MHIC MHIC Maryland Home Improvement Law and Contracts 1 — Questions and Answers
Question 1: Under the Maryland Home Improvement Act (MHIA), which of the following contractors is REQUIRED to hold an MHIC license?
- A contractor who builds new homes from the ground up
- A contractor who replaces windows and siding on an existing residence (Correct answer)
- A contractor who performs work valued under $100 on a neighbor's home as a favor
- An employee of the homeowner who performs repairs on the owner's property
Correct answer: A contractor who replaces windows and siding on an existing residence
The MHIA requires any contractor performing home improvement work on existing residential property valued at $500 or more (for labor and materials combined) to hold a valid MHIC license. Window and siding replacement on an existing residence is a classic home improvement requiring licensure.
Maryland's Home Improvement Act (Business Regulation Article, Title 8) defines a 'home improvement' as the alteration, remodeling, repair, restoration, or replacement of a building or part of a building used as a residence. Window and siding replacement falls squarely within this definition. New construction of homes is generally not covered by the MHIA (it falls under contractor licensing), and de minimis work by a homeowner's own employee or very low-value favors may be exempt. Anyone contracting for home improvements on existing residential property must be licensed as an MHIC.
Question 2: What is the maximum deposit a licensed MHIC contractor may collect from a homeowner before beginning work on a home improvement contract?
- One-quarter (25%) of the total contract price
- One-third (33⅓%) of the total contract price (Correct answer)
- One-half (50%) of the total contract price
- There is no legal deposit limit in Maryland
Correct answer: One-third (33⅓%) of the total contract price
Maryland law limits the initial deposit a home improvement contractor may collect to one-third (1/3) of the total contract price. Exceeding this limit is a violation of the MHIA and can result in disciplinary action.
Under the Maryland Home Improvement Act, a contractor may not require or accept a deposit exceeding one-third (1/3) of the total contract price before beginning the work. This consumer protection rule prevents contractors from collecting large upfront sums and then abandoning the job. For example, on a $9,000 contract, the maximum allowable deposit is $3,000. Collecting more than one-third is a violation subject to fines, license suspension, or revocation by the Maryland Home Improvement Commission.
Question 3: A homeowner signs a home improvement contract on a Monday at the contractor's office. Under Maryland law, how many business days does the homeowner have to cancel (rescind) the contract?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- No right of rescission exists for contracts signed at the contractor's office
Correct answer: 3 business days
Maryland's Home Improvement Act provides homeowners with a 3-business-day right of rescission for home improvement contracts. This applies to contracts solicited at the homeowner's residence; contracts signed at the contractor's office may be subject to different rules, but the 3-day notice of right to cancel is a standard consumer protection requirement.
Under Maryland and federal consumer protection law (the FTC Cooling-Off Rule and MHIA provisions), homeowners generally have three (3) business days to cancel a home improvement contract signed as a result of a door-to-door solicitation or at their home. When a contract is signed at a contractor's office, the federal three-day right may not automatically apply, but Maryland's MHIA still requires the contract to disclose cancellation rights. Best practice and MHIC compliance require providing the 3-day notice in all residential home improvement contracts. Contractors must include the right-to-cancel notice in every contract.
Question 4: Which of the following MUST be included in a written home improvement contract under Maryland law?
- The contractor's Social Security number
- The approximate start and completion dates of the work (Correct answer)
- The homeowner's credit score
- A list of every subcontractor's license number
Correct answer: The approximate start and completion dates of the work
Maryland law requires a home improvement contract to include the approximate start date and completion date (or time frame) for the project. This is one of several mandatory provisions under the MHIA designed to protect consumers.
The Maryland Home Improvement Act specifies several mandatory provisions for written home improvement contracts, including: the contractor's name, address, and MHIC license number; the homeowner's name and address; a description of the work to be done and materials to be used; the total price or method of determining the price; the payment schedule; approximate start and completion dates; and notice of the homeowner's right to cancel. The contractor's Social Security number, the homeowner's credit score, and every subcontractor's individual license number are not required contract provisions.
Question 5: A homeowner files a complaint against an MHIC licensee for shoddy workmanship. Which state agency is responsible for receiving and investigating this complaint?
- Maryland Department of Labor, Licensing and Regulation (DLLR) / Maryland Home Improvement Commission (Correct answer)
- Maryland Attorney General's Consumer Protection Division (exclusively)
- Maryland Department of Housing and Community Development
- Maryland Board of Public Works
Correct answer: Maryland Department of Labor, Licensing and Regulation (DLLR) / Maryland Home Improvement Commission
The Maryland Home Improvement Commission (MHIC), operating under the Department of Labor, Licensing and Regulation, is the primary state agency that licenses home improvement contractors and investigates consumer complaints against licensees.
The Maryland Home Improvement Commission (MHIC) is the regulatory body created by the Maryland Home Improvement Act to oversee the licensing and conduct of home improvement contractors. Consumers who have disputes with a licensed contractor can file a formal complaint with the MHIC. The Commission investigates complaints, holds hearings, and can impose penalties including fines, license suspension, or revocation. Maryland also maintains a Guaranty Fund that may compensate homeowners who suffer financial losses due to the misconduct of a licensed contractor, funded by contractor license fees.
Question 6: Under the MHIA, which of the following persons or entities is EXEMPT from the MHIC licensing requirement?
- A general contractor who remodels kitchens for homeowners
- A sole proprietor who installs hardwood floors in residential homes
- A homeowner who personally performs improvements on their own primary residence (Correct answer)
- A partnership that paints and repairs residential properties for profit
Correct answer: A homeowner who personally performs improvements on their own primary residence
A homeowner who personally performs home improvements on their own primary residence is exempt from MHIC licensing requirements. The law is designed to regulate contractors who perform work for others, not homeowners doing their own work.
The Maryland Home Improvement Act exempts several categories from the licensing requirement, including: homeowners who personally perform work on their own principal residence; employees of a licensed contractor (acting within the scope of employment); certain types of new construction; work by public utilities; and work by government employees in their official capacity. Any contractor — whether a sole proprietor, partnership, or corporation — who performs home improvement work for others for compensation must hold a valid MHIC license. Penalties for unlicensed contracting include fines up to $5,000 per violation and possible criminal charges.
MHIC MHIC Maryland Home Improvement Law and Contracts 1
Under the Maryland Home Improvement Act (MHIA), which of the following contractors is REQUIRED to hold an MHIC license?