Knowledge Flashcards

A licensed MHIC contractor completes a $12,000 job for a homeowner but fails to obtain a required building permit. Under Maryland law, which of the following best describes the contractor's exposure?

Answer: The contractor may face license suspension and the contract may be deemed unenforceable, but the homeowner still owes for materials supplied

Failing to obtain a required permit is a violation of the Maryland Home Improvement Law and can lead to license suspension or revocation by the Commission. However, courts have generally allowed contractors to recover the reasonable value of materials (quantum meruit) even when the contract has procedural defects—the contract is not automatically void in its entirety. A homeowner-signed waiver has no legal force to excuse a statutory permit requirement.

Under COMAR 09.08.03, which of the following disclosures is a licensed MHIC contractor required to include in a home improvement contract that the other required disclosures do NOT already cover?

Answer: A statement that the homeowner has the right to rescind the contract within three business days if solicited at their home

Maryland's Home Improvement Law requires that contracts for work solicited at the homeowner's residence include a three-business-day right of rescission notice, in addition to other standard disclosures such as the contractor's MHIC license number. Subcontractor license numbers are not required to be listed in the prime contract, and a federal EIN is not a required contractual disclosure under MHIC regulations.

An MHIC licensee's qualifying employee—the individual whose qualifications support the company's license—leaves the firm without notice. Under Maryland Home Improvement Law, how long does the licensee have to replace the qualifying employee before the license is automatically suspended?

Answer: 60 days

Maryland regulations allow a licensed MHIC entity 60 days to designate a new qualifying employee after the previous one leaves. If a replacement is not designated and approved within that window, the license becomes subject to suspension. This grace period prevents an inadvertent lapse when key personnel change unexpectedly.

A homeowner files a claim against the Maryland Home Improvement Guaranty Fund after a contractor abandons a $28,000 project. The fund pays the homeowner $22,000. The contractor later renews their MHIC license. Which of the following is TRUE regarding the fund's subrogation rights?

Answer: The fund is subrogated to the homeowner's rights and may pursue the contractor for the $22,000 paid, and the contractor's license renewal may be denied until reimbursement is made

The Maryland Home Improvement Guaranty Fund is subrogated to the rights of the claimant upon payment. This means the fund can pursue the contractor for the full amount paid. Additionally, Maryland law makes reimbursement to the fund a condition for license reinstatement or renewal—a contractor whose default triggered a fund payment cannot renew until the debt is satisfied. There is no 12-month expiration on these rights.

A Maryland home improvement contract signed on a Monday requires a down payment of 40% of the $30,000 total price, collected at signing. Is this arrangement permissible under MHIC regulations?

Answer: No, because Maryland generally limits deposits to one-third of the contract price before work commences, making a 40% deposit a potential violation

Maryland Home Improvement Law and associated regulations limit the initial deposit a contractor may collect before beginning work. The standard benchmark is one-third (approximately 33%) of the contract price. Collecting 40% upfront before any work has started exceeds this threshold and constitutes a violation, regardless of escrow arrangements. There is no blanket prohibition above $15,000, but the proportional cap applies.

Under Maryland Home Improvement Law, which scenario would subject a contractor to criminal penalties rather than purely administrative ones?

Answer: Performing home improvement work while unlicensed, where the contract value exceeds $500

Performing home improvement work without a required MHIC license is a misdemeanor under Maryland law, carrying potential criminal penalties including fines and imprisonment. This is distinct from administrative violations—such as contract disclosure omissions or registration errors—which are handled through Commission enforcement actions, civil penalties, or license discipline rather than criminal prosecution. The $500 threshold is the point at which the licensing requirement is triggered.