California’s home improvement contract rules received a significant update when Governor Newsom signed SB 517 into law in October 2025. Effective January 1, 2026, this new legislation amends Business & Professions Code §7159 to require contractors to be more transparent about their use of subcontractors on residential projects.
This article explains what SB 517 requires, who it affects, and what contractors need to do now to comply. For a broader look at construction contract issues, see our guide to construction contract red flags in California.
What Does SB 517 Require?
SB 517 adds a new subcontractor disclosure requirement to California’s existing home improvement contract statute (Business & Professions Code §7159). The key requirements are:
Subcontractor Use Disclosure
Every home improvement contract must now include a section—in the form of yes/no checkboxes—specifying whether subcontractors will be used on the project. This gives homeowners clear notice at the time of signing that the person they hired may not be doing all the work.
Required Disclaimer Language
If the contractor indicates that subcontractors will be used, the contract must include the following disclaimer:
“[O]ne or more subcontractors will be used on this project, and the contractor is aware that a list of subcontractors is required to be provided, upon request, along with the names, contact information, license number, and classification of those subcontractors.”
This disclaimer must also be included in any change orders issued during the project.
Prime Contractor Responsibility
SB 517 also codifies that the prime (or direct) contractor is responsible for completing the project in accordance with the home improvement contract, plans, and specifications. However, the law clarifies that this designation does not shield subcontractors from administrative discipline—the CSLB can still take action against subcontractors who violate the Contractors State License Law.
Who Does SB 517 Apply To?
SB 517 applies to all home improvement contracts as defined under Business & Professions Code §7151.2. In practical terms, this means:
- General contractors performing residential remodels, additions, or repairs
- Specialty contractors working directly with homeowners on projects exceeding $500
- Any contractor using subcontractors on a home improvement project
The law does not apply to new home construction sold by a builder-developer (which is governed by different disclosure and warranty requirements, including SB 800).
How Does SB 517 Work with AB 1327’s Modernized Cancellation Rights?
SB 517 was enacted alongside AB 1327, which modernizes the way homeowners can exercise their right to cancel a home improvement contract. The two bills were designed to work together—SB 517 includes a specific provision ensuring compatibility with AB 1327 if both are signed into law (which they were).
Under AB 1327, homeowners can now cancel a home improvement contract via email, in addition to traditional mail or fax. Contractors must:
- Include their email address on the first page of the contract
- Provide a telephone support number to help buyers locate and complete the Notice of Cancellation
- Update the “Three-Day Right to Cancel” notice (five days for seniors, seven days for emergency repairs) to reflect the email cancellation option
Together, SB 517 and AB 1327 represent a shift toward greater transparency and easier consumer access to information and legal rights in home improvement transactions.
What Are the Penalties for Non-Compliance with SB 517?
Failure to include the required subcontractor disclosure in a home improvement contract is a violation of Business & Professions Code §7159. Under existing law, this is cause for disciplinary action by the Contractors State License Board (CSLB). Potential consequences include:
- Administrative citations and fines
- License suspension or revocation
- Increased scrutiny on future license renewal applications
- Potential civil liability if the homeowner suffers damages related to the non-disclosure
The CSLB has broad authority to investigate complaints and can initiate disciplinary proceedings against contractors who fail to comply with §7159 requirements—including the new SB 517 provisions.
Why Does SB 517 Matter for Homeowners?
SB 517 addresses a common consumer complaint: homeowners hire a licensed general contractor, only to discover that most or all of the work is being done by subcontractors they have never met and know nothing about. The new disclosure requirements give homeowners:
- Transparency: You will know upfront whether subcontractors will be involved in your project.
- Verification ability: You can request the list of subcontractors and verify their license status through the CSLB, protecting yourself from unlicensed work.
- Accountability: By knowing who is working on your property, you are better positioned to identify problems, communicate concerns, and hold the right parties accountable.
- Lien protection: Understanding the subcontractor chain helps you anticipate potential mechanics lien claims from unpaid subcontractors.
What Should Contractors Do to Prepare for SB 517?
If you are a contractor performing home improvement work in California, here is what you should do before your next project starting on or after January 1, 2026. For a comprehensive overview of all 2026 changes, see our 2026 California Construction Law Update.
- Update your contract templates. Add the yes/no subcontractor disclosure checkboxes and the required disclaimer language. If you also need to comply with AB 1327, include your email address and support phone number.
- Implement subcontractor tracking. Maintain a current list of all subcontractors on each project, including their names, contact information, license numbers, and classifications. Be prepared to provide this list to the homeowner upon request.
- Update your change order forms. The subcontractor disclaimer must appear on change orders as well, not just the original contract.
- Verify subcontractor licenses. As the prime contractor, you are responsible for project completion. Make sure every subcontractor you engage holds a valid, active CSLB license in the correct classification for their scope of work.
- Train your team. Project managers, estimators, and salespeople should all understand the new disclosure requirements and the importance of compliance.
How Does SB 517 Fit into Existing Home Improvement Contract Requirements?
SB 517 does not replace the existing requirements of Business & Professions Code §7159—it adds to them. Contractors must continue to comply with all pre-existing requirements, including:
- Detailed description of work, materials, and labor
- Contractor’s name, address, license number, classification, and expiration date
- Approximate start and completion dates
- Payment schedule within statutory limits
- Mechanics lien warning
- Three-day right to cancel notice (now with email option under AB 1327)
- Change order procedures
The subcontractor disclosure under SB 517 is an additional layer of transparency built on top of this existing framework.
Protect Your Interests — Talk to a Construction Attorney
Schedule a consultation with Bay Legal’s construction law team to discuss your situation. Call us at (650) 668-8000 or visit baylegal.com/practice-areas/construction-law/.
Frequently Asked Questions
Q: Does SB 517 apply to all construction projects in California?
A: No. SB 517 applies specifically to home improvement contracts as defined under Business & Professions Code §7151.2. It does not apply to new home construction sold by a builder-developer or to commercial-only projects.
Q: Do I need to list all subcontractors in the contract itself?
A: Not in the contract itself. The contract must disclose whether subcontractors will be used (via checkboxes) and include the required disclaimer. The actual list of subcontractors—with names, contact information, license numbers, and classifications—must be provided to the homeowner upon request.
Q: What if I add a subcontractor after the contract is signed?
A: SB 517 requires the subcontractor disclaimer to appear on change orders as well. If you add a subcontractor mid-project, your change order documentation should reflect this, and the homeowner can request an updated subcontractor list at any time.
Q: Can a homeowner cancel a home improvement contract by email under AB 1327?
A: Yes. AB 1327, also effective in 2026, allows homeowners to cancel a home improvement contract via email within the statutory cancellation period (three business days, five days for seniors, or seven days for emergency repair contracts). Contractors must include an email address on the contract.
Q: What should I do if my contractor refuses to disclose subcontractor information?
A: If a contractor fails to provide the required subcontractor disclosure, you may file a complaint with the Contractors State License Board (CSLB). The contractor’s failure to comply with §7159 is grounds for disciplinary action.
