important. Most contractors will be happy to lower their down payment if you can prove yourself.

With that said, always make sure you aren’t getting conned. There are many con-tractors who will charge you a ridiculous rate and then flee before the work is done. Do your research, negotiate when needed, and you can be able to get the best deal out of everything when all is said and done.

 

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