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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
Each home improvement contract must contain a notice that states, "Every home improvement
contract must contain a notice that gives the telephone number of MHIC and states that"
each contractor and subcontractor must hold a current MHIC license and anyone can ask MHIC
about a contractor or subcontractor." 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.
For each contract signed after August 20, 2012, MHIC regulations require that the contract
contain the following notice:
- Formal mediation of disputes between homeowners and contractors is available through the
Maryland Home Improvement Commission;
- 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 may request that a contractor purchase a performance bond for additional
protection against losses not covered by the Guaranty Fund.
This notice shall be included within the contract or, until July 1, 2013, may be included
in an addendum attached to the contract, provided that the addendum is signed by the homeowner and contractor.
Dates
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; instead 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 the home improvement project, this information is
very important. Whenever payment for work performed under a home improvement contract will
be 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 3 business days after the date you sign it by notifying the contractor in writing
that you are rescinding the contract."
Arbitration Clause
Does the contract contain an arbitration clause? Before you sign a contract, it is
important to know what arbitration is and whether the contract has 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.
Legal Advice
Information contained in this flyer is not legal advice. You may wish to consult an attorney
prior to signing any legal document. MHIC staff cannot provide legal advice.
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