Generally, if you perform work on a home or a yard and the person who lives there pays you to do the work, including an owner or a tenant (we are going to refer to those person in this article as “customers” although you may call them “homeowners”), you need to be a licensed home improvement contractor through the Maryland Home Improvement Commission (“MHIC”). Your contract must also contain the following information (Note – at the time this article was prepared even the MHIC website did not include all the information required for a contract) and the following language is prohibited. Note individuals counties may impose additional requirements.
Obviously, the contract must be in writing and be legible. Also, the contract must describe each document that it incorporates such as plans, scope and materials descriptions. The contract must be signed by both the customer and the contractor. The contract also must contain a description of the home improvement to be performed and the materials to be used. The customer must receive a signed copy of the contract prior to the work starting. It also must contain Your Construction Businesses’ Name, Address, and MHIC License Number and license number of each salesperson.
These notices need to be an exact quote and need to say:
1. “Each contractor and subcontractor must hold a current MHIC license and anyone can ask MHIC about a contractor or subcontractor.”
2. Formal mediation of disputes between customers and contractors is available through the Maryland Home Improvement Commission;
3. The Maryland Home Improvement Commission administers the Guaranty Fund, which may compensate customers for certain actual losses caused by acts or omissions of licensed contractors; and
4. A homeowner may request that a contractor purchase a performance bond for additional protection against losses not covered by the Guaranty Fund.
The Notice Must Give the Phone Number of the MHIC and its webpage.
Estimated Time on the Job
A home improvement contract must contain the approximate dates when home improvement work will begin and when it will be substantially completed.
Deposit and Payments
A contractor cannot accept more than 1/3 of the contract price as a deposit and may not accept any payment until the contract is signed. The agreed upon price of the home improvement contract should be clearly stated.
A Gift or Inducement is Prohibited-
Do not give cash or property to a customer for providing referrals to other customers. Do not give gifts over $25 and do not require entering into a contract as a condition of giving any gift.
Mortgage or Liens
If the contractor loans money or arranges the loaning of money, the contract’s first page must state verbatim: “This contract creates a mortgage or lien against your property to secure payment and may cause a loss of your property if you fail to pay the amount agreed upon. You have the right to consult an attorney. You have the right to rescind this contract within 3 business days after the date you sign it by notifying the contractor in writing that you are rescinding the contract.”
For many reasons, you may want to put an arbitration clause in your contract. A mandatory arbitration clause in a home improvement contract is required to include the name of the arbitration forum; whether fees will be charged for the arbitration as well as listing the fee schedule; indicate whether the arbitration is binding; and state that a claim against the Guaranty Fund will be stayed until completion of the mandatory arbitration. Also, the parties must initial and date the contract next to the arbitration clause.
Door-to-Door Sales Act
If you negotiate terms or present a contract at the customer’s home the contract is covered by the Maryland Door-to-Door Sales Act. If the contract is covered by the Door-to-Door Sales Act, the contractor must include additional information in the contract, including a notice that states that “you may cancel the transaction at any time prior to midnight of the 3rd business day after the date of the transaction.” A separate “Notice of Cancellation” form must be attached to the contract and filled in with the information about how to cancel the contract. The Door-to-Door Sales Act requires that the contract be written in the same language as that principally used in the oral sales presentation.
If a contract is subject to the approval of the contractor before it becomes binding (commonly in instances where a contract is left with a homeowner who wants to think about contract) or any other language requiring prior approval before acceptance shall state that approval or disapproval of the contract shall be made within 10 working days from the date of the contract and that the owner shall be duly informed, in writing, by the contractor of the decision approving or disapproving the contract within that time.