Home Improvement Contracts: The 3-Day Right to Cancel and Deposits
The FTC Cooling-Off Rule for jobs sold at the customer’s home, and California’s and New York’s home improvement contract, deposit and cancellation rules.
By Seayora Editorial Team · Published · Facts checked · 4 min read
Short answer: A contractor who sells a job at the customer’s home must, under the FTC’s Cooling-Off Rule, give a written contract or receipt and a notice that the buyer may cancel until midnight of the third business day, for sales of $25 or more made at the home. California and New York add home improvement contract rules: California caps the down payment at $1,000 or 10% of the price, whichever is less, and New York requires a signed contract with approximate dates, a progress-payment schedule and a three-day cancellation notice.
Key takeaways
- The FTC Cooling-Off Rule covers sales of $25 or more at the buyer’s home and $130 or more at other temporary locations (16 CFR 429.0).
- The buyer may cancel until midnight of the third business day, and the seller must give two copies of a Notice of Cancellation (16 CFR 429.1).
- A buyer-initiated emergency repair can be exempt only with the buyer’s handwritten, signed statement waiving the right.
- California: a written contract for jobs over $500; down payment no more than $1,000 or 10%, whichever is less; no payment for work not yet done (Bus. & Prof. Code § 7159).
- New York: a signed writing, approximate start and completion dates, a mechanic’s lien notice and a three-business-day cancellation right (Gen. Bus. Law § 771).
Does the FTC’s 3-day cancellation rule apply to contractors?
It applies to any “door-to-door sale,” which the Federal Trade Commission defines as a sale of consumer goods or services where the seller personally solicits the sale, including in response to the buyer’s invitation, and the buyer agrees somewhere other than the seller’s place of business, with a price of “$25 or more if the sale is made at the buyer’s residence or a purchase price of $130 or more” elsewhere (16 CFR 429.0). A contractor who quotes and signs a job at the kitchen table is making that kind of sale. A sale that follows negotiations at the seller’s permanent place of business is not.
What must the contract say?
At signing, the seller must give the buyer a completed receipt or copy of the contract, in the language used in the sales presentation, showing the date and the seller’s name and address, with a 10-point boldface statement near the signature: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction.” The seller must also give a completed Notice of Cancellation in duplicate; if the buyer cancels, payments are returned within ten business days (16 CFR 429.1).
What about emergency repairs?
The FTC rule excludes a sale where the buyer initiated the contact, the work is needed “to meet a bona fide immediate personal emergency,” and the buyer gives the seller a separate, dated and signed statement in the buyer’s own handwriting describing the emergency and waiving the right to cancel (16 CFR 429.0). New York has the same exception, with the same handwritten-statement requirement (N.Y. Gen. Bus. Law § 771). A preprinted waiver form does not satisfy either.
What does California require in a home improvement contract?
A home improvement contract is required where the aggregate contract price, including labor, services and materials, exceeds $500, and the contractor must give the buyer a copy signed and dated by both before any work starts (Cal. Bus. & Prof. Code § 7159). Among its required contents:
- In 12-point bold type: “THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.”
- A progress-payment schedule describing each phase, with the statement that “IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED.”
- An “Approximate Start Date,” a description of what counts as substantial commencement, and an “Approximate Completion Date.”
- A Three-Day Right to Cancel notice, five days for a contract with a senior citizen, and seven business days for repairs after a declared disaster.
- A statement that the contractor will give a lien release for each portion of work paid for, and notice that the owner may require a performance and payment bond.
What does New York require?
Every home improvement contract covered by the article must be in a writing signed by all parties, with the approximate dates work will begin and be substantially completed, a notice that unpaid contractors, subcontractors and suppliers may file a mechanic’s lien against the property, a notice that payments received before completion must be deposited as the Lien Law requires unless the contractor posts a bond, a schedule of any progress payments tied to stages of completion, and notice that the owner may cancel “until midnight of the third business day after the day on which the owner has signed” (N.Y. Gen. Bus. Law § 771).
| Rule | Federal (FTC) | California | New York |
|---|---|---|---|
| When it applies | Sales of $25+ at the home, $130+ at other temporary locations | Home improvement contracts over $500 | Home improvement contracts under Gen. Bus. Law art. 36-A |
| Right to cancel | Until midnight of the third business day | Three days (five for seniors; seven after a disaster) | Until midnight of the third business day |
| Deposit or down payment | No rule | No more than $1,000 or 10%, whichever is less | Deposited per Lien Law § 71-a(4), or bonded |
| Emergency exception | Buyer’s handwritten, signed waiver | Cancellation rights follow Civ. Code §§ 1689.5–1689.14 | Owner’s handwritten, signed waiver |
Frequently asked questions
Can a customer cancel a contract signed at their home?
Under the FTC Cooling-Off Rule, yes, until midnight of the third business day for sales of $25 or more made at the home. California and New York give a similar right in their home improvement laws, and California gives seniors five days.
How much deposit can a contractor take in California?
No more than $1,000 or 10% of the contract price, whichever is less, on a home improvement contract, and no payment for work not yet completed or materials not yet delivered.
Does the cancellation right apply to emergency repairs?
It can be waived when the customer called you, the repair is a genuine emergency, and the customer writes and signs their own statement describing it and waiving the right. A printed waiver is not enough.
Sources
- 16 CFR Part 429, Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations, eCFR
- California Business and Professions Code § 7159, California Legislative Information
- N.Y. General Business Law § 771, Contract provisions, New York State Senate
How Seayora helps
Contracts and change orders: Signed contracts and documented change orders, so every scope change is agreed in writing before the work is done.
This article is general information, not legal advice. Landlord-tenant law varies by state and city and changes often, so check the current rule for your property and talk to an attorney before acting on a dispute.
How we write and check these guides: editorial standards.
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