Maryland Home Improvement Contracts - Home Improvement Commission
The Maryland Home Improvement Commission (MHIC) has specific requirements for the form and content of every home improvement contract. The contract must be in writing and be legible. Also, the contract must describe each document that it incorporates, and it must be signed by each party to the agreement. The contract also must contain a description of the home improvement to be performed and the materials to be used. Remember, a contract is a legally binding document so it is important to understand what you are signing. The homeowner must receive a signed copy of the contract prior to the work starting.
Contractor’s Name, Address, and MHIC License Number
A home improvement contract must contain the name, address, and MHIC license number of the contractor. If a salesperson solicited or sold the home improvement, then the contract must also contain the name and license number of each salesperson.
Notice for Homeowners
Every home improvement contract shall contain a notice that gives the telephone number and website of MHIC, and states that "each contractor must hold a current MHIC license, and anyone can ask MHIC about a contractor." The correct address for MHIC is 500 North Calvert Street, Baltimore, Maryland 21202. The telephone numbers are 410-230-6309 and 1-888-218-5925.
MHIC regulations require that the contract contain the following notice:
- The Maryland Home Improvement Commission administers the Guaranty Fund, which may compensate homeowners for certain actual losses caused by acts or omissions of licensed contractors; and
- A homeowner has the right to purchase a performance bond for additional protection against losses not covered by the Guaranty Fund.
A home improvement contract must contain the approximate dates when the performance of the home improvement 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. Beyond the initial deposit, the Home Improvement Law does not control the payment schedule. Payment terms, including a deposit of less than 1/3 of the contract, can be negotiated between the homeowner and contractor.
Mortgage or Liens
If you are borrowing money to finance a home improvement project, this information is very important: Whenever payment for a home improvement contract is secured by an interest in residential real estate, the contract is required to contain additional information. On the first page of the contract, there must be a written notice that states: "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 three business days after the date you sign it by notifying the contractor in writing that you are rescinding the contract."
Before you sign a contract, it is important to know if the contract contains an arbitration clause. A mandatory arbitration clause in a home improvement contract is required to include the name of the person or organization that will conduct the arbitration; whether any mandatory fees will be charged to the parties for the arbitration and list the fee schedule; whether the arbitrator's findings are binding; and a disclosure that a claim against the Guaranty Fund will be stayed until completion of the mandatory arbitration proceeding. Also, the parties must initial and date the contract next to the arbitration clause.
Door-to-Door Sales Act
The contract may also be 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.
The information contained above is not legal advice. You may wish to consult an attorney prior to signing any legal document. MHIC staff cannot provide legal advice.