LBExamTwo brothers behind the former company Anchored Tiny Homes have been charged with 35 felony counts over unfinished accessory dwelling unit (ADU) projects, the Contractors State License Board (CSLB) announced in news release #26-02 on October 20, 2026. The charges followed investigations by CSLB and the Sacramento County District Attorney’s Office. They are charges, not convictions, and no court has decided them. A settlement conference hearing “initially scheduled for last week,” in the release’s words, has been continued until January 12, 2027.
What the release says
According to the release, Colton Paulhus and Austin Paulhus each face 33 counts of diversion of construction funds, one count of conspiracy to commit a crime and one count of employee wage theft. The release does not name the code sections behind the counts.
The charges came after CSLB investigated more than 200 consumer complaints across 18 California counties. Those complaints alleged abandoned ADU projects, unpaid subcontractors, payments taken in advance of work performed “or often not performed,” and money homeowners paid that was not used on their own projects.
The license went first. CSLB filed an accusation with the California Attorney General’s Office seeking revocation of the company’s contractor’s license, which the release calls the most serious administrative enforcement action available to the board, and states that “CSLB revoked Anchored Tiny Homes’ license in November 2024.” Complaints kept arriving after the revocation, and CSLB began referring cases to the district attorney for possible criminal charges.
The payment rules the allegations turn on
The release closes with the rule it wants ADU builders to remember: home improvement payment law limits the down payment and the progress payments that follow it. The statute is Bus. & Prof. Code s. 7159.5, which applies to home improvement contracts between an owner or tenant and a contractor. Two of its paragraphs match the complaints CSLB describes:
- The down payment. Under s. 7159.5(a)(3), a down payment “shall not exceed one thousand dollars ($1,000) or 10 percent of the contract amount, whichever amount is less.”
- Every payment after it. Under s. 7159.5(a)(5), except for the down payment, the contractor “shall neither request nor accept payment that exceeds the value of the work performed or material delivered.”
Breaking either one is cause for discipline, and under s. 7159.5(b)(1) a violation of paragraph (3) or (5) is also a misdemeanor, punishable by a fine of $100 to $5,000, up to one year in county jail, or both. A contractor who furnishes a performance and payment bond, a lien and completion bond, or a bond equivalent or joint control approved by the registrar is exempt from paragraphs (3) to (5) under s. 7159.5(a)(8). The down payment guide walks through the contract notices and that bond exception in full.
Whether an ADU job is a home improvement contract starts with s. 7151, which defines home improvement to include “adding to” residential property. CSLB’s own reading, in this release, is that contractors building ADUs must follow the home improvement payment restrictions.
Diversion as a license ground
The criminal counts are the district attorney’s. The license law has its own version of the same conduct. Section 7108 makes it a cause for disciplinary action to divert funds or property received for a specific construction project, or to fail substantially to account for how those funds were used on the project. In license law terms, diversion is a ground for discipline against the license, and it stands apart from any prosecution.
Sources
- CSLB news release #26-02, “Former Contractors Behind Anchored Tiny Homes Face 35 Felony Charges”, October 20, 2026
- Contractors State License Law, Business and Professions Code, ss. 7108, 7151 and 7159.5