You hired a contractor to remodel your kitchen. You paid a substantial deposit—maybe $5,000, $10,000, or more. The contractor promised to start within two weeks, pull all necessary permits, and have your dream kitchen ready in six weeks. Three months later, your kitchen is either untouched or half-demolished. The contractor stopped returning calls two weeks ago. You’ve checked with the city and discovered no permits were ever filed. Your money is gone, your project is stalled, and you’re wondering whether your only option is to hire a lawyer and file a lawsuit. The good news is that you have several powerful tools at your disposal before you need to step foot in a courthouse. California law, in particular, provides homeowners with unusually strong protections against contractors who take deposits and fail to perform. Even if you’re located outside California, the general principles and strategies discussed here can guide your approach to recovering your money. This article will walk you through the legal framework governing home improvement contracts, explain how to leverage California’s contractor licensing laws, show you how to write an effective demand letter, and outline the non-court remedies available when a contractor refuses to return your deposit.

Understanding the Legal Framework: What Went Wrong With Your Contract

Before you can effectively demand your money back, you need to understand what legal violations likely occurred. Most bad contractor situations involve multiple legal problems, not just one.

The Basic Breach of Contract

At its core, your situation likely involves a straightforward breach of contract. You and the contractor had an agreement—whether written, oral, or implied through conduct. You performed your obligation by paying the deposit. The contractor failed to perform their obligations, which typically include starting work on schedule, performing work in a workmanlike manner, obtaining necessary permits, and completing the project within a reasonable timeframe. When one party materially breaches a contract, the other party is entitled to remedies. These remedies can include getting their money back (rescission), being compensated for the difference between what was promised and what was delivered (damages), or forcing the breaching party to complete the work (specific performance, though this is rarely practical with contractors). The concept of “material breach” is important here. Not every contract violation justifies walking away and demanding a refund. A contractor who shows up two days late probably hasn’t materially breached the agreement. But a contractor who takes your deposit, does nothing for three months, stops communicating, and fails to pull required permits has almost certainly committed a material breach that entitles you to rescind the contract and recover your money.

Consumer Protection and Licensing Requirements

Beyond basic contract law, most states regulate contractors through licensing requirements and consumer protection statutes. These laws exist because of the inherent power imbalance in contractor-homeowner relationships. Contractors have specialized knowledge, control the work schedule, and typically get paid before completing the work. Homeowners are vulnerable to fraud, abandonment, and substandard work. California’s regulatory scheme is particularly comprehensive and homeowner-friendly. The state requires contractors to be licensed for most home improvement work, limits how much they can demand as deposits, mandates specific contract terms, and provides multiple avenues for homeowners to recover money from bad contractors—including the nuclear option of forcing unlicensed contractors to return all money paid, regardless of any work performed. Even states with less aggressive contractor regulation typically provide some baseline protections: licensing requirements for work above certain dollar thresholds, bond requirements, and complaint mechanisms through state licensing boards.

California’s Statutory Framework: Your Legal Arsenal

If your contractor worked on property in California, you have access to several powerful statutory tools. Even if you’re not in California, understanding these laws can inform your strategy, as many states have similar (if weaker) provisions.

The Home Improvement Contract Law: Business & Professions Code Section 7159

California Business & Professions Code Section 7159 is the cornerstone of homeowner protection for renovation and repair projects. This statute applies to “home improvement contracts” as defined in Section 7151.2, which covers most residential construction work including remodeling, repair, restoration, and alteration. Section 7159 mandates that home improvement contracts include specific information: the contractor’s name, address, and license number; a detailed description of the work to be performed and materials to be used; the total “Contract Price” stated as a single sum; a payment schedule tied to progress milestones; and notices regarding the homeowner’s right to cancel the contract. The most immediately useful provision for homeowners dealing with bad contractors is the deposit limitation. Section 7159 strictly limits down payments to the lesser of $1,000 or 10 percent of the total contract price, with no exceptions for special-order materials or other circumstances. This rule is absolute. A contractor who demands or accepts a $5,000 deposit on a $30,000 kitchen remodel has violated the law, even if both parties agreed to it. This violation isn’t merely a technicality. It provides you with substantial leverage in demanding a refund. The contractor cannot defend the excessive deposit by claiming you agreed to it or that it was necessary for the project. They broke the law, and you can use that violation both to strengthen your demand letter and, if necessary, to file a complaint with the California Contractors State License Board. Additionally, if the written contract fails to include the required elements—missing license number, no detailed scope of work, no payment schedule, no right-to-cancel notice—these omissions constitute separate violations that can support a claim for rescission and full refund.

The Unlicensed Contractor Disgorgement Rule: Business & Professions Code Section 7031

California’s treatment of unlicensed contractors is draconian, by design. Business & Professions Code Section 7031(a) provides that no person engaged in the business or acting in the capacity of a contractor without a license may bring or maintain any legal action to recover compensation for performing work that requires a contractor’s license. But the real power for homeowners lies in Section 7031(b), which allows a person who utilized the services of an unlicensed contractor to bring an action in superior court to recover all compensation paid to the unlicensed contractor for performance of any act or contract requiring a license. Read that again: all compensation paid, not just the deposit, and not reduced by any value received. This means if you paid $15,000 to an unlicensed contractor who did $8,000 worth of work before disappearing, you can sue to recover the entire $15,000. The quality of the work performed is legally irrelevant. Courts have consistently held that Section 7031(b) operates as a penalty against unlicensed contractors, not as a compensation mechanism for homeowners, and therefore the contractor gets no credit for work performed. You can check a contractor’s license status through the Contractors State License Board’s online “Check a License” tool. If you discover your contractor was unlicensed at any time during performance of work requiring a license, you have extraordinary leverage. Even the threat of a Section 7031(b) disgorgement claim in your demand letter often prompts immediate settlement discussions. One important caveat: some minor work doesn’t require a contractor’s license in California. Projects with total labor and materials costs under $500 generally don’t require licensing. But for any substantial remodel, repair, or improvement project, licensing is required, and the absence of a valid license triggers Section 7031(b).

The Right to Cancel: Civil Code Sections 1689.6 and 1689.7

California Civil Code Sections 1689.6 and 1689.7 give buyers the right to cancel certain home solicitation and home improvement contracts until midnight of the third business day after receiving a signed copy of the contract with the required cancellation notice. This three-day right to cancel is extended to five business days for seniors (65 and older) and seven business days for specified transactions following a declared state of emergency or disaster. The right to cancel applies when the contract was signed at your residence rather than at the contractor’s business location, and when the sale was initiated through personal contact at a location other than the contractor’s fixed place of business. If the contractor knocked on your door, met you at a home show and then came to your house to sign paperwork, or had you sign on their iPad in your kitchen, the right to cancel likely applies. The contractor must provide you with a fully completed form in duplicate that is easily detachable and contains specific statutory language explaining your cancellation rights. If the contractor failed to provide this notice, or provided a defective notice, your right to cancel may be extended indefinitely. Why does this matter for getting your deposit back? First, if you’re still within the cancellation window (or if it never closed because the notice was defective), you can simply invoke your statutory right to cancel and demand an immediate full refund. Second, the failure to provide proper cancellation notices is itself a violation that demonstrates the contractor’s disregard for legal requirements and strengthens your overall case for rescission. There is one significant exception you should know about: emergency service and repair contracts under $750 may cancel the right to cancel if they meet specific statutory requirements. If you had a pipe burst and called an emergency plumber who came immediately and started work, you probably don’t have a three-day right to cancel that service call. But for planned renovation projects, the right to cancel almost always applies when the contract was signed at your home.

Small Claims Court: The Accessible Litigation Alternative

While this article focuses on pre-litigation strategies, you should understand the small claims option because referencing it in your demand letter provides credible pressure without threatening expensive litigation. California small claims courts allow individuals to sue for up to $12,500, a limit that increased from $10,000 on January 1, 2024. Businesses and entities can sue for up to $6,250. Most deposit disputes fall comfortably within these limits, particularly the $12,500 individual cap. Small claims court is designed for non-lawyers. Filing fees are modest (typically $30 to $75 depending on claim amount). The process is relatively quick compared to superior court. You don’t need an attorney, and in fact, businesses and individuals generally cannot be represented by attorneys in small claims court. The informal nature of small claims court works to your advantage as a homeowner. Judges in small claims court expect to hear from real people, not lawyers, and they’re familiar with contractor disputes. You present your case, the contractor presents theirs, and the judge decides. If you have clear documentation—a contract, proof of payment, photos of no work or abandoned work, unanswered communications—small claims court is often your most efficient path to recovery if the demand letter doesn’t work. Mentioning small claims court in your demand letter sends a clear message: you’re prepared to pursue formal legal action, but you’re offering the contractor a chance to resolve this directly and avoid the time, hassle, and public record of a lawsuit.

Common Scenarios and How to Address Them

Different fact patterns call for different approaches in your demand letter. Let’s examine the most common scenarios and the specific legal hooks you can use for each.

Scenario One: Contractor Took a Large Deposit and Disappeared

This is perhaps the most infuriating situation. You paid a substantial deposit—let’s say $8,000 on a $35,000 bathroom remodel. The contractor promised to start in two weeks. Three months have passed. No work has been done. No permits have been pulled. The contractor responded to your first few calls with excuses, then stopped responding entirely. Your legal hooks in this scenario are strong and multiple. First, the deposit itself likely violates California law. Ten percent of $35,000 is $3,500, so the maximum legal deposit would be $3,500, not $8,000. The contractor violated Business & Professions Code Section 7159 by accepting an excessive deposit. Second, the contractor has materially breached the contract through complete non-performance. They took your money and did nothing. This is textbook breach of contract supporting rescission and full refund. Third, check the contractor’s license status. If they’re unlicensed, you have a Section 7031(b) disgorgement claim for all money paid. Even if they’re licensed, check whether the written contract included all required elements under Section 7159. Missing license number, missing scope of work, missing payment schedule, or missing right-to-cancel notice all constitute separate violations. Your demand letter in this scenario should be assertive and cite multiple legal violations. Lead with the clearest issue (non-performance and breach of contract), then layer in the statutory violations (excessive deposit, missing contract terms, possible unlicensed work). Demand a full refund of the $8,000 deposit within 10 business days. Reference your right to file a CSLB complaint and pursue small claims litigation if the matter isn’t resolved.

Scenario Two: Contractor Started Work But Abandoned the Project

Now consider a different situation. The contractor did start work. They demolished your existing kitchen, did some rough plumbing work, then disappeared. Your house has been half-destroyed for six weeks. The contractor won’t return calls. You later discover that no permits were ever pulled, and now code enforcement has issued a notice of violation. This scenario is more complex because the contractor performed some work, which affects your damage calculation. You’re no longer simply seeking a deposit refund; you’re dealing with incomplete work, potential code violations, and the cost of hiring a replacement contractor to finish the job. Your legal hooks include material breach through abandonment, violation of Section 7159 if the deposit was excessive, potential Section 7031(b) claims if the contractor is unlicensed, and additional damages for permitting violations and repair costs. In your demand letter, you need to clearly itemize the problems and your damages. The contractor breached by abandoning the project after partial performance. If they were required to obtain permits (as most substantial work requires) and failed to do so, this is an additional breach that has caused you quantifiable harm. You’re now facing city fines, must pay for permits yourself, and may need to hire an engineer or architect to produce plans for permit approval. Calculate your damages: the deposit paid, plus any progress payments, minus any reasonable value of work actually performed, plus your costs to remediate (permits, plans, inspection fees, code compliance work). Your demand should seek this total amount. Also demand that the contractor either complete the work properly with permits or transfer any plans, drawings, or materials purchased with your money so a replacement contractor can proceed. If the contractor has materials stored at their shop that were purchased with your deposit, those materials are your property, and you have a right to their return or credit for their value.

Scenario Three: Contractor Took Deposit for Permits But Never Filed

Here’s a specific sub-scenario that comes up frequently. The contract states that the deposit covers “plans, permits, and materials.” The contractor took your $4,000 deposit and assured you they would handle all permitting. Three months later, you check with your local building department and discover no permit application was ever submitted. Meanwhile, the contractor keeps stalling, saying they’re “working on the plans” or “waiting for city approval.” This is fraud or misrepresentation in addition to breach of contract. The contractor represented that your deposit would be used to obtain permits. Not only did they fail to obtain permits, they apparently never even tried. This suggests the money was used for other purposes or simply pocketed. Your demand letter should highlight this specific misrepresentation. You paid for a specific service (permitting) that was never performed. Even if the contractor argues they intended to handle it eventually, their failure to even submit an application after months is clear evidence of breach. Demand a full refund of any portion of the deposit attributed to permitting work that was never performed. Also put the contractor on notice that you will not permit any further work on your property without proper permits, and that any unpermitted work already performed may need to be removed at their expense. If you’re pursuing rescission of the entire contract based on this breach, frame it as a material failure of a critical term. Permitting isn’t a minor detail; it’s a legal requirement that affects your property’s value, your insurance coverage, and your exposure to city enforcement. The contractor’s failure to handle permitting as promised goes to the heart of the agreement.

Gathering Evidence Before You Write Your Demand Letter

A demand letter is only as strong as the evidence supporting it. Before you write anything, spend time collecting and organizing your documentation. You want to be able to prove every factual assertion in your letter, and you want the contractor to know you have this proof. Start with the contract itself. If you have a written contract, locate the original signed copy. If you never received a signed copy, that’s actually another violation of California law—Section 7159 requires the contractor to give you a signed copy before starting work. Make note of every deficiency in the contract: missing license number, vague scope of work, no payment schedule, no right-to-cancel notice, excessive deposit terms. Gather all proof of payment. Bank statements showing cleared checks, credit card statements, Venmo or Zelle transaction records, cash receipts if you paid cash (please tell me you didn’t pay cash without receipts). Create a simple spreadsheet showing the date, amount, and method of each payment. Total it up. This is the starting point for calculating your damages. Check the contractor’s license status through the CSLB website and take screenshots. The search will show you whether they’re currently licensed, what type of license they hold, the license number, when it was issued, whether it’s active or inactive, and any public discipline. If the contractor is unlicensed, print or screenshot this evidence. If they have a license, verify that the license number in their advertising or proposals matches their actual CSLB record. Collect all written communications. Go through your email and download every message exchanged with the contractor. Screenshot text messages and save them as PDFs or images. If you communicated through messaging apps like WhatsApp or through contractor platforms like Houzz or Thumbtack, capture those conversations too. These communications often contain admissions, excuses, broken promises, and timeline evidence that strengthen your case. Document the current state of the work with photographs and video. If no work has been done, photograph the unchanged condition of your property. If work was started and abandoned, document what was done and what condition it was left in. Take wide shots and close-ups. Date-stamped photos from your phone are excellent evidence. If there’s visible damage, code violations, or safety hazards resulting from the contractor’s work, document these extensively. Verify permit status with your local building department. Most cities allow online permit searches by address. If no permits exist, get written confirmation of this from the building department. If permits were required but not obtained, this is powerful evidence of the contractor’s breach. If code enforcement has issued any notices or violations related to the contractor’s work, obtain copies of these documents. Finally, get repair estimates from other contractors. If you’re claiming damages for incomplete or defective work, you need to quantify those damages. Get at least two written estimates from licensed contractors for the cost to complete the work properly or repair the contractor’s defective work. These estimates serve as evidence of your actual damages and demonstrate that you’ve mitigated by seeking reasonable solutions.

Writing an Effective Demand Letter for Deposit Return

Your demand letter needs to accomplish several goals simultaneously. It must clearly communicate the facts of what happened. It must identify the specific legal violations and breaches. It must calculate and demand specific relief. It must set a reasonable deadline for response. And it must create pressure for settlement without making threats you can’t or won’t follow through on.

Opening: Identify the Parties and Project

Start with the basics. Identify yourself as the homeowner and provide the property address. Identify the contractor by business name and, if you have it, the license number (or note that you’ve verified they’re unlicensed). Reference the contract date and a brief description of the project. “I am writing regarding the home improvement contract dated March 15, 2024, for a kitchen remodel at 123 Main Street, Riverside, California. You are a licensed contractor (CSLB License #987654) who agreed to perform this work for a total contract price of $45,000.” Or if they’re unlicensed: “I am writing regarding the home improvement contract dated March 15, 2024, for a kitchen remodel at 123 Main Street, Riverside, California. I have verified through the California Contractors State License Board that you do not hold, and did not hold at the time of contracting, a valid contractor’s license for this work.” This opening immediately establishes the context and, in the unlicensed scenario, puts the contractor on notice that you know about a major legal problem.

Summarize the Contract and Payments

Next, briefly summarize the agreement and what you paid. Be specific about amounts and dates. “Under the contract, I paid you a deposit of $7,000 on March 15, 2024. The contract stated that work would commence within 14 days and be completed within 60 days. The deposit was described as covering ‘materials, permits, and initial labor.'” If you made multiple payments, list them chronologically with dates and amounts. This creates a clear record and prevents disputes about how much you actually paid.

Describe What Happened: The Factual Timeline

Now tell the story of what went wrong. Be factual and specific, with dates wherever possible. Avoid emotional language or name-calling. Let the facts speak for themselves. “Work did not commence as promised. On March 30, I contacted you by phone, and you stated that you were waiting on material delivery. On April 15, I sent an email inquiry about the start date, to which you responded that you would ‘be there next week.’ No one arrived that week. On April 30, I called and left a voicemail requesting an update. You returned the call on May 2 and stated you had ‘scheduling issues’ but would start by May 15. As of today, June 20, 2024, no work has been performed on my property. I have verified with the City of Riverside Building Department that no permits have been filed for this project. My most recent attempts to reach you by phone and email on June 10 and June 15 have gone unanswered.” This factual recitation accomplishes multiple things. It shows you made repeated good-faith attempts to work with the contractor. It establishes a clear pattern of broken promises and avoidance. It includes verifiable facts (no permits filed) that the contractor cannot dispute. And it demonstrates your diligence in documenting the timeline.

Identify the Legal Violations and Breaches

This is where you bring in the statutory framework. Don’t just say “you breached the contract.” Explain specifically how the contractor violated California law and what legal consequences flow from those violations. “Your conduct constitutes multiple violations of California law. First, you have materially breached our contract through complete non-performance over a period exceeding 90 days from the promised start date. Second, the $7,000 deposit violates Business & Professions Code Section 7159, which limits home improvement down payments to the lesser of $1,000 or 10 percent of the contract price. Ten percent of $45,000 is $4,500, meaning you accepted an unlawful deposit exceeding the statutory maximum by $2,500. Third, our written contract fails to include several elements required by Section 7159, including a detailed payment schedule and proper right-to-cancel notices. Fourth, you accepted payment for permit services but never filed any permit application, which constitutes both breach of contract and misrepresentation.” If the contractor is unlicensed, this section becomes even more pointed: “I have verified through the CSLB website that you do not hold a valid contractor’s license and did not hold one on the date you entered into this contract or at any time during your engagement on this project. Under Business & Professions Code Section 7031(b), any person who utilizes the services of an unlicensed contractor may bring an action in court to recover all compensation paid to the unlicensed contractor for performance of any act or contract requiring a contractor’s license. This means I am legally entitled to recover the entire $7,000 deposit regardless of any work you claim to have performed or expenses you incurred.”

Calculate and Demand Specific Relief

Don’t be vague about what you want. State a specific dollar amount and explain how you calculated it. “Based on the breaches and violations described above, I am demanding a full refund of $7,000, representing all money paid to you under this contract. This refund is warranted because no work has been performed, no permits have been obtained, and the contract itself is void or voidable due to multiple statutory violations.” If some work was performed, adjust accordingly: “I am demanding a refund of $5,000, calculated as follows: $7,000 deposit paid, minus $2,000 representing the reasonable value of demolition work actually performed. In addition, I demand payment of $1,500 to cover the cost of permits and engineering plans I must now obtain due to your failure to file permits as promised, and $500 in city fines I have incurred due to unpermitted work. Total amount due: $7,000.” Make sure your damage calculation is reasonable and supportable with evidence. You’re not trying to punish the contractor (even though you may want to); you’re seeking to be made whole.

Set a Reasonable Deadline

Give the contractor a realistic timeframe to respond, but not so long that it allows further delay tactics. “I expect your full response to this letter, including confirmation of how and when you will refund the $7,000, within 10 business days of the date of this letter. If you wish to discuss a payment plan or alternative resolution, please contact me immediately.” Ten business days is reasonable. It’s enough time for the contractor to consult with their own attorney if they choose, but not so much time that they can use it as an excuse for further avoidance.

Reference Non-Court Escalation Options

This is where you create pressure without making threats. Explain what steps you will take if the contractor doesn’t resolve this voluntarily. “If we cannot reach a resolution within the stated timeframe, I will proceed with the following actions. First, I will file a formal complaint with the California Contractors State License Board detailing the violations described in this letter. I understand that these violations may result in disciplinary action against your license. Second, I will pursue a claim against your contractor’s bond to recover the amounts owed. Third, I will file a lawsuit in small claims court to recover all money paid plus additional damages. Small claims litigation will become a matter of public record.” Note the careful phrasing. You’re not threatening to file a false complaint or to use regulatory action as leverage to extract payment. You’re simply explaining that if this can’t be resolved between you, you’ll pursue all available legal remedies. That’s entirely appropriate and ethical.

Close Professionally

End the letter with a clear call to action and professional tone. “I am hopeful we can resolve this matter directly and avoid the time, expense, and public disclosure of formal legal proceedings. Please contact me at [your phone and email] to discuss resolution. I reserve all legal rights and remedies available under California law.” Sign the letter with your full name. If you’re sending it by email, type your name. If you’re mailing a hard copy, sign it by hand above your typed name.

Delivery Method

Send the demand letter in a way that creates proof of delivery. Certified mail with return receipt requested is the gold standard for mailed letters. For email, request a read receipt, and consider following up the email with a hard copy by certified mail. Some homeowners send demand letters both by email and certified mail simultaneously. The email often gets read immediately, while the certified mail creates a paper trail and proof of delivery for court purposes.

Non-Court Escalation Options When the Demand Letter Fails

Let’s assume you sent your demand letter, waited the specified timeframe, and received no response or an unsatisfactory response. Before filing a lawsuit, you have several other pressure points you can use.

Filing a CSLB Complaint

The California Contractors State License Board exists to protect consumers from bad contractors. Filing a complaint with CSLB is free, can be done online, and triggers an investigation that can lead to license discipline, mandatory arbitration, or mediation. Visit the CSLB website and navigate to the complaint section. You’ll fill out a detailed form describing what happened, upload your supporting documents (contract, proof of payment, photos, communications), and submit it electronically. CSLB will assign an investigator who may contact both you and the contractor, attempt to facilitate resolution, and determine whether disciplinary action is warranted. The CSLB complaint process has several advantages. It’s free. It puts additional regulatory pressure on the contractor. The investigation findings can be used as evidence if you later file a lawsuit. And in some cases, CSLB can facilitate a settlement or require the contractor to complete the work. The limitation is that CSLB cannot force the contractor to refund your money or complete your project. The board’s primary role is licensing and discipline, not consumer restitution. However, many contractors faced with potential license suspension or revocation suddenly become more willing to settle with complaining homeowners. When you file the complaint, be thorough and attach all relevant evidence. The quality of your complaint affects how seriously it’s taken and whether CSLB pursues enforcement action.

Pursuing the Contractor’s Bond

Every licensed contractor in California must maintain a contractor’s bond, currently $25,000. This bond exists specifically to provide a source of recovery for homeowners harmed by contractor violations. If the contractor violated licensing laws or contract requirements, you may be able to file a claim against their bond. Obtain the bond information from the CSLB license lookup. The license record will show the surety company that issued the bond. Contact that surety company and inquire about their bond claim process. Be aware of several limitations with bond claims. The bond amount is shared among all claimants, so if multiple homeowners have filed claims, your recovery may be limited. Bond claims typically require the surety company to investigate and verify the contractor’s violation. The process can take months. And the surety may deny the claim, requiring you to file suit against both the contractor and the surety. Despite these limitations, the bond claim process is worth pursuing, particularly for smaller amounts. A $5,000 bond claim is much more likely to result in payment than a $50,000 claim, simply because the bond amount is finite.

Involving Local Building and Code Enforcement

If the contractor performed unpermitted work or left your property in an unsafe or code-violating condition, your local building department may become involved whether you want them to or not. Rather than viewing code enforcement as an enemy, you can use it as leverage for settlement. If the contractor left your property with open walls, exposed electrical, or incomplete plumbing, these conditions likely violate local building codes. Document these conditions thoroughly. Then contact your building department, explain that a contractor abandoned work mid-project, and ask what you need to do to bring the property into compliance. The building department may issue a notice of violation or stop-work order. While this creates hassle for you, it also creates significant pressure on the contractor. They may face fines, and if they’re licensed, the code violation may be reported to CSLB as additional grounds for discipline. You can then approach the contractor and offer to work together to resolve the permitting and code issues if they’ll refund your money or complete the work properly. Many contractors, faced with mounting regulatory problems, will agree to a settlement rather than deal with multiple agencies and violations. A word of caution: don’t threaten to “turn the contractor in” to code enforcement solely as a bargaining chip to extract payment. That veers into extortion territory. Instead, frame it as a practical reality: “The property has code violations that must be corrected. I can work with you to fix this, or I’ll need to hire someone else and file claims to recover my costs. What do you prefer?”

Small Claims Court as the Final Pre-Attorney Step

If the demand letter and agency complaints don’t produce results, small claims court is your next move. Filing a small claims action is relatively simple, inexpensive, and doesn’t require an attorney. Visit your county’s superior court website and locate the small claims section. You’ll file a complaint (usually called a “Plaintiff’s Claim”) that identifies the defendant (the contractor), states the amount you’re seeking, and briefly explains why you’re entitled to that amount. The filing fee typically ranges from $30 to $75 depending on the claim amount. After you file, the court will issue a hearing date, typically within 60-90 days. You must properly serve the contractor with the complaint and hearing notice. Service can usually be accomplished by certified mail or by hiring a process server. At the hearing, you’ll have 10-15 minutes to present your case to the judge. Bring organized evidence: the contract, proof of payment, photos, communications showing broken promises, estimates from other contractors, permit search results, and any other documents supporting your claim. The judge will hear from both sides and typically issue a decision the same day or within a few days. If you win, you get a judgment. Collecting on that judgment may require additional steps (wage garnishment, bank levies, liens), but you at least have an official court order establishing that the contractor owes you money. The threat of small claims litigation is often the final push that gets a contractor to settle. Many contractors will pay to avoid the hassle of going to court, the public record of a judgment against them, and the potential impact on their license if they lose.

When Larger Amounts Are Involved: Knowing When to Hire an Attorney

Everything discussed so far assumes your claim is within small claims limits or that you’re willing to cap your recovery at those limits to avoid the cost of hiring an attorney. But sometimes the numbers are too large for small claims court, or the legal issues are too complex to handle yourself. If your deposit and damages exceed $12,500, you cannot bring the claim in small claims court. You’ll need to file in superior court, and practically speaking, this means hiring an attorney. Similarly, if you’re pursuing a Section 7031(b) disgorgement claim against an unlicensed contractor for a large amount, the contractor will likely hire an attorney to defend, and you’ll need legal representation to effectively litigate the case. Complex cases involving significant defective work, property damage, injury risks, or multiple legal theories may also warrant hiring an attorney, even if the dollar amount is theoretically within small claims range. When evaluating whether to hire an attorney, consider the cost-benefit ratio. If you’re owed $8,000 and an attorney wants a $5,000 retainer, you may be better off capping your claim at the small claims limit and representing yourself. But if you’re owed $50,000 and have strong evidence of multiple statutory violations, hiring an attorney on a contingency basis (where they take a percentage of any recovery) may make sense. Many consumer attorneys, particularly those who handle contractor disputes, will offer consultations to evaluate your case. Use these consultations to understand your options and the likely costs and outcomes before deciding whether to proceed pro se or with representation.

Frequently Asked Questions

What if the contractor claims they spent my deposit on materials and labor even though no work was done on my property?

This is a common defense from contractors caught with their hands in the cookie jar. The short answer is: it’s irrelevant to your legal rights. The contract was for work at your property. If the contractor claims they spent your money on something else—materials for another job, business overhead, personal expenses—that’s breach of contract, not a defense. Under basic contract law, when you pay a deposit for a specific project and the contractor fails to perform that project, you’re entitled to a refund regardless of what the contractor did with the money. If the contractor made poor business decisions, overpromised to multiple customers, or simply mismanaged funds, those are their problems, not yours. This is especially clear in California when dealing with excessive deposits. Remember, Business & Professions Code Section 7159 limits deposits to the lesser of $1,000 or 10 percent. If a contractor accepted a $7,000 deposit, $2,500 of that was illegal from day one. They have no legal right to retain money they had no legal right to take in the first place. If you’re dealing with an unlicensed contractor, Section 7031(b) explicitly provides for recovery of all compensation paid “for performance of any act or contract” requiring a license. The statute doesn’t say “all compensation paid minus whatever the contractor spent.” It says all compensation paid, period. Courts have consistently held that the contractor gets no offset or credit for expenses incurred or work performed when they were operating without a required license. In your demand letter, if the contractor raises this defense, respond firmly: “How you chose to spend money you had no legal right to take does not affect my right to a full refund under California law.”

Can I report the contractor to the Better Business Bureau or post negative reviews online?

Yes, with important caveats. You have a First Amendment right to share your honest experience with a business, including through online reviews or BBB complaints. However, you must be truthful and stick to facts you can prove. Before posting anything online, make sure you can back up every statement you make. Don’t call the contractor a “thief” or “scammer” unless you can prove criminal conduct. Don’t claim work was “defective” unless you have an expert opinion supporting that characterization. Don’t accuse the contractor of unlicensed operation unless you’ve verified their license status through CSLB. Safer approaches include stating objective facts: “Contractor took a $7,000 deposit on March 15, 2024, for a kitchen remodel. As of June 20, 2024, no work has been performed. I have verified with the city building department that no permits were filed. The contractor has not returned my calls or emails since June 1.” The BBB complaint process is straightforward and relatively safe because it’s a formal complaint mechanism rather than a public review platform. The BBB will forward your complaint to the business and attempt to facilitate resolution. Whether this produces results varies dramatically, but it creates another paper trail and another source of pressure. Online reviews on Google, Yelp, HomeAdvisor, or similar platforms are more visible and potentially more impactful on the contractor’s business, but they also carry more risk if you make false or misleading statements. Stick to provable facts, avoid inflammatory language, and focus on what happened rather than speculating about the contractor’s motives or character. Many contractors threatened with negative reviews will suddenly become more amenable to settlement. Some may threaten to sue you for defamation. The truth is a complete defense to defamation, so if everything you’ve written is accurate, you have nothing to fear. But be prepared for this threat, and don’t let it intimidate you into silence about factually accurate experiences.

What if the contractor offers to return part of the deposit but not all of it?

Partial refund offers are common and require careful evaluation. On one hand, getting some money back immediately beats the uncertainty and delay of litigation. On the other hand, accepting a partial refund typically requires you to release the contractor from all claims, meaning you forfeit your right to pursue the remaining amount. Evaluate partial offers based on several factors. How much are you being offered as a percentage of what you’re owed? If the contractor offers $5,000 on a $7,000 claim, that’s a strong offer representing 71% recovery. If they offer $1,000 on a $7,000 claim, that’s an insulting lowball. Consider the strength of your case and the likelihood of full recovery through litigation. If your case has weaknesses—maybe some work was actually performed, or maybe your documentation is incomplete—a partial settlement might be smarter than risking a smaller judgment in court. Think about your time and energy. Pursuing a claim to completion through small claims court requires multiple court appearances, service of process, evidence preparation, and potentially post-judgment collection efforts. If a reasonable partial settlement lets you move on with your life immediately, that has value beyond just dollars. Evaluate the contractor’s financial condition. If the contractor is judgment-proof (no assets, no income, operating through a now-defunct LLC), collecting a judgment may be impossible anyway. A partial payment now might be the only money you’ll ever see. If you’re considering a partial settlement, insist on three things: full payment of the agreed amount before you sign any release, a written settlement agreement that clearly states the terms, and a clear understanding that you’re releasing all claims against the contractor related to this project. Don’t accept promises of future payment or installment plans unless you’re confident the contractor will follow through.

The contractor says they’ll complete the work instead of refunding my deposit. Should I accept this?

This is almost never a good idea, and here’s why. The contractor has already demonstrated unreliability, poor communication, and disregard for their contractual obligations. They’ve broken promises, missed deadlines, and possibly violated multiple laws. Allowing them back onto your property gives them another chance to disappoint you, cause more damage, or make the situation worse. Additionally, the relationship has broken down. Trust is essential in a contractor-homeowner relationship. You need to trust that the contractor will show up when promised, do quality work, handle permitting correctly, and finish the project. That trust is gone. Trying to resurrect the relationship rarely works and usually just extends your misery. There are very limited circumstances where allowing the contractor to complete the work makes sense. If they’ve already done substantial work that would be expensive to redo, if they’re willing to put the completion timeline and quality standards in writing with penalties for non-compliance, if they’ll hire a bonded supervisor you approve to oversee completion, and if they’ll place funds in escrow to guarantee completion, then maybe—maybe—it’s worth considering. But in most cases, the cleaner solution is to get your money back and hire a different contractor. Yes, this means starting over. Yes, it’s frustrating. But it’s better than watching the same contractor continue to fail while your property remains in limbo. If you do decide to let the contractor continue, insist on a written modification to the contract that includes specific deadlines with liquidated damages provisions, a reduced payment schedule where you retain most leverage until completion, proof of insurance, confirmation of permits, and regular inspection rights. Basically, turn the relationship into an extremely tight, heavily documented arrangement that protects you at every step.

What if I can’t find the contractor anymore? They’ve disconnected their phone and don’t respond to emails.

Disappearing contractors present obvious challenges, but you still have options. Start by documenting all your attempts to contact them. Send letters by certified mail to every address associated with the contractor—business address, registered agent address from their license, property addresses from public records. The returned mail or tracking showing refusal to pick up certified mail serves as evidence of their avoidance. Check whether the business entity is still active. If the contractor operates through a corporation or LLC, search your state’s business entity database. If the entity has been dissolved or suspended, that’s evidence you’ll use later. But it doesn’t eliminate your claims—you can still pursue the individual owner or responsible managing employee. Hire a skip trace service or process server if necessary. These professionals specialize in locating people who are avoiding contact. For a few hundred dollars, they can often find current addresses, workplaces, and service opportunities you couldn’t find on your own. File your CSLB complaint even if you can’t reach the contractor directly. The board has more investigative resources than you do, and they can pursue the contractor through the license address on file. If CSLB takes disciplinary action, that creates additional pressure and a public record of the violations. Proceed with small claims filing. You can effect service through alternative means if personal service isn’t possible—service by publication, service at the contractor’s last known address, or service on the registered agent if it’s a business entity. The court can guide you through these alternative service methods. The fact that the contractor disappeared is actually evidence of consciousness of guilt and strengthens your case. Contractors who have legitimate reasons for delay don’t vanish; they communicate and try to work things out. Disappearing shows they know they’re in the wrong and are trying to avoid accountability.

Can I file a police report for theft or fraud?

You can try, but criminal prosecution is unlikely in most contractor deposit disputes, and here’s why. Theft and fraud require proof of criminal intent at the time the money was taken. A contractor who took your deposit intending to do the work, but then failed to perform due to poor business management, scheduling problems, or incompetence has committed breach of contract, not theft. To prove criminal fraud or theft, prosecutors would need to show the contractor took your money with the specific intent never to perform the work. This is difficult to prove unless there’s a pattern of behavior (the contractor takes deposits from multiple homeowners and does no work for any of them) or direct evidence of intent (emails or statements showing the contractor knew they had no ability or intention to do the work). Most police departments and district attorneys won’t pursue these cases because they view them as civil disputes, not criminal matters. They’ll tell you to sue in civil court. This is frustrating, but it reflects the reality that the criminal justice system is designed for clear-cut theft, not contractor disputes where intent is ambiguous. That said, if you truly believe you were the victim of fraud—the contractor knowingly misrepresented their license status, ran a fake business, or engaged in a pattern of taking deposits and disappearing—file a police report anyway. Even if criminal charges aren’t filed, the police report creates a valuable record you can reference in your civil case and your CSLB complaint. Some district attorneys’ offices have consumer protection divisions that handle contractor fraud differently than regular police departments. Research whether your county has such a division and file complaints with them specifically. They may take an interest in cases involving unlicensed contractors, large-scale fraud schemes, or contractors with multiple victim complaints.

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If you’re dealing with a contractor who took your deposit and failed to perform, I can help you evaluate your options and draft an effective demand letter. As a California-licensed attorney with over 13 years of experience, I’ve helped numerous  homeowners recover deposits and resolve construction disputes without expensive litigation.