Legal Limits on a Cabinet Job Down Payment

      Cabinetmakers explain how they deal with "10 percent down" state laws for remodeling contracts. March 6, 2008

I recently got my California specialty contractor's license in the field of doors, cabinets and trim (C6). I'm looking at a few avenues now and would really like to focus on the cabinet design and fabrication. I'm a sole proprietor with no employees, if that makes a difference.

I'm looking at contracts to begin my new venture and from what I understand, you really only need a contractor's license for building new structures or when you alter or attach something to a structure. The fabrication of a cabinet does not fall under that category. Installing would, but if I separate the installation price from the fabrication, it falls under the minimum bid price to install without a license.

I'm not trying to avoid anything. I just got the license to do it the right way, but here's the thing... In California, under a homeowner contract, you cannot ask for more than 10 percent of the contract price (or 1k, whichever is less). I cannot afford to build a set of cabinets with a down payment of anything less than 50 percent because of the cost of materials, so I was thinking maybe I could work it under a service contract, as opposed to a homeowner contract. Apparently not, because a service contract cannot exceed 750.00. What type of contract is generally used for custom fabrication? Should I be looking for a sales contract or something?

Forum Responses
(Business and Management Forum)
From contributor L:
In Massachusetts they have a similar law. 10% or $1000, whichever is less. But that is to get them on your waiting list. As soon as you start to work on their project - i.e. order supplies - you can charge them whatever you need.

From contributor D:
I'm in Northern CA and have the same license, C6. We regularly ask for 1/3 to 1/2 to begin work. We explain our terms up front. If someone has a problem with that, then we go for 10% to hold their place in line and then begin. Or price appropriately. We look at it this way - if you order a pair of custom boots, you pay full price up front.

From contributor R:
I too am in Northern California, with a C-6. I take the 10% or $1,000.00 as a deposit and they are placed on the schedule. Once I am ready to start production, I collect 40% (draw) to order materials and start production. I then take another 20% when the doors arrive at the shop, another 20% due COD (no exceptions here, cabinets stay on the truck until I get paid), and the final 10% is due after installation. The client is allowed 1 punch list as we walk the project together. Once the list is complete, they are due my final 10%. I add a late fee for not getting paid as outlined in the contract and a % for invoices past 30 days.

From contributor A:
10% or $1,000.00 down at signing does not mean you can't bill for progress payment the next day. Our contracts state balance of 50% prior to start of fabrication and fabrication starts with order of materials.

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