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Contractor took your deposit and didn't do the work in New York: your rights

Updated By The editorial teamNot reviewed by an attorney — based on the official sources below

In short

If you paid a home improvement contractor in New York before the work was substantially finished, the law treats that money as still yours until it is properly used for your job. The contractor must deposit it in an escrow account at a New York bank within five business days, or give you a bond or letter of credit instead (Lien Law § 71-a(4)). Your written contract must list the dates, the work, the price and a payment schedule (General Business Law § 771). If the work never starts, ask in writing where your money is held, demand it back by a firm date, complain to the Attorney General or your local consumer office, and consider small claims court.

Read on for the details, the exceptions and the sources.

In plain words

Deposit
Money paid before the work is done. Under New York law, a home improvement deposit stays your property until it's properly applied to your job.
Escrow account
A bank account where money is held for a specific purpose and can't simply be spent on anything else.
Bond
A guarantee from a surety company that you'll get your money back, or that it will be used for your job.
Substantial completion
The point where the job is essentially done, apart from small finishing items.
Home improvement contractor
A business that repairs, remodels or adds to homes for a fee and does more than $1,500 of such work in a 12-month period.

What the law says, briefly

New York's home improvement law covers repairs, remodeling and additions to a home — kitchens, roofs, siding, windows, driveways, fences and more — when a contractor does the work for a homeowner, co-op owner or residential tenant (General Business Law § 770). If the contract price is over $500, the contract must be in writing, signed by both sides, and include the contractor's name, address, phone and license number (if one is required), approximate start and completion dates, a description of the work and materials, the price, and a schedule of any progress payments that bears a reasonable relationship to the work done (§ 771(1)). You must get a signed copy before work begins (§ 771(2)).

Payments you make before the work is substantially complete must be deposited within five business days in an escrow account at a bank in New York, unless the contractor instead gives you a bond, contract of indemnity or irrevocable letter of credit guaranteeing their return or proper use (Lien Law § 71-a(4)(a)–(b)). Unless the contract names the bank, the contractor must tell you in writing where the money is within ten business days after depositing it. The deposit remains your property until it is properly applied to the job under the payment schedule, until the job is substantially performed, or until your own breach excuses the contractor — and even then only to the extent of a reasonable liquidated-damages amount set in the contract, and only after seven days' written notice (§ 71-a(4)(d)). Not placing deposits in escrow is a violation (§ 71-a(4)(g)), and a contractor who fails to escrow or to give a proper written contract can face civil penalties (General Business Law § 773).

What to check in your lease, contract or papers

  • Is there a written, signed contract? For jobs over $500, there should be (General Business Law § 771(1)).
  • The start and completion dates, and whether a definite completion date was made 'of the essence'.
  • The payment schedule: how much was due up front, and what work had to be done before each payment.
  • Whether the contract names the bank holding your deposit, or whether you got a bond or letter of credit.
  • The three-day cancellation notice: you can cancel until midnight of the third business day after signing (§ 771(1)(h)).
  • Whether payment was on an hourly or time basis for work already done — those payments aren't treated as deposits (§ 771(1)(g); Lien Law § 71-a(4)(f)).
  • In New York City, whether the contractor holds a Home Improvement Contractor license from the Department of Consumer and Worker Protection.

What to document

  • The contract, estimate and any change orders.
  • Proof of every payment: canceled check, card statement, bank transfer, payment-app record.
  • Every message about start dates, delays and excuses, with dates.
  • Photos showing that no work (or only a little) was done, with dates.
  • The contractor's business name, address, license number and any vehicle or website information.

What to do, step by step

  1. Cancel within three business days if you can

    If you signed in the last three business days, you can cancel by written notice; a mailed notice counts when it is properly addressed, stamped and put in a mailbox (General Business Law § 771(1)(h)).

  2. Ask where your deposit is

    Write to the contractor asking for the name of the bank holding your deposit in escrow, or a copy of the bond or letter of credit, as Lien Law § 71-a(4) requires.

  3. Set a firm date to start or refund

    Give a specific date to begin work (or finish it), and say that otherwise you want your deposit returned. Keep copies and proof of sending.

  4. File complaints

    File a consumer complaint with the New York Attorney General. In New York City, also complain to the Department of Consumer and Worker Protection; elsewhere, check whether your county has a consumer affairs office.

  5. Go to small claims court

    You can sue for the deposit and your losses up to $10,000 in New York City, $5,000 in city and district courts, or $3,000 in town and village courts. Larger amounts go to the regular civil courts.

What not to do

  • Don't pay more money to 'get the job started' unless the work in the payment schedule has actually been done.
  • Don't hire someone else to do the whole job before telling the first contractor in writing that you are ending the contract and why — otherwise they may claim you broke it.
  • Don't sign a 'waiver' of your escrow rights or your three-day cancellation right on the spot; the emergency waiver for cancellation must be in your own handwriting and only applies to real emergencies you called the contractor about (§ 771(1)(h)).
  • Don't wait months hoping they'll show up. Evidence and money both tend to disappear.

When to send a demand letter

Send it as soon as the start date in your contract passes without real work, or the contractor stops answering. Cite General Business Law § 771 and Lien Law § 71-a(4), list what you paid and when, and give a short, specific deadline (for example, 10 days) to either start the work or return your deposit.

When to go to court

If the deadline passes, you can file in small claims court for the amount you paid and your proven losses. If the contractor got you to sign by making false written statements, you may also be able to recover a $500 penalty plus reasonable attorney's fees on top of your damages (General Business Law § 772). If you believe the contractor never meant to do the work at all, you can also report it to local police or the district attorney. For large amounts, a lawyer can advise you on all your options.

What evidence to keep

  • The written contract and any changes
  • Proof of every payment
  • Any notice about where your deposit was placed — or the lack of one
  • Dated photos of the site
  • Your demand letter and proof of delivery
  • Complaint confirmation numbers from the Attorney General or local agency

Figures that change

  • Contract price that requires a written home improvement contract: Over $500 (as of 2026-10-30; N.Y. General Business Law)
  • Time to put a deposit in escrow: 5 business days after receiving it (as of 2026-10-30; N.Y. Lien Law)
  • Time to cancel a home improvement contract: Until midnight of the 3rd business day after signing (as of 2026-10-30; N.Y. General Business Law)
  • Penalty for inducing a contract with false written statements: $500 plus reasonable attorney's fees, in addition to damages (as of 2026-10-30; N.Y. General Business Law)

Frequently asked questions

The contractor says the deposit was spent on materials. Is that allowed?

Only within the rules. Deposits made before substantial completion must be held in escrow (or covered by a bond or letter of credit) and can be withdrawn only up to the amounts in the contract's payment schedule, which must bear a reasonable relationship to the work done and materials bought (Lien Law § 71-a(4)(e)). Ask for receipts and to see the materials.

We never signed a written contract. Can I still get my money back?

Often, yes. A contractor's failure to give a proper written contract is itself a violation (General Business Law §§ 771, 773), and you can still sue for the money you paid for work that was never done. Your payment records and messages become the key evidence.

Does this apply to my apartment? I'm a renter.

The home improvement law defines 'owner' to include residential tenants as well as homeowners and co-op owners (General Business Law § 770(2)), so it can apply when a tenant hires a contractor.

Does the contractor need a license?

In New York City, anyone doing home improvement work on residential property needs a Home Improvement Contractor license from the Department of Consumer and Worker Protection. Some counties outside the city have their own licensing; check with your county's consumer affairs office.

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Official sources

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This page is general information based on the official sources listed, current as of the update date. It is not legal advice and does not replace a review of your own situation; if a case is already in court, a deadline is close, the amount is large, or there are criminal, immigration or family-law consequences, talk to a lawyer or legal aid.