MHIC Knowledge 2 — Questions and Answers
Question 1: Maryland's mechanics' lien law protects which parties from non-payment on home improvement projects?
- Contractors, subcontractors, and material suppliers (Correct answer)
- Only the prime contractor
- Only licensed MHIC contractors
- Homeowners only
Correct answer: Contractors, subcontractors, and material suppliers
Maryland's mechanics' lien law protects contractors, subcontractors, and material suppliers who have provided labor or materials to improve a property and have not been paid.
Maryland's mechanics' lien law (Real Property Article §9-101 et seq.) provides a statutory remedy for contractors, subcontractors, and material suppliers who have not been paid for work performed or materials furnished to improve real property. The lien attaches to the property itself, providing security for the unpaid party. Homeowners can protect themselves by obtaining lien waivers from all parties as payments are made.
Question 2: Under Maryland Consumer Protection law, which of the following contractor actions would constitute an 'unfair or deceptive trade practice'?
- Misrepresenting the materials to be used in a home improvement project (Correct answer)
- Charging market-rate prices for high-quality materials
- Requiring a written change order for scope changes
- Completing work ahead of the estimated completion date
Correct answer: Misrepresenting the materials to be used in a home improvement project
Misrepresenting materials to be used — for example, advertising premium materials but using lower-grade substitutes — is a deceptive trade practice under Maryland Consumer Protection law.
Maryland's Consumer Protection Act (Commercial Law Article §13-301) prohibits unfair or deceptive trade practices in consumer transactions, including home improvement contracts. Misrepresenting the quality, nature, or specifications of materials is a classic deceptive practice. Violations can result in civil penalties, consumer restitution, and MHIC disciplinary action. The Maryland Attorney General has authority to enforce the Consumer Protection Act.
Question 3: A contractor working in Baltimore City installs new windows without obtaining a building permit. What are the potential consequences?
- Stop-work order, fines, and potential requirement to remove or redo the work (Correct answer)
- Only a verbal warning from the building inspector
- MHIC automatically revokes the license on first offense
- The contractor must pay only the permit fee retroactively
Correct answer: Stop-work order, fines, and potential requirement to remove or redo the work
Performing work without required permits can result in stop-work orders, fines, and requirements to remove or bring the work into compliance, at the contractor's expense.
Building permits exist to ensure work is inspected and meets code requirements. Performing unpermitted work that requires a permit is a violation of local building codes and MHIC regulations. Consequences can include stop-work orders issued by the local building authority, fines, and in serious cases, orders to remove and redo the work to pass inspection. The contractor may also face MHIC disciplinary action for the code violation.
Question 4: An MHIC contractor wants to have a lien on a homeowner's property released. What is the typical way this is accomplished?
- Filing a lien release or satisfaction with the circuit court once paid (Correct answer)
- Notifying MHIC that the lien is resolved
- The lien automatically dissolves after 90 days if no action is taken
- The homeowner must petition the court to remove the lien
Correct answer: Filing a lien release or satisfaction with the circuit court once paid
Once a mechanics' lien has been satisfied (paid), the contractor files a release or satisfaction of lien with the circuit court where the lien was filed. This clears the lien from the property's title.
When a mechanics' lien is paid or otherwise resolved, the lienholder must file a release or satisfaction of the lien with the circuit court clerk where it was originally filed. This formal release clears the lien from the property's chain of title. Contractors who fail to release satisfied liens promptly may be liable to the homeowner for damages. Property title companies check for mechanics' liens during real estate transactions, so timely releases are important.
Question 5: Under Maryland Home Improvement Law, a contractor who receives payment but intentionally fails to pay their subcontractors may be charged with:
- Home improvement fraud (Correct answer)
- Civil breach of contract only
- A building code violation
- Unfair labor practices
Correct answer: Home improvement fraud
Intentionally withholding payment from subcontractors after receiving payment from the homeowner can constitute home improvement fraud under Maryland law.
Maryland Home Improvement Law specifically addresses fraudulent practices, including the scenario where a contractor receives payment from a homeowner but intentionally fails to pay subcontractors or material suppliers. This is treated as home improvement fraud and can result in criminal charges, civil liability, and MHIC license revocation. The fraudulent diversion of trust funds intended for construction payments is a serious crime.
Question 6: A homeowner in Maryland signs a home improvement contract on a Monday. By when must they notify the contractor if they wish to cancel under the right of rescission?
- By midnight on Thursday (3 business days later) (Correct answer)
- By midnight on Sunday (7 calendar days later)
- By midnight on Wednesday (2 business days later)
- By noon on Tuesday (1 business day later)
Correct answer: By midnight on Thursday (3 business days later)
The 3-business-day right of rescission begins the day after signing. A Monday signing means the 3-day period expires at midnight on Thursday.
Maryland's right of rescission gives homeowners 3 business days to cancel a home improvement contract. Business days do not include Saturdays, Sundays, or legal holidays. If a contract is signed on Monday, the 3-day period begins on Tuesday and expires at midnight on Thursday. To cancel, the homeowner must provide written notice to the contractor by that deadline. The contract must include the specific cancellation deadline date.
MHIC Knowledge 2
Maryland's mechanics' lien law protects which parties from non-payment on home improvement projects?