The Problem — Why Milestone Protection Matters in 2026
In a typical California ADU project, payment flows look like this:
- Homeowner signs contract for $300K project
- Contractor requests 10–20% deposit ($30K–$60K) before mobilizing
- Each draw — foundation, framing, MEP, finishes, final — released against contractor invoice
- Contractor disappears mid-project? Homeowner has paid out 30–60% of contract value with 20–40% of work completed
- Recovery options: California's $25,000 license bond (caps total recovery), small-claims court (slow), or full civil suit (expensive, often against a dissolved entity)
In 2024–2025, this pattern played out repeatedly:
Anchored Tiny Homes — Roseville, CA
Shut down July 2024, abandoning 450+ ADU projects before filing Chapter 7 bankruptcy with $12.8M in liabilities. CSLB revoked all licenses by December 2024.
Multitaskr Construction — Chula Vista, CA
License #1074209. Closed fall 2024 after collecting an estimated $15–48 million from 100+ Southern California homeowners. CSLB Accusation N2024-235 filed April 2025; license revoked June 2025; four officers banned from contracting for 5 years.
The legal floor — California's CSLB contractor license bond — is structurally inadequate for ADU project size. The bond pays out at $25,000 maximum total for all claims combined (raised from $15,000 under SB 607, effective January 2023). On a $300K project, that's under 10% recovery.
How Verified Milestone Payouts Work — Six Steps
Define milestones in the contract
We work with you and your contractor to define 5–7 inspection-anchored milestones during contract review. Milestones are written into the construction contract — that is what gives them teeth.
- Mobilization + permit issuance — typically 5–10%
- Foundation pour + foundation inspection passed (LADBS) — 15–20%
- Framing complete + framing inspection passed — 20–25%
- MEP rough-in + MEP inspection passed — 15–20%
- Drywall + insulation + drywall inspection passed — 10–15%
- Finishes + final inspection passed (Certificate of Occupancy) — 10–15%
- Punch list + retention release — 5%
You fund the controlled account
Your project budget moves into a controlled account. Choose the rail:
- Automated milestone payments (default) — funds held in a controlled Stripe account under your project ID, released automatically on a passed inspection. No partner fee.
- Licensed escrow (optional) — funds held by a California DFPI-licensed escrow agent under California Financial Code §17000 et seq. Partner fee: 0.5–1.0% of funds held.
Either rail, funds are not in the contractor's account and not in ours. We don't hold your money.
Contractor completes milestone
Contractor performs the work, schedules the LADBS (or local building department) inspection.
LADBS-recorded inspection passes
The municipal building department records the passed inspection in their permit-tracking system. We pull this record directly from the source — not from the contractor's email or a screenshot. For LADBS projects, that means querying the LADBS permit-tracking system using your permit number.
Independent on-site verification
We physically verify the work for that milestone. The standard photo set covers: scope-of-work area from four angles, close-up of specified materials, the inspection sticker, and a brief written note tying the milestone to the contract scope. The full set lands in your customer portal alongside a live project timeline.
Payout released
Once both checks pass — LADBS-recorded inspection AND our verification — the milestone payout releases to the contractor automatically on the default rail. This typically happens within 1–3 business days of milestone completion.
Walk through your milestone schedule in a 30-minute call
No commitment. We'll map your specific project size, inspection sequence, and rail choice.
Automated Milestone Payments vs. Licensed Escrow — When to Choose Which
California Financial Code §17000 et seq. defines "escrow" as a regulated activity requiring DFPI licensing. Calling the automated rail "escrow" without DFPI licensing would violate state law. We do not do that. The automated rail runs milestone payments through Stripe's payment infrastructure into a controlled account with inspection-gated release — accurate, legal-safe, and equally protective in practice.
What Happens If Your Contractor Fails Mid-Project
This is the scenario the system is built to survive.
The contractor has them. Recovery routes through California's $25,000 license bond (total for all claims combined) or civil action.
They stay in the controlled account. They do not go to the contractor. They do not go to ADUscale. They wait for the next contractor.
What we do for you in this scenario
Document the work-in-place
Using our existing milestone records: what is completed, what is paid, what remains.
Coordinate the LADBS permit transfer
California permits do not automatically transfer; the original permit holder must authorize transfer or the new contractor must apply for an amendment.
Re-run 6-source verification on replacement contractors
Same 6 data sources, same 8 disqualifying screens — and get one of them the capacity to take over your project.
The funds-in-account protection turns a catastrophic loss into a manageable transition. Most homeowners do not realize how survivable a contractor failure can be when the payment structure is right.
What Verified Milestone Payouts Do NOT Protect Against
Funds already paid before engagement
If you've already paid a contractor a 30% deposit before contacting us, that money is outside our protection scope.
Quality defects that pass inspection
A contractor can install a leaky shower that passes inspection. The milestone releases. The leak appears in 6 months. That's a separate recourse path (warranty, contract remedies, civil action).
Design defects
If the contractor builds exactly to the approved plans and the plans are defective, that's a design liability, separate from contractor performance.
It doesn't replace insurance
General liability and workers' comp insurance protect against accidents and injuries. Milestone payouts protect against payment-vs-completion mismatch. Different risks; both required.