AB 559 Explained: Will California’s New ADU Fraud Bill Actually Protect Homeowners? (2026)

California’s legislature wrote a bill because the system it built didn’t work. AB 559, introduced by Assemblymember Marc Berman in February 2025 and sponsored by the Contractors State License Board, exists for one reason: more than 400 California homeowners filed ADU contractor complaints with the state, and the state’s existing rules didn’t stop any of the companies that took their money. Anchored Tiny Homes collapsed with $12.8 million in liabilities. Multitaskr walked away with $15 million. The contractors violated laws that were already on the books — deposit limits, licensing requirements, fiduciary obligations. AB 559 doesn’t create new protections so much as it admits the old ones weren’t enforced. Whether that’s enough depends on what you think went wrong in the first place.

CSLB received more than 400 ADU-specific complaints between 2023 and 2025. That number — cited in Berman’s press release and in ABC10’s reporting — represents only the complaints that were formally filed. The real number of affected homeowners is higher, because many never file with the state at all.

The pattern across the cases that triggered the bill was consistent: a contractor signs dozens or hundreds of ADU contracts, collects deposits far exceeding California’s legal limit of $1,000 or 10%, performs little or no work, and eventually disappears or files bankruptcy. The existing penalties — license suspension, bond forfeiture, referral to the Attorney General — arrived after the damage was done. Homeowners lost their money. The contractor lost a license they were no longer using. The $25,000 bond split among all victims paid a few hundred dollars per person.

Berman represents Menlo Park, in the heart of the Bay Area’s ADU market. His district saw firsthand what happens when ADU contractor fraud hits a high-cost housing market — losses per homeowner measured in six figures, not thousands.

The bill focuses on one specific problem: contractors who collect more money than California law allows before doing the work. It toughens penalties for violations of the existing deposit and progress payment rules under Business and Professions Code Section 7159.5.

Current law already caps the initial deposit at $1,000 or 10% of the contract price, whichever is less. Subsequent payments cannot exceed the value of work completed. Every contractor in the Anchored, Multitaskr, Nonna, and Next Generation Builders cases violated these limits — some by collecting 50-80% of the contract upfront.

AB 559 proposes:

• Enhanced penalties for ADU contractors who take deposits exceeding the legal limit — moving violations from administrative infractions toward criminal liability in egregious cases.
• Faster CSLB enforcement action when deposit violations are reported, reducing the gap between complaint and license suspension.
• Clearer contractor obligations specific to ADU construction contracts, reinforcing the payment rules that already exist but were routinely ignored.

The deposit problem is real and AB 559 targets it directly. In every major ADU fraud case in California, the contractor’s first move was collecting an illegal deposit — $30,000, $50,000, $80,000 upfront on a project where the legal maximum was $1,000. If homeowners had held to the legal limit, their maximum exposure would have been $1,000 per contract instead of tens of thousands.

Making the penalty for violation more severe is a legitimate deterrent. A contractor who knows that taking an $80,000 deposit on a $200,000 ADU contract could result in criminal charges, not just a licensing action, may think twice. Or they may not — but at least the consequence matches the scale of the harm.

The bill also signals that the legislature is paying attention to ADU-specific fraud, which is different from general contractor fraud. ADU projects involve larger deposits, longer timelines, and more vulnerable homeowners (often building for aging parents or rental income they’re depending on). Treating ADU contractor fraud as its own category, rather than lumping it with kitchen remodels and roof repairs, is appropriate given the scale of losses.

The $25,000 bond stays at $25,000

AB 559 does not increase the contractor bond. The bond has been $25,000 since 2007. ADU projects now cost $150,000 to $400,000. When Anchored Tiny Homes collapsed with 55 claimants, the bond paid $455 per person. When Multitaskr’s 100+ victims filed claims, each received roughly $250. The bond is a rounding error on a six-figure loss, and this bill doesn’t change the math.

Increasing the bond requires a separate legislative effort and faces opposition from the construction industry, which argues higher bond costs would burden legitimate small contractors. That argument has merit for a one-person handyman operation. It has less merit for companies signing hundreds of ADU contracts worth millions of dollars.

Hidden complaints stay hidden

CSLB closed 10,719 complaints without investigation between 2020 and 2024. Anchored had 55 complaints filed — only 10 were made public. AB 559 does not change how CSLB publishes or withholds complaint data. A homeowner checking a contractor’s license after the bill passes will see the same filtered complaint record they see today: only complaints that CSLB chose to investigate, which is a fraction of all complaints filed.

No real-time license monitoring

Contractors whose licenses are suspended or revoked continue to sign contracts between the date of the violation and the date CSLB acts. That gap — weeks or months — is when the most damage happens. AB 559 promises faster enforcement but doesn’t create a real-time monitoring system that alerts homeowners when a contractor’s status changes mid-project.

A homeowner who checks a license on January 1 and signs a contract on January 5 has no way to know if that license was suspended on January 3 — unless they check again. The bill doesn’t solve this. Automated monitoring systems like LiveVerify exist precisely because the state’s system doesn’t provide real-time updates to the people who need them.

Enforcement depends on staffing

Tougher penalties are meaningless without enforcement capacity. CSLB’s investigation backlog is part of why 10,719 complaints were closed without investigation in the first place — not because the board didn’t care, but because it didn’t have enough investigators. AB 559 creates new penalty structures. It doesn’t create new investigators to enforce them.

As of early 2026, AB 559 has been referred to the committees on Business, Professions & Economic Development and Judiciary. It has not been voted on by either committee. It has not passed the Assembly. It has not been signed by the governor.

Berman’s office classified it as a “two-year bill,” meaning it can carry over to the next legislative session if it doesn’t pass in the current one. This is common for bills that face committee scheduling delays or need additional negotiation with industry stakeholders.

Until AB 559 passes and is signed into law, the existing rules apply: $1,000 or 10% deposit cap, existing CSLB enforcement timelines, existing penalty structures. The bill’s passage would add teeth. It would not change the fundamental rules.

Don’t wait for AB 559. The deposit cap is already law. The CSLB license check is already free. The protections that would have prevented every major ADU fraud case in California already exist — the problem is that homeowners didn’t use them, and contractors knew that.

1. Hold to the $1,000 / 10% deposit cap. This is current law under B&P Code 7159.5. If every Anchored Tiny Homes customer had held to this limit, maximum per-person losses would have been $1,000 instead of $30,000-$100,000. The law already protects you — if you follow it.
2. Verify the license at cslb.ca.gov. Confirm active status, current bond, workers’ comp on file. Takes 30 seconds. Full walkthrough here.
3. Check beyond CSLB. BBB complaints, Google/Yelp reviews, web search for “[contractor] complaints.” CSLB’s public database doesn’t show all complaints — 10,719 were hidden between 2020 and 2024.
4. Tie payments to inspected milestones. Foundation passes inspection, pay for foundation. Framing passes, pay for framing. Never pay ahead of verified progress.
5. Use a verified directory. Every builder in our Sacramento, Los Angeles, San Diego, and SF Bay Area directories has been checked for active license, current bond, workers’ comp, complaint history, and ADU-specific experience. The verification AB 559 promises to strengthen is something we already do — daily, automatically, and before any builder appears on the site.

What is AB 559?

A California bill introduced by Assemblymember Marc Berman in February 2025, sponsored by CSLB. It toughens penalties for ADU contractors who violate deposit and progress payment limits. It was introduced in direct response to the Anchored Tiny Homes and Multitaskr fraud cases and CSLB’s 400+ ADU-related complaints.

Has AB 559 been signed into law?

No. As of early 2026, it has been referred to the Business, Professions & Economic Development and Judiciary committees but has not been voted on. It’s classified as a two-year bill, meaning it can carry over to the next session.

Does AB 559 increase the $25,000 contractor bond?

No. The bill addresses deposit violation penalties only. The $25,000 bond amount, unchanged since 2007, is not affected by AB 559. Increasing the bond would require separate legislation.

Does AB 559 fix the CSLB hidden complaints problem?

No. The bill does not change how CSLB publishes or withholds complaint data. Complaints settled privately or closed without investigation will remain invisible to the public, the same as today.

What deposit limits does AB 559 enforce?

The existing limits under B&P Code 7159.5: initial deposit cannot exceed $1,000 or 10% of the contract price, whichever is less. Subsequent payments cannot exceed the value of work completed. These limits are already law — AB 559 adds tougher penalties for violating them.

Will AB 559 prevent another Anchored Tiny Homes?

It would make the penalties more severe for contractors who collect illegal deposits. It would not prevent the deposit from being collected in the first place — that depends on homeowners knowing and enforcing the $1,000/10% cap. It also wouldn’t fix the bond gap, hidden complaints, or real-time monitoring gaps that allowed the fraud to continue undetected.

What should I do while waiting for AB 559 to pass?

Don’t wait. The deposit cap is already law. Hold to $1,000 or 10% upfront. Verify the CSLB license. Check BBB and reviews. Tie payments to inspected milestones. Use a verified directory. The protections that would have prevented every major ADU fraud case already exist — the problem was enforcement and homeowner awareness, not missing legislation.

Who sponsored AB 559?

The Contractors State License Board (CSLB) sponsored the bill. Assemblymember Marc Berman (D-Menlo Park) introduced it. Berman’s district is in the Bay Area, where ADU construction costs and fraud losses are among the highest in the state.