Short answer
Pause further payments, move all communication to writing, and ask for a written, itemized change order with proof (supplier quotes, labor hours, permit fees) that explains the increase. Compare it to your signed contract. If the jump isn’t justified by documented scope changes or a clear price‑escalation clause, negotiate revised scope or pricing caps—or send a formal demand for a refund and terminate per your contract. If negotiations stall, use leverage: licensing-board complaints, a credit card chargeback, a claim against the contractor’s bond, or small claims court.
Why this happens
Significant price increases after a deposit typically stem from:
- Material price spikes or long lead times
- Hidden conditions discovered after demo (rot, code issues)
- Scope creep or unclear allowances (e.g., “mid‑grade fixtures” not defined)
- Estimating errors or, in worse cases, a bait‑and‑switch
A solid contract handles these with documented change orders and proof, not surprise numbers.
Step-by-step: Protect yourself and negotiate
1) Freeze payments and work
- Don’t authorize new work or release more funds until you have a signed, itemized change order.
- Keep the project safe: if work paused mid‑demo, cap live wires, cover open walls, and secure the site.
2) Pull and review your contract
- Is it fixed-price or time & materials (T&M)?
- Does it include a price‑escalation clause (what triggers it and what proof is required)?
- How are change orders handled (must be written and signed)?
- What are cancellation and refund terms? Any cooling‑off period?
3) Request a written, itemized revision
Ask for a detailed breakdown:
- Materials: quantities, unit costs, supplier quotes
- Labor: hours, trades, hourly rates
- Overhead/profit: percentage
- Schedule impacts
- Specific reason for change (unforeseen condition, code requirement, owner request)
4) Require documentation
- Supplier invoices or quotes for materials increases
- Photos and inspector notes for “unforeseen conditions”
- Permit fee increases or code citations if applicable
5) Negotiate smart
- Adjust scope: simplify finishes, reduce square footage, remove non-critical items
- Use allowances with caps for finishes
- Price lock: agree to a not‑to‑exceed for materials with receipts
- T&M caps: set hourly rates and a maximum cost without written approval
- Split verified increases only (e.g., pay the delta on materials with proof)
- Flex schedule: longer lead time may reduce rush premiums
- Keep retainage (5–10%) until punch list completion
6) Put changes in writing (no exceptions)
Use a signed change order before work continues. Example:
CHANGE ORDER #3
Project: Kitchen Refresh, 123 Maple St
Date: 2025-11-07
Reason: Cabinet supplier increased cost 12%; owner upgraded pulls
Scope Additions: Swap to Maple Pro Line, 36 pulls (Brushed Nickel)
Cost Impact: Materials +$1,480 (see supplier quote), Labor +$240 (6 hrs @ $40/hr)
Schedule Impact: +3 business days
Revised Contract Total: $28,960 (was $27,240)
Payment Terms: +$500 at delivery; balance per milestones
Signatures: Owner ____ Contractor ____
7) If you can’t agree
- Send a formal letter (email + certified mail) stating the contractor must proceed under the original contract absent a signed change order, or refund the deposit less documented costs. Give a clear deadline (5–7 business days).
- Use leverage: file a complaint with the state licensing board, pursue a credit card chargeback, or claim against the contractor’s bond. Small claims court is often effective for deposits.
Tools and materials (paperwork toolkit)
- Contract and change-order templates (ToolStash project binder)
- Scanner app or PDF tool to save every document and receipt
- Spreadsheet for costs and allowances
- Email and certified mail (return receipt) for formal notices
- Camera/phone for jobsite photos
- Notepad or project management app to log calls (include dates/times)
Safety considerations
- Site safety during pauses: cover open electrical boxes, tape down poly sheeting, secure tools and materials, and keep kids/pets out of work zones.
- Financial safety: never pay large upfront deposits; obtain partial lien waivers with each payment to reduce mechanic’s lien risk.
Tips for best results
- Deposits: Many states cap deposits (e.g., California: the lesser of 10% or $1,000). Ask your licensing board about caps in your area.
- Payment schedule: Tie payments to inspections or milestones, not dates.
- Proof-first policy: No pay for changes without documentation.
- Use credit cards for deposits when possible—chargebacks add protection.
- Ask for the contractor’s license, insurance, and bond information up front.
Example milestone schedule:
Deposit: 10% (or state cap)
Milestone 1: Demo complete, site broom-clean — 20%
Milestone 2: Rough MEP passed inspection — 25%
Milestone 3: Drywall up, taped, first coat — 20%
Milestone 4: Cabinets/counters installed — 15%
Retainage at substantial completion/punch list — 10%
Common mistakes to avoid
- Paying big deposits or cash
- Approving verbal changes (no paper trail)
- Vague scopes and undefined allowances
- Letting T&M proceed without written rate sheet and a not‑to‑exceed
- Failing to get lien waivers with each progress payment
Costs and timelines
- Short consult with a construction attorney: $200–400 for a review of your contract and a demand letter (often enough to resolve disputes)
- Small claims filing fees: roughly $30–$100 depending on jurisdiction
- Credit card chargeback windows: typically 60–120 days from the transaction
When to call a professional
- If the contractor refuses to itemize or provide documentation
- If you suspect fraud or license/permit issues
- If there’s active jobsite safety risk or code violations
- If the deposit refund is disputed—a construction attorney or local consumer protection office can often resolve this quickly
By slowing the project, moving everything to writing, demanding evidence for changes, and tying dollars to verified scope, you transform a surprise price hike into a structured negotiation—or a clean exit with your funds protected.