MHIC Financial Management and Consumer Protection 4

Question 1

Under Maryland's Home Improvement Law, what is the maximum deposit a contractor may collect before beginning work on a project?

Accepted Answer

One-third of the total contract price

Answer

Maryland law limits contractor deposits to one-third (1/3) of the total contract price prior to starting work.

Question 2

A homeowner cancels a signed home improvement contract within the allowed rescission period. What must the contractor do?

Accepted Answer

Return all payments within 10 days of cancellation

Answer

Maryland law requires contractors to return all consumer payments within 10 days after a valid cancellation notice.

Question 3

Which fund compensates Maryland homeowners harmed by licensed home improvement contractors who fail to complete work or perform defective work?

Accepted Answer

The Home Improvement Guaranty Fund

Answer

The Home Improvement Guaranty Fund provides compensation to consumers damaged by licensed MHIC contractors.

Question 4

A contractor submits a final invoice that is $4,200 higher than the written contract amount due to undisclosed cost overruns. Under MHIC rules, what is the likely outcome?

Accepted Answer

The consumer owes nothing beyond the original contract price without a written change order

Answer

Changes to a Maryland home improvement contract must be documented in a written change order signed by both parties; unauthorized overruns are not enforceable.

Question 5

What is the purpose of requiring Maryland contractors to maintain a separate project escrow account for large deposits?

Accepted Answer

To ensure consumer funds are protected and used only for the specified project

Answer

Escrow requirements protect consumers by ensuring their deposit money is not commingled with the contractor's operating funds and is available to complete the project.

(MHIC) Maryland Home Improvement Contractor Practice Test

(MHIC) Maryland Home Improvement Contractor Practice Test

MHIC Financial Management and Consumer Protection 4