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Maryland Home Improvement Contractors: Button Up Your Contracts

Author: S. Hayes Edwards Jr. Date: 12/21/2014

Categories: Business Startups, Corporate and Business Law

So you meet the requirements to be a licensed home improvement contractor in Maryland. You work hard to develop business, satisfy your clients, and build a reputation. But do your written contracts comply with the long list of requirements set forth in the Maryland Home Improvement Act (“MHIA”)? If not, you might find yourself facing an inquiry from the Maryland Home Improvement Commission (“MHIC”), initiated by your client.

The reasons you might wish to simplify or even skip a comprehensive written contract are countless, and understandable. Maybe the project seems too small to merit the contract. Or maybe you’ve worked with a homeowner before and you trust each other. I understand that homeowners can be reluctant to sign off on a contract that looks intimidating.

But here is the fact you must never ever forget: The MHIA is written to protect homeowners, not contractors. It presumes that you know the laws and regulations that govern your business. In contrast, the law assumes that consumers do not know their rights. You and your contract are in charge of advising homeowners of their rights, and some other things as well. If the contract leaves out any of these requirements, it is you and not the homeowner who is on the hook.

At its heart, a contract is a reasonably straightforward exercise: You provide X goods and Y services, and the homeowner pays you Z. But the less obvious requirements – everything from the size of the type for some disclosures to information about mediation – can create a minefield. And you need to be especially careful if you are requiring a deposit at signing or taking a security interest in the homeowner’s property.

Although the agreement itself might survive even if these requirements are not met, as the contractor you could face civil penalties, loss of license, or even criminal prosecution. Even if the project goes smoothly, a homeowner can report you to the MHIC for failing to use a compliant contract.

Here’s how to make sure your contracts will comply every time without adding a lot of effort to the process of winning a job and signing a deal. We can help you with any or all of these tasks.

REVIEW AND UPDATE YOUR STANDARD CONTRACT.

At your request, we can evaluate your contract template and suggest modifications to bring it into complete alignment with the requirements. If you don’t have a standard contract, we could create one for you. When a new job comes along, you pull it up on your computer screen or print out a blank copy and fill in all of the relevant details. Because the requirements are built in, you minimize the risk of missing any of them.

BE SURE YOU KNOW WHAT ALL OF THE TERMS MEAN.

As part of the process, we can jointly review all of the items – especially ones that are new or unfamiliar to you – to make sure you are comfortable with what they mean and that you can explain them to a homeowner. Your ability to have that conversation can help you reassure a homeowner, get your job off to a strong start, and avoid misunderstandings as the project proceeds.

CONFIRM YOUR MARYLAND STATUS AS A LICENSED CONTRACTOR.

I have assumed throughout this article that you are properly licensed. If you aren’t and you’re performing home improvement work on someone else’s home then even the most perfect contract can’t guarantee your protection. You are subject to anything from civil penalties to criminal prosecution if you get paid to work on a home in Maryland without a license. Licensure in another state such as Virginia won’t protect you either; a countertop fabricator from Fairfax cannot legally install a granite counter in Bethesda without an MHIC license. Your Maryland license also needs to be renewed every two years. An expired license is the same as no license.

Finally, it is just about a given in the home improvement business that disagreements, dissatisfaction and disputes are unavoidable. If a homeowner accuses you of violating the law because of a non-compliant contract, please feel free to contact us. A contractor-consumer dispute is not just a question of whether the provisions were followed. And we can help you protect your interests, prepare your side of the case as effectively as possible, and resolve the dispute in an efficient manner.

If you need to review or update your home improvement contract, or if you are facing any dispute with a homeowner over a project, you can reach me at hedwards@mcmillanmetro.com or (240) 778-2329. My colleagues and I will be glad to assist you.

Coming Next Month – Home Improvement Contracts 101 for Homeowners.