Contractor Red Flags: How to Avoid Losing Your Deposit in North Dakota

Who this is for: homeowners in Bismarck, Mandan and across North Dakota who are about to sign with a contractor and pay a deposit, or who already paid and can't get the contractor to call back.

Short answer

Most lost deposits follow the same pattern: no license check, no written contract, too much money up front and pressure to decide fast. Five habits remove most of that risk: verify the North Dakota contractor license, get a written contract with start and completion dates, keep the deposit small and tied to materials, pay by check or card instead of cash, and tie later payments to finished stages of work.

North Dakota's Attorney General puts the payment rule plainly in its hiring a contractor guidance: you may have to pay a small percentage up front for materials, but you should not make full payment until all the work has been satisfactorily completed. Further down, we show how we handle deposits ourselves as a licensed general contractor in Bismarck and Mandan. This is general information, not legal advice; for your own contract, talk to an attorney.

9 red flags before you sign

Any one of these is a reason to slow down. Two or more is a reason to walk away.

1. Cash only, or a "cash discount." The FTC lists cash-only requests, and asking for everything up front, among the signs of a home improvement scam. Cash leaves no record and can't be disputed.
2. Most of the money before work starts. The Attorney General's contractor guide names "requiring advance non-refundable payments or payment in full before the work is completed" as a warning sign.
3. No license, or the wrong one. North Dakota requires a state contractor license when the cost of a job exceeds $4,000, according to the Secretary of State. The license should be active, in the name on your contract, and in a class that covers your project. Here's how to check a contractor's license in North Dakota in a couple of minutes.
4. No written estimate or contract. The Attorney General's advice is to never accept a verbal estimate and to get two or three written bids.
5. Pressure to sign today. "This price is only good today" is a sales tactic. The FTC notes that scammers push for an immediate decision, and the AG lists high-pressure sales tactics and very low bids as warning signs.
6. Asking you to pull the permit. The FTC flags a contractor who asks you to get the required building permits.
7. A knock on the door. "We're working in the area and have leftover materials" is an opener the FTC warns about, and the AG lists unmarked vehicles among its warning signs.
8. A new "local" office after a storm. The AG warns that out-of-state storm chasers sometimes open temporary offices to look local. A contractor not originally from the area also needs a transient merchant license from the Attorney General.
9. Vague answers about who does the work. The AG says the contract should name any subcontractors, with their license numbers and how they'll be paid.

How much deposit is normal?

There's no single right number; it depends on what has to be ordered before work starts. The FTC notes that some states limit down payments by law. In North Dakota, the practical guide is the AG's: a small percentage for materials, with the materials down payment written into the contract.

A fair deposit holds your spot on the schedule and pays for materials ordered for your job, like special-order tile or cabinets. Ask before you pay:

• What exactly does this deposit pay for?
• When will those materials be ordered, and can I see the order?

A deposit that's much larger than the materials for the first phase, or that's "non-refundable" no matter what, deserves a hard look.

How to pay safely

• Tie payments to finished stages, such as completed demolition, a passed rough-in inspection or finished tile, not to dates on a calendar.
• Pay by check or credit card, and keep every receipt. Under federal billing rules, a credit card charge for services not delivered as agreed can be disputed in writing; your letter must reach the card issuer within 60 days after the first bill with the charge was sent.
• Hold the final payment until the work is done and you're satisfied, as the FTC advises.

Liens: why you can pay twice

Under North Dakota's construction lien law, NDCC chapter 35-27, anyone who improves your property under a contract with you or with your contractor or subcontractor can claim a lien on it. That includes suppliers and subs your contractor never paid. The law also says a lien isn't allowed when you hold a valid lien waiver signed by that person. A lien claimant must give the owner written notice by certified mail at least 10 days before recording the lien, and generally must record it within 90 days after finishing their work.

In practice, ask for signed lien waivers from your contractor and major subcontractors and suppliers with progress payments and before the final payment. If a lien notice arrives by certified mail, call a real estate attorney right away; how these rules apply to your project is a question for an attorney.

Put these in the contract

Between the FTC's list and the North Dakota AG's, the contract should include:

• The contractor's legal name, address, phone number and license number
• A detailed description of the work, and the type, grade and quality of materials
• The total price, the deposit amount and what it covers, and the payment schedule
• A start date and a completion date, in writing
• Subcontractors, their license numbers and how they'll be paid
• Warranties on materials and workmanship
• Who is responsible for permits
• How changes are approved: in writing, with the price, before the work

The dates matter. Under NDCC 43-07-02, a contractor who takes payment and then fails to substantially start within 60 days of a written start date (or 90 days from the contract date if none was set) may be presumed to have abandoned the project, which can be construction fraud. The same applies to failing to finish within 90 days of a written completion date, or 180 days from the contract date if none was agreed. Construction fraud is a felony in North Dakota, graded by the amount paid.

Your right to cancel

If you signed at home after a salesperson came to you, you may be able to cancel. The FTC's Cooling-Off Rule gives three business days for many sales made at your home, with exceptions, including repairs you asked the seller to come out for. North Dakota's home solicitation law, NDCC chapter 51-18, generally allows cancellation until midnight of the third business day, with a longer window for some sales to buyers 65 or older. Whether your contract qualifies depends on how the sale happened, so check with the Attorney General's Consumer Protection Division.

How we handle deposits and payments

You should be able to check everything in this article against us. Hugo Home Improvement (Hugo Home Improvement LLC) holds North Dakota Contractor License No. 000050538, Class D, which covers single projects up to $100,000, and our employees are covered through WSI.

• The deposit, what it covers and when the rest is due are written into your estimate before you sign. Ask the office which payment methods and fees apply to your invoice, and if you want lien waivers, we agree on the forms and the payment stage before you pay.
• Tell us the property address. We identify the permitting office and the required inspections, and your written scope states who will file each permit and who pays the fees.
• Ask our office for our license and insurance information before you sign.
• Our estimates are written and list what's included and what isn't, and any repair or change outside the written scope is priced and approved by you in writing before we continue.

To see when each payment comes due, read how a remodeling project works with us.

If your contractor disappears with your deposit

Act quickly and in writing:

1. Stop paying and gather everything: contract, receipts, canceled checks, texts, photos and a timeline.
2. Send a written demand. Ask the contractor to start by a set date or refund the deposit. The FTC suggests certified mail with a return receipt, and keeping copies.
3. File with the Secretary of State. The SOS accepts complaints on form SFN 16999 for abandonment, diversion of funds, fraud and failure to refund an advance payment. It doesn't handle workmanship disputes. The office says most contractor complaints are resolved within 60 days.
4. File with the Attorney General. Use the consumer complaint page or call Consumer Protection at (701) 328-3404 or 1-800-472-2600 (within North Dakota). When a complaint is within its authority, the division tries to mediate, but it doesn't act as your attorney.
5. Report suspected fraud to local law enforcement, as the AG's contractor guide advises.
6. Dispute card payments within the 60-day window.
7. Consider small claims court. In North Dakota, small claims handles money claims of $15,000 or less. For larger amounts, or if liens show up, talk to an attorney.

It happens here, too. In 2021, the Attorney General warned Bismarck-Mandan homeowners about an unlicensed contractor who had been barred from contracting years earlier and was facing criminal charges. A license search would have caught it.

Frequently asked questions

How much should a contractor's deposit be in North Dakota?

The North Dakota Attorney General's guidance is a small percentage up front for materials, with no full payment until the work is satisfactorily completed. The deposit should match what's being ordered for your job, and the amount belongs in the written contract.

Is it illegal to take a deposit and not do the work in North Dakota?

It can be. Under NDCC 43-07-02, willfully abandoning a project after receiving payment is construction fraud, a felony. Abandonment is presumed if work doesn't substantially start within 60 days of a written start date, or 90 days from the contract date if none was set. Defenses exist, including a full refund before charges are filed.

Do contractors need a license in North Dakota?

Yes, when the cost, value or price of a job exceeds $4,000. Licenses come from the Secretary of State and are searchable for free on FirstStop. Check that the license is active, in the same name as your contract, and in a class that covers your project's value.

Should I ever pay a contractor in cash?

Avoid it. Cash leaves no record and can't be disputed, and the FTC lists cash-only requests among the signs of a home improvement scam. Pay by check or credit card and keep a receipt for every payment.

What is a lien waiver?

A signed document from a contractor, subcontractor or supplier giving up the right to file a lien for the amount they've been paid. Under North Dakota law, a lien isn't allowed when the owner holds a valid waiver from that person. Ask for waivers with progress payments and before the final payment.

Before you sign with anyone, run through our 7-step checklist for hiring a general contractor. When you're ready, check our license and request a free written estimate. Call or text Viktor at (701) 329-9659 with your town, photos and what you want to change. Our office follows up during business hours.