Part 2 – MHIC Complaints: What Contractors Need to Know

• January 26, 2018
• Estate Planning

When a homeowner files a complaint about your work, the Maryland Home Improvement Commission could suspend your license and require you to pay thousands of dollars in fines. According to Consumer Reports, most home remodeling complaints are the result of “miscommunication and mismatched expectations.” The best way to avoid being the subject of a complaint is to focus on communication and ensure that your contract clearly states the scope of a project.

Protect Your Interests

You may already know that once a homeowner signs your contract, you can legally collect your deposit (which can be no more than a third of the total project cost). But Maryland law does not specify how and when you will be paid for the rest of the job. To ensure you are paid in a timely manner, put in writing your expectations about payment, including any penalties for late payment or non-payment. In the unlikely event you should have to sue a homeowner for payment, a solid contract can help you prove your case.  

Understand Your Liability

As of July 1, 2016, subcontractors do not need a license to perform work under a contractor who is licensed in the state of Maryland. But if you plan to hire general laborers or subcontractors, make sure to at least check their references. Should a subcontractor perform substandard work, or damage the homeowner’s property, you could be liable – at least in part – for the homeowner’s monetary losses.

How to Handle Complaints

Fostering good relationships with clients and encouraging them to contact you with questions or concerns is the first step in avoiding formal complaints. You may also wish to include an arbitration clause in your contract, specifying:

• The person or organization that will handle arbitration, in the event of a dispute
• Whether the arbitrator’s findings are binding
• Whether fees will be assessed to the client for initiating arbitration (and if so, what those fees are)
• No claim shall be made against the MHIC Guaranty Fund (the fund that compensates homeowners for monetary losses) until arbitration is complete.

If you have no arbitration clause, and a client should file a complaint with the MHIC, once notified, you must respond in writing within 14 days, or you could lose your license and face a fine of up to $5,000. The MHIC offers free mediation services. When contractors agree to try resolving the complaint through mediation, the case won’t become part of the public record. In reviewing a complaint, the MHIC will look at the contract. If the contract doesn’t meet all legal requirements, the MHIC may assess fines of $500 to $2,000.

Get Advice

Being an independent contractor, you have the freedom to work when you choose, and to undertake only those projects that interest you. But along with that freedom comes risk – a non-paying client or a formal complaint can be financially disastrous. To position yourself for success, you need a solid and well-crafted contract, and Lusk Law, LLC, can help you with that. Lusk Law, LLC, is devoted to assisting owners of small businesses, helping to avoid litigation when possible and actively representing our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to contractors in Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, Montgomery County, Anne Arundel County, and other counties in Maryland. In addition, we have represented Contractors in MHIC Hearings. Please call us at 443-535-9715 or fill out our contact form if have any questions about this topic.