How to Protect Yourself from the Home Remodeling Nightmare

Contact these agencies:

Other steps to avoid an unhappy, costly mistake which can be avoided
•    Google the owner of the firm personally. Expect to find 4-6 pages of info about them    personally – and ensure it is all positive
•    Google their company name. Expect to find 4-6 pages of info about them personally – and ensure it is all positive
•    Study their company’s website
•    Scrutinize the varieties and quality of projects shown on their site
•    Ensure they have significant public recognition: articles about the firm and their projects
•    Ensure they have been reviewed by their peers and given high marks for quality, creativity, customer satisfaction…and earned many awards as  the result
•    Read and scrutinize their testimonials. The firm should have many positive ones.
•    Check for their ability to complete your project after you have paid them. Ask them who their main suppliers are. Call their suppliers and ask if the contractor’s bills are being paid on time.

Critical Information Homeowners Need to Know:
•    Ensure the contractor carries liability insurance and workman’s compensation insurance…and the policies are current and in force.
•    To ensure this, ask for certificates of insurance to be provided directly from the insurer.
•    Easily check on how long the firm has been in business (se next)
•    The lower the MHIC License #, the longer the firm has been in business.
•    License #’s below #9,999 were issued in the 1970’s
•    License #’s above #50,000 were issued more recently

The Maryland Home Improvement Commission (MHIC) has specific requirements for the form and content of every home improvement contract.

Maryland Home Improvement Contracts – Maryland 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.

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. The contract must also 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.”

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 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.”

Mandatory Arbitration
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. According to the Door-to-Door Sales Act, the contract must be written in the same language as that principally used in the oral sales presentation.

Maryland Home Improvement Commission www.dllr.state.md.us/license/mhic/

The Maryland Home Improvement Commission licenses and regulates home improvement contractors, subcontractors and salespersons. Home improvement work includes alteration, remodeling, repair or replacement of a building or part of a building used as a residence. Home improvement also includes work done on individual condominium units. Home improvement does not include work done on commonly owned areas of condominiums or buildings that contain four or more single family units. The Commission investigates complaints by homeowners, awards monetary damages against licensed contractors, and prosecutes violators of the home improvement law and regulations.

The Commission has a Guaranty Fund (the Fund) established by assessments to contractors. This Fund compensates homeowners for actual monetary losses due to poor workmanship or failure to perform a home improvement contract. The Fund applies only to work done by licensed contractors. Each licensed contractor is covered by the Fund for up to $100,000 for all claims. THE AMOUNT WHICH CAN BE AWARDED PER HOMEOWNER IS $20,000.

This is not intended to be legal advice. Feel free to consult an attorney for further information. However, from my experience, most attorneys do not know all of the information within this report until they do additional research for themselves.

For further information including regulations in other jurisdictions contact Russ Glickman     Russ@GlickmanDesignBuild.com