MHIC Maryland Home Improvement Law and Contracts Flashcards

A licensed MHIC contractor completes a $22,000 kitchen renovation. The homeowner pays in full but later discovers the contractor never pulled the required permits. Under Maryland law, what is the homeowner's most powerful statutory remedy specific to MHIC violations?

Answer: File a complaint with the Maryland Home Improvement Commission to rescind the contract and recover all payments

Under Maryland's Home Improvement Law (Md. Code, Bus. Reg. § 8-601 et seq.), a homeowner may file a complaint with the MHIC, which has authority to order contract rescission and full restitution when a contractor violates the Act — including failure to obtain required permits. This is a statutory remedy unique to MHIC enforcement that goes beyond ordinary civil litigation.

An MHIC-licensed contractor enters into a $15,500 home improvement contract. The written contract does not include the contractor's MHIC license number. Which of the following statements most accurately reflects the legal consequence under Maryland law?

Answer: The contract is voidable at the homeowner's option, and the homeowner may recover any payments already made

Maryland law requires that every home improvement contract include the contractor's MHIC license number. A contract lacking this required information is voidable at the homeowner's election — not automatically void. The homeowner can choose to rescind and recover payments, but the contractor cannot use the defect offensively to escape obligations. This asymmetric voidability protects consumers without punishing them.

A homeowner signs a home improvement contract on a Saturday at a home show. On the following Monday evening (Day 3), she mails a written cancellation notice. The contractor argues the rescission is untimely. Under Maryland's three-day right of rescission rules, which analysis is correct?

Answer: The rescission is timely because Sundays are excluded from the three-business-day count under federal and Maryland law

Under both the Federal Trade Commission's Cooling-Off Rule and Maryland's corresponding provisions, the three-day rescission period counts only business days. Sundays (and federal holidays) are excluded. A contract signed Saturday gives the homeowner until the close of the third business day — Tuesday — to cancel. Mailing on Monday is timely. The right applies to sales made at locations other than the seller's permanent place of business, which includes home shows.

Under MHIC regulations, a contractor collects a deposit of 35% of the total contract price ($40,000 job) before beginning work. The contractor then abandons the project after completing approximately 10% of the work. Regarding the Guaranty Fund, which statement is most accurate?

Answer: The homeowner may file a Guaranty Fund claim, but recovery is capped at $20,000 per project regardless of actual loss

Maryland's MHIC Guaranty Fund provides recovery for homeowners harmed by licensed contractors, including project abandonment. However, the Fund caps recovery at $20,000 per claimant per project (with a separate $50,000 per-licensee aggregate). Even though the actual loss may exceed $20,000, the statutory cap limits individual recovery. The deposit amount, while potentially a separate violation, does not bar the claim itself.

A homeowner contracts with a licensed MHIC contractor for a $9,500 deck installation. The contract is silent on the dispute resolution method. After a dispute arises, the contractor demands arbitration based on an arbitration clause he now claims was in his standard terms incorporated by reference. The homeowner refuses. What is the correct legal position under Maryland home improvement law?

Answer: Mandatory pre-dispute arbitration clauses are unenforceable in Maryland home improvement contracts; the homeowner cannot be compelled to arbitrate

Maryland's Home Improvement Law expressly prohibits mandatory pre-dispute arbitration clauses in home improvement contracts. Such clauses are void and unenforceable as a matter of public policy under Md. Code, Bus. Reg. § 8-623. The contractor cannot compel arbitration regardless of incorporation by reference. This protection exists because mandatory arbitration was seen as stripping homeowners of judicial remedies guaranteed by the MHIC statute.

A subcontractor completes $8,000 of electrical work on a residential project for a general MHIC-licensed contractor, but the GC fails to pay. The subcontractor wants to file a mechanics' lien. Which scenario most precisely reflects Maryland mechanics' lien law as applied to home improvement subcontractors?

Answer: The subcontractor must serve the homeowner with a Notice of Intent to Lien within 120 days of last furnishing labor or materials, or the lien right is lost

Under Maryland's Mechanics' Lien Law (Md. Code, Real Prop. § 9-104), a subcontractor who has no direct contract with the owner must provide written Notice of Intent to Lien to the owner within 120 days of the date on which the subcontractor last performed work or supplied materials. Failure to give this notice within the deadline extinguishes the lien right entirely, even if the work was properly performed. This notice requirement specifically protects homeowners from surprise liens from parties they never dealt with directly.