Contractors can keep payment only for work actually done. If one takes a large deposit and stops, you generally have a claim for the unearned part. The strongest cases have a written contract, photos and a clear paper trail.
Start with a written demand
- State what the contract promised, what was paid, what was done and what is incomplete.
- Give a firm deadline, often 10 to 14 days, to either finish the work or refund the unearned amount.
- Send it by certified mail and email, and keep copies.
- Say that you will file a complaint with the licensing board and a lawsuit if there is no response.
What the contractor may keep
In general, a contractor who stops may keep the reasonable value of work performed, not the whole deposit. If you paid $8,000 and the finished work is worth $3,000, you may have a claim for the difference. Photographs taken before and after, a second contractor's inspection and itemized estimates are the usual way to prove this.
Cost to complete
If finishing the job with a new contractor costs more than the original price allowed, the extra can sometimes be recovered as damages. Get written estimates from licensed contractors, and keep invoices for any corrective work.
Where to file
- The state contractor licensing board, if the contractor is licensed. Boards can discipline and sometimes order restitution or access a recovery fund.
- Small claims court for amounts under your state's limit. Limits vary a great deal.
- A civil lawsuit for larger amounts, usually with a lawyer.
- Your state attorney general or consumer protection office.
- Your credit card company, if you paid by card, which may allow a dispute within its time limit.
Unlicensed contractors and bankruptcy
Some states let homeowners recover money paid to an unlicensed contractor, sometimes in full, with short deadlines. If the contractor files for bankruptcy, you may become an unsecured creditor and should file a claim as instructed in the notice. Ask a lawyer about your state's rules.
Before the next project
Use a written contract with a payment schedule tied to milestones, check the license and insurance, avoid large upfront payments and keep every change order in writing. Our guide to home improvement contractor disputes covers the contract terms to check.
A hypothetical to see the claim
A homeowner pays a $9,000 deposit on a $24,000 kitchen job. The contractor demolishes the old cabinets, then stops responding. A new contractor will finish for $19,000, and says the demolition and rough work done was worth about $3,000. The homeowner's claim is roughly the unearned deposit of $6,000, plus the extra cost to complete if it exceeds the original price. Photographs, the contract and the second contractor's written estimate make the numbers easy to prove.
Evidence to collect now
Take photographs and video of the site before anyone else touches it. Save the contract, change orders, payment receipts, texts, emails and voicemails. Write a timeline of dates the contractor promised to return. Ask the new contractor to document the condition of the work and note defects.
A note on liens
In many states unpaid subcontractors and suppliers can place a lien on your home even if you paid the contractor. Ask for lien waivers when you make payments, and check whether suppliers were paid. If you receive a lien notice, talk to a lawyer promptly because deadlines are short.
Frequently asked questions
Can a contractor keep my whole deposit?
Generally only the reasonable value of work done, though the contract terms matter.
Should I send a demand letter?
Yes, and keep proof of delivery.
Can I use small claims?
Yes, up to your state's limit.
What if the contractor is unlicensed?
Some states let you recover what you paid, with short deadlines.
Can I dispute a card payment?
Possibly, if you act within the card's dispute window.