MHIC Basic 1 — Questions and Answers
Question 1: What is a requirement of a home improvement contract in the following choices?
- The seller must reclaim it at his own expense within 20 days from the date of cancellation.
- When the property owner will do the house improvements.
- Before work starts, the customer receives a signed copy of the contract. (Correct answer)
- The cost of replacing substandard materials
Correct answer: Before work starts, the customer receives a signed copy of the contract.
A key requirement for home improvement contracts, designed to protect consumers, is that the customer must receive a signed copy of the contract before any work commences. This ensures transparency and provides the homeowner with a legal document outlining all agreed-upon terms, scope of work, costs, and timelines. It helps prevent misunderstandings and disputes by ensuring both parties have a clear record of their agreement.
Question 2: What is the maximum deposit a contractor may ask to install a deck attached to a house if the entire contract value is $5,400?
- $3,800
- $840
- $2,400
- $1,800 (Correct answer)
Correct answer: $1,800
Maryland Home Improvement Commission (MHIC) regulations limit the initial deposit a contractor can request. For contracts over $1,000, the maximum deposit is typically one-third (1/3) of the total contract price. In this case, one-third of $5,400 is $1,800, which is the maximum allowed deposit.
Question 3: A garbage can was ordered and built by a home improvement contractor. The next winter, the roof failed to withstand the snow weight, resulting in damage to both the roof and the owner's automobile. The contractor restored the roof but refused to pay for automobile repairs. How much may the property owner recover from the home improvement guaranty fund for automobile repairs?
- Nothing (Correct answer)
- Total of car's damage
- Something
- 21 Days
Correct answer: Nothing
The Maryland Home Improvement Guaranty Fund is designed to reimburse homeowners for 'actual loss' directly resulting from a licensed contractor's faulty workmanship or breach of contract related to home improvement work. It does not cover consequential damages to personal property, such as an automobile, or work that falls outside the scope of home improvement. Therefore, automobile repairs are not recoverable from the fund.
Question 4: An example of non-door-to-door sales
- Before beginning work, the customer receives a signed copy of the contract.
- Sale of insurance to a homeowner in his house
- Sale of a $300 investment advising package by credit card transaction via the internet (Correct answer)
- A roofing contractor was contacted to repair a leak in a property's roof. Sells the owner a contract for a whole new roof.
Correct answer: Sale of a $300 investment advising package by credit card transaction via the internet
Door-to-door sales (or home solicitation sales) are typically defined as sales made at a buyer's residence or away from the seller's usual place of business. These sales often come with specific consumer protection rights, like a right to cancel. An online transaction for an investment advising package does not occur at the customer's home and is conducted remotely, thus it is not considered a door-to-door sale.
Question 5: What is the first assessment for each home improvement contractor's guarantee fund?
- $100 (Correct answer)
- $50,000
- $150
- $250
Correct answer: $100
When a home improvement contractor first obtains a license in Maryland, they are required to pay an initial assessment to the Home Improvement Guaranty Fund. This fee helps to capitalize the fund, which is used to reimburse homeowners for losses caused by licensed contractors. The standard initial assessment amount is $100.
Question 6: What are the reasons for canceling a home improvement contractor's license?
- sale of insurance to a homeowner in his house
- failure to submit information on changes in ownership of the firm (Correct answer)
- a list and description of the materials to be utilized in the project
- within 10 business days of the seller receiving the cancellation notification
Correct answer: failure to submit information on changes in ownership of the firm
The Maryland Home Improvement Commission requires licensed contractors to keep their business information current and accurate. Failure to report significant changes, such as a change in the ownership structure of the firm, can be considered a violation of regulations. Such non-compliance can lead to disciplinary actions, including the suspension or cancellation of the contractor's license.
Question 7: A home improvement contractor is offering an affordable price on hot tubs. His advertisements just show the basic price of the tub. What is required in his advertisement?
- The seller must reclaim it at his own expense within 20 days from the date of cancellation.
- A disclaimer indicating that any accessories shown or that may be required for operation are not included in the stated price. (Correct answer)
- Within 10 business days of the seller receiving the cancellation notification.
- None, no legal requirement.
Correct answer: A disclaimer indicating that any accessories shown or that may be required for operation are not included in the stated price.
Maryland's consumer protection laws, enforced by the MHIC, require advertisements to be clear and not misleading. If an advertisement for a product like a hot tub shows accessories or implies features that are not included in the basic advertised price, a disclaimer is necessary. This ensures consumers are fully informed about what is and is not covered by the stated price.
Question 8: A customer cancelled within the specified time frame, and the vendor reimbursed the deposit. How does the seller reclaim possession of the merchandise?
- Within 10 business days of the seller receiving the cancellation notification.
- A statement indicating that the quoted price does not include the accessories displayed or that may be required for operation.
- The seller must reclaim it at his own expense within 20 days from the date of cancellation. (Correct answer)
- A $5,000 fine and imprisonment of up to three years for the contractor and the owner.
Correct answer: The seller must reclaim it at his own expense within 20 days from the date of cancellation.
Under Maryland's Door-to-Door Sales Act, if a customer validly cancels a contract and the seller has refunded the deposit, the seller is responsible for reclaiming any merchandise delivered to the customer. The law specifies that the seller must retrieve the merchandise at their own expense within 20 days from the date the cancellation notice was received. This prevents the seller from abandoning the goods and ensures a clean break from the cancelled contract.
Question 9: John Jones and Company, a home improvement contractor, is changing his firm's name to John Jones and Son. When should he tell the Home Improvement Commission?
- Within 10 days of the change (Correct answer)
- The duration of the current license
- Within 8 days of the change
- Within 3 days of the change
Correct answer: Within 10 days of the change
Maryland Home Improvement Commission regulations mandate that licensed contractors promptly notify the Commission of any significant changes to their business information. This includes changes to the firm's name, address, or ownership. The required timeframe for reporting such changes is typically within 10 days to ensure the Commission's records remain accurate and up-to-date for regulatory and public information purposes.
Question 10: Who is necessary to receive a Maryland home improvement license?
- A contractor who works in Maryland but does not have his or her primary business location there. (Correct answer)
- A list and description of the materials to be utilized in the project.
- Show proof of general liability insurance.
- The letters MHIC# and his license number in three-inch high letters on both sides of the car.
Correct answer: A contractor who works in Maryland but does not have his or her primary business location there.
Maryland law requires any individual or company performing home improvement work within the state to be licensed by the Maryland Home Improvement Commission (MHIC). This requirement applies regardless of whether the contractor's primary business location is within Maryland or in another state. The license ensures adherence to state standards and consumer protection regulations for all work performed in Maryland.
Question 11: What is not necessary in an advertisement promoting a specific home renovation at a temporary reduced cost?
- The former employer
- A guaranty or warranty (Correct answer)
- His name and license number
- None, no legal requirement
Correct answer: A guaranty or warranty
While advertisements for home improvement services must be truthful and include essential information like the contractor's name and license number, there is no general legal requirement for every advertisement to explicitly state a guaranty or warranty. Guarantees and warranties are typically detailed within the contract itself, rather than being a mandatory element of every promotional advertisement.
MHIC Basic 1
What is a requirement of a home improvement contract in the following choices?