ADU construction is a $200,000–$400,000 transaction with one of the highest fraud rates in residential construction. Florida and California consistently top contractor-complaint dashboards. This is how to vet before you sign — the eight checks that filter out almost every bad outcome.
California requires a B-license (general building) or B-2 (residential remodelling) for ADU construction. Sub-contractors carrying only specialty licences (C-class) cannot be the prime contractor on an ADU build.
Verify at the CSLB Instant License Check. The verification should show: "CLEAR" status (not suspended, expired, or revoked), at least one of B / B-2 in classifications, current bond on file ($25,000+ for ADU-scale work), and current workers' compensation coverage.
If you can't verify the license, walk away. We see contractors using a relative's license, expired licences, or claiming to be "in the process" of getting licensed. None of that protects you.
On the same CSLB site, click the licence number to see complaints, citations, and legal actions. A few resolved complaints over a long career are normal. Patterns of unresolved complaints, multiple legal actions, or recent revocations are red flags.
Cross-reference the contractor on Yelp, Google Reviews, BBB, and Houzz — but weight CSLB data heavier. Online reviews are easier to game than CSLB records.
If a worker is injured on your property and the contractor doesn't carry workers' comp, you're personally liable. CSLB shows workers' comp coverage status — "EXEMPT" only flies for sole-proprietor contractors with no employees, which means anyone they bring on-site is technically also working as an independent and creates more liability.
General liability insurance: $1M minimum is standard. Get a Certificate of Insurance (COI) listing you as the additional insured, dated within the last 30 days. Don't accept a screenshot — call the insurer to confirm it's current.
Specifically ADU references, not general remodelling. The constraints (zoning, utility connections, ministerial review) are different from kitchen remodels.
Call all three. Ask: was the project completed on the original timeline, did the final cost match the contract or did change orders inflate it, were change orders explained and priced fairly, were inspections scheduled on time, did the contractor handle the city's plan-check corrections or push them back to the homeowner, would you hire them again.
Drive past at least one completed project. Look at the exterior finishes, the trim quality, the way the roof line ties in. Quality-conscious builders build externally consistent work.
Three is the magic number. One bid gives you no comparison. Two leaves you guessing whether the cheap one is competent. Three reveals the actual market range for your project.
All three should bid the same scope — the architect's plans, the same finish allowances, the same site-prep assumptions. If one bidder says "we don't do that" or "we're including different scope," they're not bidding the same project.
Throw out the cheapest bid if it's more than 15% below the next two. That's almost always either a missed-scope error (which becomes a change order later) or a deliberate underbid to win the job. The cost will catch up to you.
California ADU contracts must be in writing for projects over $500. Required elements under California Business & Professions Code: contract value, payment schedule, project description, start date, completion date, contractor's licence number, three-day right of cancellation notice, mechanic's lien notice.
Watch for: open-ended scope ("general construction services" instead of itemised work), milestone payments not tied to specific completion criteria, change-order processes that don't require your written approval, mediation clauses that waive your right to small-claims court.
Avoid: contracts with deposits over 10% or $1,000 (whichever is less). California law caps initial deposits and contractors who push for more are violating state law.
Tie payments to completed milestones, not to dates. "30% on signing, 30% on framing complete, 30% on substantial completion, 10% on final" is a typical schedule.
Each milestone should be visually verifiable — you (or a third-party inspector) can see whether framing is actually complete. Don't pay against contractor invoices alone.
Hold back 10% of total contract value as final payment until the certificate of occupancy is issued and a final lien-release is signed by every subcontractor and material supplier. This is the only leverage you have to get final corrections done.
Change orders are the #1 source of ADU cost overruns. Even on a $300k project, $40-80k in change orders is common.
Contractually require: every change order in writing before work proceeds, with a specific cost (not "time and materials"), your signature required, and a revised completion date if the change affects the schedule.
Reject "verbal authorisation" or "we'll figure out the cost later." Once work has started on an unpriced change, your leverage to negotiate is gone.
Walk you through the bid line by line, not just the bottom number.
Carry their own architect or designer, OR work cleanly with yours — no dismissive comments about plans.
Pull the permit themselves (don't ask you to be the "owner-builder" of record — that's a way to dodge their licence requirements).
Schedule inspections without prompting and notify you of results.
Manage subcontractors directly without asking you to chase them.
Provide weekly written updates with photos, especially when you're not on-site daily.
Pay subcontractors before requesting your next milestone payment (you can verify this by asking for sub lien releases).
Pressure to sign immediately to "lock in pricing" — quality contractors are booked out months and don't pressure-sell.
Cash discounts or off-the-books pricing — a contractor avoiding the books has no incentive to honour warranties.
Refusing to provide a contract until after deposit — illegal in California for any work over $500.
Requesting payment to a personal Venmo or Zelle instead of a business account — makes recovery in dispute much harder.
Saying things like "we won't pull permits, we'll do it under the table" — guarantees you'll have problems at sale and disqualifies you from any insurance claim.
Quoting a number with no written breakdown — there's no real bid behind it.
Owner-building (where the homeowner is the licensed builder of record) sounds like a way to save money but exposes you to direct liability for code violations, worker injuries, and lien disputes. Most banks won't fund construction loans for owner-builders. Hire a licensed contractor.
Site-visit + bid is typically free. If a contractor wants a paid bid, that's a sign they're trying to lock you in. Detailed schematic plans cost money — but those should be quoted by an architect, not the contractor.
This is why we recommend the 10% holdback and milestone payments. Their bond ($25k for B-license) provides limited recovery for unfinished work or unpaid subs. The CSLB has a process to file against the bond — start it immediately if signs of failure appear.
Yes — the contract should list specific brands or grade-equivalents. "Or equal" language allows substitution but you should review and approve any substitutions in writing.
Design-build (one firm does both architecture and construction) is often 10–15% cheaper because there's less back-and-forth. The downside: less independent oversight of the contractor's pricing. Design-bid-build (separate architect, then bid out construction) gives you more competitive bids but adds 4–8 weeks to the timeline.