Knowledge Flashcards

A licensed MHIC contractor completes a $14,000 kitchen remodel but discovers after the fact that a subcontractor he used was not registered with MHIC as required. Under Maryland law, which consequence most accurately describes the contractor's legal exposure?

Answer: The contractor may be subject to license suspension or revocation for using an unregistered subcontractor on a home improvement project

Under the Maryland Home Improvement Law, a licensed contractor is responsible for ensuring that subcontractors used on home improvement projects are properly registered with MHIC. Using an unregistered subcontractor can result in disciplinary action against the contractor's own license, including suspension or revocation. The obligation to verify subcontractor registration rests with the primary contractor.

A homeowner signs an MHIC contract on a Monday at the contractor's office and pays a $3,000 deposit. She calls Thursday to cancel. Under Maryland's Home Improvement Law cancellation provisions, which statement is correct?

Answer: She has no right to cancel because the contract was signed at the contractor's office, not her home

Maryland's Home Improvement Law three-day right of rescission applies specifically to contracts solicited at the homeowner's residence. When a homeowner travels to a contractor's place of business and signs a contract there, the statutory three-day cancellation right under the Home Improvement Law does not automatically apply (though Federal FTC cooling-off rules may apply in solicited-sale contexts). This is a critical distinction that catches many contractors and homeowners off guard.

An MHIC licensee is working on a project where the total contract value is $75,000. The homeowner requests that progress payments be tied to completion milestones. Under Maryland Home Improvement Law, what is the maximum deposit or initial payment a contractor may legally collect before work begins?

Answer: $10,000 or one-third of the contract price, whichever is less

Maryland Home Improvement Law limits the initial deposit a contractor may collect to the lesser of one-third of the total contract price or $10,000. For a $75,000 contract, one-third would be $25,000, but the $10,000 cap applies because it is the lesser amount. This provision protects homeowners from contractors collecting large upfront sums and then failing to perform.

Under the Maryland Home Improvement Law, which of the following items is NOT required to appear in a written home improvement contract?

Answer: The manufacturer warranty terms for all installed materials

Maryland's Home Improvement Law mandates specific contract disclosures including the contractor's MHIC license number, a description of the work, start and estimated completion dates, the total price, and payment terms. However, the law does not require that manufacturer warranty terms for installed materials be spelled out in the contract itself—those warranties are governed separately by the manufacturer's documentation. Contractors must provide their own workmanship warranty disclosures, but listing every manufacturer warranty is not a statutory contract requirement.

A Maryland homeowner files a claim against the Guaranty Fund after a licensed contractor abandoned a $45,000 project. The homeowner suffered $38,000 in actual damages. What is the maximum amount the homeowner can recover from the MHIC Guaranty Fund for this single claim?

Answer: $20,000 per claimant for any one contractor

The Maryland Home Improvement Commission Guaranty Fund limits recovery to $20,000 per claimant against any single contractor, regardless of actual damages sustained. Even though the homeowner suffered $38,000 in damages, the statutory maximum per individual claimant is $20,000. There is also an aggregate cap per contractor license. This limitation is frequently tested because applicants confuse the per-claimant cap with the aggregate per-contractor cap.

A licensed MHIC contractor submits a bid that includes pulling all necessary permits. After winning the contract, the contractor discovers the local jurisdiction requires a homeowner co-signature on the permit application. The homeowner refuses to sign, claiming the contractor should handle everything. Which statement best reflects the contractor's legal and ethical obligations under MHIC standards?

Answer: The contractor should halt work, explain to the homeowner that proceeding without a required permit violates Maryland law and could jeopardize the contractor's license, and seek resolution

Under Maryland Home Improvement Law and MHIC regulations, performing work that requires a permit without obtaining one is a violation that can result in license suspension or revocation. A contractor may not forge or misrepresent a homeowner's co-signature, and proceeding without a required permit—even with documented homeowner refusal—still exposes the contractor to disciplinary action. The correct course is to halt work, clearly explain the legal obligation to the homeowner, and work toward a lawful resolution before proceeding.