MHIC Basic 4 — Questions and Answers
Question 1: Under Maryland law, what is the maximum allowable down payment a licensed home improvement contractor may collect before starting work?
- One-third of the contract price (Correct answer)
- One-half of the contract price
- 25% of the contract price
- No limit is set by statute
Correct answer: One-third of the contract price
Maryland law caps the initial down payment at one-third of the total contract price to protect homeowners.
Question 2: A homeowner discovers that a contractor completed work without a required building permit. Who is primarily responsible for obtaining that permit under MHIC rules?
- The licensed contractor (Correct answer)
- The homeowner
- The subcontractor who performed the work
- The local code inspector
Correct answer: The licensed contractor
The MHIC-licensed contractor bears responsibility for securing all required permits before beginning covered work.
Question 3: Which document must an MHIC licensee provide to the homeowner BEFORE starting a home improvement project valued over $100?
- A written contract signed by both parties (Correct answer)
- A verbal agreement confirmed by email
- A material cost estimate only
- A lien waiver form
Correct answer: A written contract signed by both parties
Maryland requires a written, signed contract for home improvement work exceeding $100 to protect both parties.
Question 4: If an MHIC licensee's bond is cancelled by the surety company, within how many days must the contractor notify the Maryland Home Improvement Commission?
- 10 days
- 30 days (Correct answer)
- 60 days
- 90 days
Correct answer: 30 days
Contractors must notify the Commission within 30 days of any bond cancellation to maintain compliance.
Question 5: A salesperson working for a licensed MHIC contractor wishes to solicit home improvement contracts. What credential does that salesperson need?
- A separate MHIC salesperson license (Correct answer)
- No license — the contractor's license covers them
- A general contractor's license
- A notary public commission
Correct answer: A separate MHIC salesperson license
Maryland requires each individual who solicits home improvement sales to hold their own MHIC salesperson license.
Question 6: Under the Maryland Home Improvement Law, which of the following projects is EXEMPT from MHIC licensing requirements?
- New construction of a single-family dwelling (Correct answer)
- Replacing kitchen cabinets in an existing home
- Repainting the exterior of an existing residence
- Installing a new HVAC system in an occupied house
Correct answer: New construction of a single-family dwelling
New construction is excluded from MHIC coverage; the law applies only to improvements on existing residential structures.
Question 7: An MHIC licensee completes a roofing job but the homeowner refuses to pay the final balance. What legal remedy does Maryland provide the contractor to secure payment?
- File a mechanic's lien against the property (Correct answer)
- Immediately remove the installed materials
- Report the homeowner to the Commission
- Withhold the permit completion certificate
Correct answer: File a mechanic's lien against the property
Maryland's mechanic's lien law allows contractors to place a lien on the property for unpaid labor and materials.
MHIC Basic 4
Under Maryland law, what is the maximum allowable down payment a licensed home improvement contractor may collect before starting work?