MHIC Business and Labor Practices 4 — Questions and Answers
Question 1: Under Maryland law, how long must a licensed MHIC contractor retain records of home improvement contracts?
- 1 year
- 3 years (Correct answer)
- 5 years
- 7 years
Correct answer: 3 years
Maryland regulations require home improvement contractors to keep records of contracts and related documents for at least 3 years.
Question 2: A homeowner pays a contractor a $5,000 deposit but the contractor fails to begin work within the agreed timeframe and stops responding. Which Maryland agency should the homeowner contact first?
- Maryland Attorney General
- Maryland Home Improvement Commission (MHIC) (Correct answer)
- Maryland Department of Labor
- Better Business Bureau
Correct answer: Maryland Home Improvement Commission (MHIC)
The MHIC is the primary regulatory body that handles complaints against licensed home improvement contractors in Maryland.
Question 3: Which of the following is a valid reason for the MHIC to suspend a contractor's license?
- Hiring subcontractors on a project
- Abandoning a home improvement project without justification (Correct answer)
- Requiring a deposit before starting work
- Completing work ahead of schedule
Correct answer: Abandoning a home improvement project without justification
Abandoning a project without legal justification is grounds for license suspension or revocation by the MHIC.
Question 4: What is the maximum deposit percentage that a Maryland home improvement contractor may legally collect before starting work?
- 10%
- 25%
- 33% (Correct answer)
- 50%
Correct answer: 33%
Maryland law caps initial deposits at one-third (approximately 33%) of the total contract price.
Question 5: An MHIC licensee wants to add a partner to the business. Which step is required?
- File a new license application listing the partner (Correct answer)
- Simply add the partner's name to existing contracts
- Notify MHIC in writing within 90 days
- No action is required if the partner is family
Correct answer: File a new license application listing the partner
Adding a new owner or qualifying party typically requires filing an updated license application with MHIC.
Question 6: Under Maryland's Home Improvement Law, which statement about subcontractors is correct?
- Subcontractors must have their own MHIC license to perform specialty work
- The general contractor is solely responsible for subcontractors' compliance (Correct answer)
- Homeowners must approve each subcontractor in writing
- Subcontractors cannot be used on contracts under $5,000
Correct answer: The general contractor is solely responsible for subcontractors' compliance
The licensed general contractor is responsible for ensuring that subcontractors working under them comply with applicable laws.
Question 7: A contractor completes a kitchen remodel but the homeowner refuses to pay the final balance, claiming defective work. What is the contractor's best legal first step in Maryland?
- Place a mechanic's lien on the property (Correct answer)
- Report the homeowner to MHIC
- File a complaint with the Maryland Attorney General
- Begin removing installed materials
Correct answer: Place a mechanic's lien on the property
A mechanic's lien is the primary legal remedy available to contractors for unpaid work on real property in Maryland.
MHIC Business and Labor Practices 4
Under Maryland law, how long must a licensed MHIC contractor retain records of home improvement contracts?