How Much Deposit Can a Contractor Ask For in New York?
New York does not set a single percentage cap on a home improvement deposit; instead the Lien Law makes a homeowner's advance payments trust funds that must be held in escrow or bonded, and the General Business Law sets what the written contract must say, each rule verified against its primary source.
New York regulates home improvement deposits through the Lien Law and General Business Law Article 36-A rather than a single deposit percentage. The rules below each bear on a homeowner's deposit, and every one is tied to its primary source and verified against it.
Rules that bear on your deposit
In New York, payments a home improvement contractor receives from an owner before substantial completion of the work must be deposited in an escrow account in a bank located in the state within five business days. 1
Instead of depositing the payments in an escrow account, the contractor may post a bond, contract of indemnity, or irrevocable letter of credit guaranteeing the return or proper application of the payments. 2
Payments deposited in the escrow account remain the property of the owner except as otherwise provided in the statute. 3
Failure to place customer deposits in escrow, except as provided in the statute, constitutes a violation of the section. 4
A home improvement contractor who fails to deposit funds in escrow or provide a bond as required is subject to a civil penalty that may not exceed twenty-five hundred dollars for each contract. 5
Under a New York home improvement contract, the owner may cancel the contract until midnight of the third business day after the day the owner signed it. 6
Every New York home improvement contract, and all amendments to it, must be evidenced by a writing signed by all the parties to the contract. 7
Sources
In New York, payments a home improvement contractor receives from an owner before substantial completion of the work must be deposited in an escrow account in a bank located in the state within five business days.
Instead of depositing the payments in an escrow account, the contractor may post a bond, contract of indemnity, or irrevocable letter of credit guaranteeing the return or proper application of the payments.
Payments deposited in the escrow account remain the property of the owner except as otherwise provided in the statute.
Failure to place customer deposits in escrow, except as provided in the statute, constitutes a violation of the section.
A home improvement contractor who fails to deposit funds in escrow or provide a bond as required is subject to a civil penalty that may not exceed twenty-five hundred dollars for each contract.
Under a New York home improvement contract, the owner may cancel the contract until midnight of the third business day after the day the owner signed it.
Every New York home improvement contract, and all amendments to it, must be evidenced by a writing signed by all the parties to the contract.
Frequently asked questions
- Does New York cap how much deposit a contractor can ask for?
- New York does not set a single percentage deposit cap. Instead, the Lien Law requires a contractor to hold a homeowner's pre-completion payments in escrow (or post a bond in lieu), so the money stays the owner's property until the work is done.
- What protects my deposit in New York?
- Your advance payments are trust funds under Lien Law section 71-a: the contractor must place them in a New York escrow account within five business days or post a bond, and the written contract must tell you so under General Business Law Article 36-A.
Last reviewed August 4, 2026
This page is general information about state law, not legal advice. Laws change, and how they apply depends on the facts of your situation.