Construction scams cost California homeowners millions of dollars every year. The most common victims are people who hired the cheapest bid, skipped license verification, or ignored early warning signs. This guide covers the 10 red flags that consistently appear in contractor fraud cases — so you can spot them before you sign anything.
California law (Business and Professions Code §7159.5) caps the initial deposit at 10% of the total contract price or $1,000 — whichever is less. Any contractor asking for 30%, 50%, or “materials costs upfront” is either breaking the law or setting up to disappear with your money. A legitimate contractor has established credit with suppliers and does not need your cash to buy materials before work begins. APLA uses a milestone-based payment schedule tied to construction progress.
Every contractor performing work over $500 in California must hold a valid CSLB license. If a contractor cannot give you a license number immediately, or becomes evasive when you ask, stop the conversation. Verifying is free and takes 30 seconds at cslb.ca.gov. You are looking for: active license status, correct classification (Class B for general contracting), no disciplinary actions, and current workers’ compensation insurance. APLA’s license is CA #1136359 — verify it any time.
When one bid comes in 30–50% below the others, something is wrong. Either the contractor is planning to make up the difference with change orders once work starts (the most common scam), they are unlicensed and cutting corners, or they are underbidding the scope and will abandon the job. A legitimate contractor cannot build your ADU for $40,000 if every other licensed contractor quoted $95,000. The materials and labor cost what they cost.
California law requires a written contract for any home improvement project over $500. The contract must include: full scope of work, start and completion dates, payment schedule, description of materials, contractor license number, and workers’ comp information. A contractor who wants to work on a handshake has no accountability and you have no legal recourse. Never let work begin without a signed written contract.
“We can do this without a permit and save you money” is one of the most dangerous things a contractor can say. Unpermitted structural, electrical, plumbing, and mechanical work is illegal in California. It must be disclosed when you sell your home, it voids your homeowner’s insurance coverage for that work, and the city can order it demolished. A contractor who suggests skipping permits is protecting themselves from CSLB oversight — not saving you money.
“This price is only good today.” “I have another job starting Monday so I need a deposit now.” “I can start immediately if you sign today.” Legitimate contractors give you time to review bids, check references, and verify their license. Pressure to decide immediately is designed to prevent you from doing due diligence. Walk away.
A contractor with only a cell phone number, a Gmail address, and a freshly-made website has no track record. Legitimate construction companies have a physical business address, a company history on their CSLB record, and verifiable past projects. Search for the company name, check Google reviews, ask for the addresses of 2–3 completed projects you can drive past.
Legitimate contractors accept checks, bank transfers, and sometimes credit cards. A contractor who insists on cash payments is avoiding a paper trail — usually because they are unlicensed, not paying taxes, or planning to dispute what you paid. Always pay by check or bank transfer so there is a documented record of every payment.
A licensed contractor must carry: general liability insurance (covers property damage during construction) and workers’ compensation insurance (covers injuries to their workers on your property). Ask for certificates of insurance naming you as an additional insured before work begins. If a worker gets injured on your property and the contractor has no workers’ comp, you can be held liable. CSLB’s license lookup shows whether a contractor’s workers’ comp is current.
A contract that says “kitchen remodel — $85,000” with no itemization is not a contract — it’s a blank check. A legitimate construction contract specifies: exact materials (brand, model, finish), scope of every trade (electrical circuits, plumbing fixtures, tile specifications), what is and is not included, how change orders are priced and approved, and the exact payment milestones. If a contractor cannot or will not provide an itemized scope, you have no protection against scope creep, substituted materials, or cost escalation.
10% of the total contract price or $1,000 — whichever is less. This is California law. Any contractor asking for more is violating the Business and Professions Code and should be reported to the CSLB.
File a complaint with the CSLB at cslb.ca.gov/consumers/complaints. You can also call the CSLB hotline at 1-800-321-2752. For active fraud (contractor took money and disappeared), also file a police report and contact the DA’s consumer protection division.
Licensed contractors are bonded — their bond can cover losses up to the bond amount ($15,000 for most classifications). The CSLB Arbitration Program can also resolve contract disputes. For larger losses, civil court is an option. Unlicensed contractors are harder to recover money from, which is why verifying the license first is so important.
Yes. CA General Contractor License #1136359 — verify at cslb.ca.gov. APLA carries general liability and workers’ compensation insurance. We provide insurance certificates to every client before work begins.
APLA Construction has been serving Greater Los Angeles homeowners with fully licensed, fully insured, permit-compliant construction.
Call: (818) 818-4419
Email: info@aplaconstruction.com
CA General Contractor License #1136359
See our complete guide: How to Choose a Contractor in Los Angeles.