Basic Flashcards

A licensed MHIC contractor completes a home improvement project and is paid in full. Three years later, the homeowner files a complaint alleging defective workmanship. Under Maryland law, what is the maximum period during which the MHIC Guaranty Fund can be accessed for a valid claim arising from this completed contract?

Answer: The claim must be filed within 3 years of the date the homeowner discovered or reasonably should have discovered the defect

Maryland's MHIC Guaranty Fund claims are subject to a 3-year statute of limitations that runs from when the homeowner discovered or reasonably should have discovered the defect — not necessarily from project completion. This 'discovery rule' protects homeowners from losing their remedy for latent defects that are not immediately apparent.

An MHIC-licensed contractor enters into a home improvement contract for $22,000. The homeowner requests that the contractor begin immediately and offers to pay 60% upfront ($13,200). Under MHIC regulations, what is the contractor's proper course of action?

Answer: Accept no more than one-third ($7,333) as a deposit regardless of the homeowner's preference

Maryland MHIC regulations prohibit a contractor from accepting a deposit or down payment exceeding one-third (1/3) of the contract price before work begins, even if the homeowner voluntarily offers a larger amount. The restriction is on the contractor's conduct, not the homeowner's offer — accepting more than one-third is a prohibited act regardless of who initiated it.

A sole proprietor holds an MHIC license and hires a subcontractor who is not MHIC-licensed to install custom cabinetry in a client's kitchen. The subcontractor works directly with the homeowner and collects a separate payment from them. Which party has committed a violation of MHIC law?

Answer: Both the licensed contractor and the unlicensed subcontractor have committed violations

Both parties are in violation. The unlicensed subcontractor violated MHIC law by performing home improvement work without a license. The licensed contractor violated MHIC law by hiring an unlicensed subcontractor — a licensed contractor is responsible for ensuring that subcontractors working on their projects are also properly licensed. The fact that the subcontractor collected payment directly from the homeowner compounds both violations.

A homeowner and MHIC contractor sign a written contract on a Monday afternoon at the contractor's office. The homeowner later has second thoughts. Under Maryland's MHIC rescission provisions, by what deadline must the homeowner provide written notice of cancellation to exercise their right to rescind?

Answer: Midnight of the third business day following the contract signing

Under Maryland MHIC law, homeowners have the right to rescind a home improvement contract within 3 business days of signing, regardless of where the contract was signed. The rescission right applies to office signings as well as home signings. The notice must be in writing and sent by midnight of the third business day — not calendar day — following execution.

An MHIC licensee's license expires on September 30. The contractor continues performing home improvement work through October 15 while their renewal application is pending. During this period, a dispute arises with a homeowner. What is the most accurate legal characterization of the contractor's status and the contract's enforceability?

Answer: The contractor is unlicensed during the lapse period; contracts entered into or work performed during that period may be voidable and subject to MHIC penalties

An expired license is no license at all — a pending renewal application does not automatically extend the license. Any home improvement work performed or contracts entered into during the lapse period are treated as unlicensed activity under MHIC law. Such contracts may be voidable at the homeowner's option, the contractor is subject to penalties, and claims from that period would not be covered by the MHIC Guaranty Fund.

Under MHIC regulations, which of the following scenarios would disqualify an applicant from obtaining or renewing an MHIC license even if all other requirements are met?

Answer: A criminal conviction for theft over $1,500 for which the applicant completed probation 4 years ago

Maryland MHIC law requires the Commission to consider criminal convictions involving moral turpitude or dishonesty — including theft — when evaluating license applications. A felony theft conviction is a significant disqualifying factor because it directly bears on the applicant's trustworthiness to enter consumers' homes and handle their funds. Unlike the other scenarios, a recent theft conviction raises direct integrity concerns that the Commission is mandated to weigh, and can result in denial even after probation is completed.