Last Updated on August 25, 2026 by Umar Farooq
Almost every page telling you how to choose a waterproofing contractor was written by a waterproofing contractor. We counted the words on the one ranking first: in 924 words about hiring, the words licence, insurance, deposit, cancel, lien and permit appear zero times each.
This page is only about the commercial and legal side. What you should ask about the diagnosis is a separate matter and we cover it separately.
One note before anything else. Almost everything below is jurisdiction-specific. The figures differ by state, sometimes by city, and we have labelled which is which. Use them as worked examples and then check your own.
The rule that covers the visit you invited
This trade sells through in-home visits, usually a free inspection you booked yourself. There is a federal rule about exactly that, and no page in this market cites it.
Here is the definition, and the clause that matters is in the middle:
You invited them and it still counts. That is the sentence, and it disposes of the commonest thing homeowners get told when they try to cancel.
The threshold is low: $25 or more if the sale is made at your home, $130 or more elsewhere. A basement job clears it comfortably.
What the contractor is required to do
The contract must carry this statement, and the rule prescribes the wording:
They must also give you a completed cancellation form in duplicate, and tell you about the right orally at the time you sign. Failing any of those is itself defined as an unfair and deceptive act.
They cannot ask you to sign the right away either. The rule specifically prohibits including any waiver of any of the rights to which the buyer is entitled, including the right to cancel.
If you do cancel, they have to refund all payments within 10 business days. And they may not sell your finance agreement to a third party before midnight of the fifth business day, which stops a lender being interposed while you are still deciding.
Two practical details. Business day excludes Sundays and federal holidays, so the window is usually longer than three calendar days. And the federal rule is a floor, not a ceiling: state law can be stronger, and often is. Maryland gives five business days, or seven if you are 65 or over. Illinois gives 15 business days to those over 65, and its attorney general states the point bluntly.
The deposit, which is probably capped
Contractors in this trade often ask for a third or a half up front. In some states that is illegal.
| Jurisdiction | The limit |
|---|---|
| California | $1,000 or 10 percent of the contract price, whichever is less. And there are no exceptions for special-order materials |
| Maryland | No more than one third of the contract price, and nothing at all before the contract is signed |
| New York | Deposits must be held in escrow under lien law, unless the contractor posts a bond or letter of credit instead |
| Texas | Not a cap, but over $5,000 the contractor must deposit your payments in a construction account, and you can require access to the records in the contract |
The general principle behind all of them, stated by California’s licensing board, is that payments to the contractor cannot exceed the value of the work performed. New York puts the same test in statute, requiring progress payments to bear a reasonable relationship to the work performed and the materials purchased.
The federal consumer agency confirms the general position and tells you where to look:
Why “you can pull the permit” is a red flag
The federal consumer agency lists it among the signs of a home improvement scam, in those words: scammers ask you to get any required building permits. What it does not explain is why, and the why is worth understanding because it is the biggest single liability transfer in this whole subject.
When you sign the permit application, you become the owner-builder.
It goes further than paperwork. As owner-builder you are responsible for ordering materials and making sure all suppliers are paid, and for supervising, scheduling and paying subcontractors. And the consequence attaches directly to your house: subcontractors and suppliers who are not paid on schedule may file liens against your property.
So the contract has to say who pulls the permits, and it should not be you. And once issued, verify it. If a contractor is obtaining the permits for you, it is important to verify those permits have actually been issued before work begins, because without them you can be fined, you can have problems selling, and the work may be unsafe.
Insurance, and the part about your own policy
Two policies matter and people usually check only one. General liability covers damage. Workers’ compensation covers the person injured in your basement.
The exposure if it is missing is yours:
There is a mechanism behind that, and it connects back to the permit point. If you use anyone other than a licensed subcontractor, you may be considered an employer, with the obligations that carries including workers’ compensation insurance.
On verifying it: a certificate of insurance is a snapshot from the day it was issued and a policy can lapse afterwards, so the only way to know it is in force today is to ask the insurer. New York now requires the contractor to disclose the insurer’s contact details including a phone number and address before work starts, which gives you the number to ring. Elsewhere, ask for it.
One nuance worth knowing: some jurisdictions accept a certificate of exemption from workers’ compensation, which a sole trader may hold. An exemption is not cover. If a sole trader is working alone in your basement under an exemption, understand that is what you are accepting.
Liens: how you can pay twice
This is the risk homeowners least expect and it is the one that can cost the house.
And the part that catches people:
Texas states the same independently: if your contractor fails to pay the subcontractors and suppliers, you are responsible, even though you never contracted with them.
Four defences, all cheap
- Joint checks. The simplest defence, and nobody mentions it. Make the cheque payable to both the contractor and the supplier or subcontractor, so both must endorse it.
- Conditional releases before you pay, unconditional releases after. And note the leverage: by law you may withhold the next payment until you get the unconditional releases for the previous one.
- Preliminary notices. Subcontractors and suppliers who may need to lien must send you one, and if they do not send it they lose the right to file.
- A Notice of Completion afterwards. Filing one within 15 days of completion cuts a contractor’s window to record a lien from 90 days to 60, and a subcontractor’s or supplier’s from 90 days to 30.
Those specifics are Californian. The mechanism exists in most US states with different timings, so check yours. In Texas, note that signing a contract for improvements on your homestead can itself create the lien.
New York requires the warning to be printed in the contract, which tells you how seriously the risk is taken: any contractor, subcontractor or materialman who is not paid may have a valid legal claim against your property known as a mechanic’s lien.
Checking the firm
Licensing for this trade is state by state, sometimes county or city level, and in some states there is no dedicated licence at all. We are not going to publish a state table, because the only sources offering one are lead generation sites. Find your own state’s authority. Some worked examples of what a good lookup gives you:
- California licenses the firm and registers home improvement salespersons separately, so the person in your living room should have their own registration.
- Maryland requires the licence number in the contract, and the name and licence number of any salesperson who sold the job.
- Washington lets you review a contractor’s licence history for previous lawsuits or licence violations, which is far more useful than a star rating.
- New York City licenses home improvement contractors even though the state does not, and its definition names basements explicitly.
For a pre-1978 house there is one accreditation that is legally required rather than marketing: lead-safe certification. Anyone paid to perform work that disturbs paint in housing built before 1978 must be certified, and that includes sole proprietorships. Interior basement work routinely disturbs painted masonry, so this applies more often than people assume.
The honest limits of every check
- A licensing board only records complaints against licensees. An unlicensed operator is invisible to it.
- A firm that dissolves and re-registers under a new name carries no history at all.
- “Bonded” is not a per-customer guarantee. A bond is a fixed shared pot. Washington raised general contractor bonds to $30,000 and specialty contractor bonds to $15,000, across all claimants, and the protection only applies if the contractor is registered.
- Reviews are the weakest signal. As one attorney general puts it, they can also be misleading, so get them from multiple sources and cross-check.
The best single check is a courthouse one that no consumer page mentions: check for lawsuits at the local courthouse, and check the firm’s reputation for paying its subcontractors and suppliers.
The contract
The federal minimum is the contractor’s name, address, phone number and licence number, estimated start and completion dates, any promises made in conversation, and a written statement of your right to cancel within three business days.
Beyond that, borrow the strictest state requirements as your template:
- Specificity. Not “install drainage” but the make, model, quantity and specification. California’s own example is instructive: the contract should read “install oak kitchen cabinets, manufactured by Company XYZ, model 01381A”, not just “install kitchen cabinets”.
- A payment schedule tied to phases, with the price for each segment and, unusually and usefully, identification of the subcontractors and material suppliers for each segment. That is what makes the joint-cheque defence workable.
- Who pulls the permits, and a completion date.
- Changes in writing. If the price or scope changes it must be done with a written change order signed by both parties before the change. Expect a service charge for changes, and expect it to be covered in the contract.
- No blanks. Never sign a blank or partially blank contract. In Washington DC, contractors are not allowed to have consumers sign a contract with any spaces left blank.
On the pressure to sign now, one attorney general puts the test well: the salesperson should be willing to leave the contract with you so you can read it on your own time, and anyone who rushes you or will not leave a copy should make you suspicious of both the person and the contract.
Read the arbitration clause before you initial it
Almost nobody covers this. Maryland requires a mandatory arbitration clause to disclose who conducts the arbitration, the fees, whether the finding binds you, and this:
So initialling that clause can put your route to compensation on hold. That is worth ten seconds of attention.
Contractor-arranged finance
The federal red flag list includes contractors who suggest you borrow from a lender they know. Texas explains the arithmetic:
The red flag lists, in their own words
These are government lists, quoted rather than paraphrased.
Federal consumer agency, signs of a home improvement scam: scammers knock on your door looking for business because they are in the area; say they have materials left over from a previous job; pressure you for an immediate decision; ask you to pay everything up front or only accept cash; ask you to get any required building permits; suggest you borrow money from a lender they know.
Illinois attorney general adds one that lands squarely on this trade: someone who offers to inspect your home for free without authentic identification establishing their business status. Also on their list: a company listing only a phone or PO box number, refusal to provide proof of insurance and references, a cheque payable to a third party, and an offer to drive you to your bank to withdraw the money.
On the unusually low bid, the most useful framing comes from Texas: question the quality of materials and work, because a very low bidder may not include all the tasks you expect, may use inexperienced labour or second-rate materials, and most legitimate bids fall into a fairly close range.
So get three written bids, and do not automatically choose the lowest. Ask for an explanation if there is a big difference between them.
If it goes wrong
- Write to the contractor by certified mail with a return receipt, so you can prove they received it. Keep notes and copies. Every later route needs this.
- Cancel if you are still in the window. Three business days federally, five or seven in Maryland, 15 business days for over-65s in Illinois.
- Complain to the licensing board.
- Complain to the state attorney general or consumer protection office.
- Court, then the recovery fund, where one exists.
- Claim against the bond where the state uses bonds instead.
Recovery funds, with their real caps and their real gates
| Fund | Cap | The catch |
|---|---|---|
| Maryland Guaranty Fund | $30,000 per claimant, $250,000 across all claimants against one contractor | Covers actual loss only, not legal fees or consequential damage. Will not reimburse money paid to an unlicensed contractor. Three year limit |
| Virginia Recovery Fund | $30,000 per claim, $100,000 per biennium for one contractor | You must already have a court judgment. And improper or dishonest conduct does not include mere breach of contract |
Maryland also offers free mediation through its commission, which is worth trying before anything adversarial.
If you are in the UK
The equivalent is stronger, and the version circulating online is wrong. A contract signed in your own home is an off-premises contract, defined as one concluded in the simultaneous physical presence of trader and consumer in a place which is not the business premises of the trader.
You may cancel an off-premises service contract without giving any reason, and the cancellation period ends 14 days after the day the contract is entered into.
And the sanction for not telling you is severe. If the trader never provides the information about your right to cancel, the cancellation period runs for 12 months.
So if you signed a damp-proofing contract at your kitchen table and nobody mentioned a cooling-off period, you may still be inside it long after you assumed otherwise.
FAQ
I booked the appointment myself. Do I still get three days?
Yes. The rule covers sales made in response to or following an invitation by the buyer. Booking a free inspection does not turn a home visit into a showroom visit.
They want 50% up front. Is that normal?
It is common and in some states it is unlawful. California caps it at $1,000 or 10 percent, whichever is less. Maryland caps it at a third. Everywhere, the principle is that payments should not run ahead of the value of the work done.
Should I pull the permit to save money?
No. Signing that application makes you the owner-builder, which puts supervision, code compliance, paying suppliers and lien exposure onto you. The federal agency lists being asked to do it among the signs of a scam.
The contractor is licensed and bonded. Am I covered?
Partly. A bond is a fixed pot shared among all claimants, not a per-customer guarantee, and it only applies if the contractor is properly registered. Check the licence history for lawsuits and violations rather than relying on the phrase.
I paid the contractor in full. Can a subcontractor still lien my house?
In many US states, yes. That is precisely the double payment risk. Joint cheques and unconditional lien releases before each payment are the defences.
What if I already signed and the three days have passed?
Write to them by certified mail first, because every later route requires that record. Then licensing board, then attorney general, then court and a recovery fund if your state has one. And check your state’s window, because several are longer than the federal three days.
