To evaluate California construction change order costs, separate added work, deleted-work credits, and agreed fees. Apply the agreed pricing method, then reconcile the net adjustment with your last approved contract total. For covered home improvement contracts, both parties must sign the written change order before the changed work begins. A discussion about price should leave neither party guessing whether work is authorized. California Business and Professions Code §7159

This checklist addresses California residential improvement contracts under §7159, generally covering projects whose aggregate contract price exceeds $500. It is a cost-review aid, not a complete contract form; qualifying service-and-repair contracts have separate rules. Do not automatically apply these requirements to every new-home or commercial construction agreement. Scope of §7159

Start with the scope you already purchased

Gather the signed contract, incorporated plans and specifications, previous approved changes, payment schedule, and payment record. Identify the exact item the proposal changes. Ask the contractor to show what the original agreement included and why the proposed work falls outside it.

Request a comparison showing what will be added, what will be removed, and what stays. For a material substitution, identify both products, quantities, installation work, and any drawing revisions. “Upgrade bathroom” does not give you enough information to check a charge.

Clearly label a pricing request as a request for a proposal, with no authorization to purchase materials or start work. When you are ready to proceed, put any agreed start conditions into the signed change order. Do not assume the contractor will wait for another verbal go-ahead after signing.

Check the written change order

California requires the written scope, amount added or subtracted, and effect on progress payments; §7159.6 also addresses the completion date. Both parties’ signatures must precede the changed work. Use this review checklist alongside the contractor’s compliant paperwork. Change-order requirements, §§7159 and 7159.6

• Identification: property, contract date, change-order number, revision date, and parties.
• Changed scope: added and deleted work, materials, quantities, drawings, and exclusions.
• Price: additions, credits, fees, net adjustment, and revised contract total.
• Timing: affected payment milestones, schedule assumptions, and revised approximate completion date—or an explicit statement that the date is unchanged.
• Authorization: signatures, dates, agreed start conditions, and a copy for each party.

Check the 2026 paperwork. Effective January 1, 2026, §7159(c)(7) requires a subcontractor-use disclosure in the home improvement contract and the statutory subcontractor disclaimer on each change order. The disclaimer concerns providing subcontractors’ names, contact information, license numbers, and classifications upon request. An older template containing only scope, price, and signatures can miss this requirement. 2026 subcontractor-disclaimer requirement

Check the deleted-work credit before the markup

Start with the original work or material package being removed. Request the value attributed to its materials, labor, equipment, and subcontracted work. Ask how the contract treats associated overhead and profit when work is deleted.

Separate costs the change avoids from costs already incurred. Have materials been ordered, can they be returned, and has any installation occurred? Request documentation for claimed restocking, cancellation, removal, or rework charges, along with the contractual basis for passing them through. Record who keeps any unused materials.

A deletion does not necessarily warrant a full retail-price refund. If the original pricing was a lump sum, ask how the contractor valued the omitted portion. Keep the credit and any offsetting charges visible so you can assess each part of the adjustment.

Confirm which costs receive markup

Ask which contract provision or proposed agreement establishes the fee, what costs receive it, and how credits affect it. Section 7159 specifies documentation requirements; it does not prescribe a standard change-order markup percentage. Section 7159

The percentage tells you only part of the calculation. Confirm whether it applies to gross additions or the net change, whether subcontractor prices already include fees, and whether taxes, freight, supervision, or administration are included elsewhere. Ask the contractor to explain overlapping charges; separate fees are not automatically duplicates. If the contract leaves the pricing method open, settle it in writing before authorizing the change.

Worked example: from replacement cost to net change

Hypothetical assumptions: The owner substitutes a material package before installation. Original materials are returnable, the parties agree to the credits below, and a documented $200 return charge applies. Their pricing agreement applies a 15% overhead-and-profit fee to the net direct-cost adjustment, including that charge. Applicable tax and freight are included in the material figures; there are no other change costs. The percentage is an illustration, not a California standard.

With the same figures, applying 15% to the $6,200 in additions and return charges before subtracting the $4,000 credit would produce a $3,130 increase. The $600 difference is the fee attributable to the deleted costs. That calculation would conflict with this example’s agreed net-cost method; another contract may specify a different method.

Set payment timing and completion effects before signing

Ask the contractor to identify each payment milestone that changes and show its old and new dollar amounts. Check that the same work is not payable through both a separate change-order invoice and an increased original milestone.

For ordinary covered contracts, apart from the permitted down payment, a contractor cannot request or accept payment exceeding the value of work performed or materials delivered. Section 7159.5(a)(8) provides an exception for specified full-performance and payment security arrangements. A signature approving an increase does not by itself make the entire increase payable immediately. Payment rules and exception

Record whether the change adds working or calendar days, the revised approximate completion date, and assumptions about deliveries or decisions. If the contractor proposes extended supervision or another delay charge, identify its amount and whether it is already included in the price.

Continue your separate payment and lien-release checks when a payment becomes due.

Reconcile the approved contract total

Maintain a register with each change’s number, revision, description, signature date, amount, and status. Keep proposals and disputed requests separate from approved adjustments, and retain earlier versions as superseded records.

Continuing the hypothetical example:

If recorded payments total $35,000, the unpaid contract balance is $50,830. That balance is not the amount currently due: use the revised payment schedule and completed work or delivered materials to check the next invoice.

Before signing, settle the scope, net price, payment effects, completion effects, and required paperwork. Once both parties have signed, save the final version with your records for managing home improvement work, update the contract register, and revise the budget for your other construction cost decisions.