Payments
California law sets deadlines for paying contractors, subcontractors, and retention, caps what may be withheld in a dispute, and adds a 2% per month penalty for late payment. This lesson also covers progress payments on home improvement jobs, public works retention, stop payment notices, joint checks, lien waivers, and final payment.
Payment questions are full of look-alike numbers: 7 days, 10 days, 21 days, 30 days, 45 days, 60 days, 150%, 125%, 5%, and 2%. Learn which number goes with which payment and which kind of project (private or public). On the job, knowing these rules helps you get paid on time and avoid CSLB discipline for paying your subcontractors late.
1. Progress payments on home improvement jobs
A progress payment is a payment made as the work moves forward, before the whole job is done. On a home improvement contract, any payments before completion (other than the down payment) must follow a Schedule of Progress Payments stated in dollars and cents and tied to specific work or materials. Except for the down payment, the contractor may not request or accept payment that exceeds the value of the work performed or material delivered. This also applies to advance payments from a lender or financier (B&P §7159.5(a)(4)–(5)).
Worked example
Is this payment request legal?
- Kitchen remodel contract: $40,000. Down payment collected: $1,000.
- Demolition and rough plumbing are finished; their scheduled value is $9,000.
- The contractor asks for $15,000 because the cabinets are ordered but not delivered.
- Value of work performed and material delivered = $9,000. $15,000 is more than $9,000.
No. The contractor may bill only $9,000 now; the cabinets can be billed after delivery.
After any payment, and before the next one, the contractor must furnish a full and unconditional release from lien claims for the work paid for, if the owner requests it. The owner may withhold further payments until the releases are furnished (B&P §7159.5(a)(6)).
2. Prompt payment and retention deadlines
Retention (also called retainage) is a portion of each progress payment held back until the job is complete, to make sure the work gets finished. The table shows California’s main deadlines as of 2026. “Unless otherwise agreed in writing” means the parties may set a different schedule in their written contract for that payment; the private retention rules in Civil Code §8810–8822 cannot be waived by contract.
| Payment | Deadline | Dispute withholding | Source |
|---|---|---|---|
| Private: owner → direct contractor, progress payment | 30 days after written notice demanding payment (unless otherwise agreed in writing) | Up to 150% of disputed amount | Civil Code §8800 |
| Private or public: prime or sub → subcontractor, progress payment | 7 days after receiving each progress payment (unless otherwise agreed in writing) | Up to 150% of disputed amount | B&P §7108.5 |
| Public utility project: direct contractor → subcontractor, progress payment | 21 days after receiving payment (unless otherwise agreed in writing) | Up to 150% of disputed amount | Civil Code §8802 |
| Private: owner → direct contractor, retention | 45 days after completion of the work of improvement | Up to 150% of disputed amount, from final payment | Civil Code §8812 |
| Private: direct contractor → subcontractor, retention | 10 days after receiving all or part of a retention payment | Up to 150% of estimated value of disputed amount | Civil Code §8814 |
| Public: public entity → original contractor, retention | 60 days after completion | Up to 150% of disputed amount, from final payment | PCC §7107(c) |
| Public: original contractor → subcontractor, retention | 7 days after receiving retention | Up to 150% of estimated value of disputed amount | PCC §7107(d)–(e) |
| Public: local agency → contractor, progress payment | 30 days after an undisputed, properly submitted request, or the agency pays interest at the legal judgment rate (10% per year) | Improper requests returned within 7 days with written reasons | PCC §20104.50; CCP §685.010 |
| State contract: contractor → subcontractors, progress payment | 7 days after receiving each progress payment | Subcontractor may notify CSLB in writing of underpayment | PCC §10262 |
Know this
Late payment penalty: 2% per month on the amount wrongfully withheld, in place of ordinary interest, plus attorney’s fees to the winner in a collection lawsuit (Civil Code §8800, §8818; B&P §7108.5; PCC §7107(f)).
Exam trap
Private retention to a subcontractor: 10 days. Public retention to a subcontractor: 7 days. Progress payment to a subcontractor: 7 days on both. Owner retention: 45 days private, 60 days public.
Worked example
Withholding and late penalty
- A prime receives a progress payment that includes $20,000 for a subcontractor. The prime disputes $4,000 of that work in good faith.
- Maximum withholding: $4,000 × 150% = $6,000. Amount due within 7 days: $20,000 − $6,000 = $14,000.
- The prime instead withholds all $20,000 for 3 months. Wrongfully withheld: $20,000 − $6,000 = $14,000.
- Penalty: $14,000 × 2% × 3 months = $840.
Pay at least $14,000 within 7 days; holding it 3 months adds an $840 penalty (plus CSLB discipline risk).
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