Down Payments in Home Construction – What Ohio Law Says
In a home construction project, how big should the down payment be?
Take note, contractors: The law sets clear limits on down payment size—and ignoring those limits could cost you big.
First, let’s be clear: The down payment is not. your. money. It is the customer’s, and it can only be used for their project.
Too often, contractors collect a down payment or deposit and use it as operating income.
Not smart. Don’t do this, ever!
For new home builds or remodels over $25,000, Ohio law says you can’t ask for more than 10% upfront unless you’re ordering custom or specialty materials. Asking for more violates the Home Construction Service Suppliers Act (HCSSA).
For smaller projects under $25,000, there’s no specific limit on the down payment. But you still have rules to follow. You must provide a written receipt that clearly states when the deposit was paid and whether it is refundable or non-refundable.
The date when you received the funds is important because, under Ohio law, once you take that deposit, you are on the clock.
From the moment the deposit is paid, a contractor has 8 weeks to complete, or at least start, the work. If you can’t do this, you have to let the homeowner know and offer to return the deposit during the delay.
Failing to follow these rules isn’t just a bad look—it’s a violation of the Consumer Sales Practices Act (CSPA).
That means you could be on the hook for “treble” (or triple) damages if the homeowner takes legal action.
The bottom line: Requesting and accepting a down payment from a homeowner is not to be taken lightly. To protect your business, contractors should document any funds received and have receipts for how those funds are used.
My goal is to help contractors and construction professionals avoid unnecessary risk. This post is part of a series about avoiding potential pitfalls in residential construction contracts. If you’ve found it helpful, please share it with colleagues in the business, and follow me (Phil Truax of Truax Law Group) for more.
If you’re a home construction contractor and would like help with your residential construction contract, fill out our contact us form. Reference this article and you’ll get a complimentary consultation with one of our legal team members.
You can also find more related information in our Guide to Avoiding Residential Construction Contract Nightmares.
