Maryland Home Improvement Contractor Bond (MHIC)

Who needs an MHIC license, and who is exempt

A contractor is a person, other than an employee of an owner, who performs or offers to perform a home improvement for an owner. Except as the law otherwise provides, a person must have a contractor license whenever the person acts as a contractor in the State. Home improvement does not include, among other things, construction of a new home, work done on apartment buildings that contain four or more single-family units, or work on the commonly owned areas of condominiums. An architect, electrician, plumber, or heating, ventilation, air-conditioning, or refrigeration contractor licensed under State or local law is exempt from the MHIC contractor license when acting within that trade.

This page covers the MHIC home improvement contractor license; a trade that is exempt from that license should confirm its own rules with its own licensing board. The Maryland Home Improvement Commission has the final word on what a given license requires, so confirm your requirements with MHIC before you apply.

The MHIC bond form: obligee, term, and cancellation

On the Maryland Home Improvement Contractor's Bond form (revised Oct 2022), the principal and surety are held and firmly bound unto the State of Maryland for the benefit of the Maryland Home Improvement Guaranty Fund, in the event that it is damaged because of payment made on account of a violation of the Maryland Home Improvement Law, in the full and just sum of thirty thousand dollars ($30,000). The surety's aggregate liability for all Guaranty Fund payments on account of the principal's violations arising during the period covered by the bond cannot exceed $30,000, and any renewal or extension establishes a new bonding period. The bond does not require the surety to be responsible for completing any home improvement contract, and it does not release the principal from liability to the Fund in excess of $30,000.

The bond is issued for a term of two years from the date of issuance, and the form carries a field for the address to which claims against the bond are to be sent. The surety may cancel the bond on thirty (30) days' written notice to the Commission by certified mail; if the bond is canceled or reduced by the surety, the principal's license is at risk of revocation.

The Guaranty Fund and homeowner claims

Homeowners are compensated through the Guaranty Fund, within the limits below. An owner may recover from the Fund for an actual loss that results from an act or omission by a licensed contractor, where "actual loss" means the costs of restoration, repair, replacement, or completion arising from an unworkmanlike, inadequate, or incomplete home improvement. The claimant must live in the home or own no more than three residences, and a claim must be brought within 3 years after the loss was or should have been discovered. A claim is submitted to the Commission under oath.

The Commission may not award more than $30,000 to one claimant for the acts or omissions of one contractor, more than $250,000 to all claimants for one contractor (unless the contractor reimburses the Fund), or an amount in excess of what the claimant paid to the contractor. The MHIC page states that the most a homeowner may recover through the Fund is the amount paid to the contractor, up to $30,000, and that awards are pro-rated when total claims against a contractor exceed $250,000. If claims against one contractor exceed $250,000, the Commission may pay claims proportionately. After the Fund pays a claim, the contractor the Commission finds responsible must repay the Fund with interest at an annual rate of at least 10%. Before the Commission issues a contractor license, the contractor pays a $100 fee credited to the Fund.

Steps

1. Pass the exam. Take and pass the MHIC licensing exam before you submit an application.
2. Show your finances. With your original application, submit a credit report and a statement of outstanding judgments and pending civil actions so the Commission can review your financial solvency.
3. Add the bond only if you need it. If you are not financially solvent by $30,000, sign the surety bond and submit it with your other documents; COMAR requires the bond only when you cannot show the net worth the rule describes, and the MHIC page also mentions an indemnitor, so confirm with MHIC.
4. Carry liability insurance. Maintain the general liability insurance MHIC requires; the sources differ on the amount, so confirm the current figure with MHIC.
5. Keep the bond in force. Maintain the bond at all times unless you demonstrate a sufficient net worth and the Commission authorizes you to cancel it.
6. Renew on time. Renew the license for another 2-year term and submit proof of insurance at renewal.

Sources

• Maryland Home Improvement Commission (MHIC)
• MHIC license requirements
• MHIC original-contractor follow-up documents
• MHIC fees
• Maryland Home Improvement Contractor's Bond form
• COMAR 09.08.01.19
• Md. Business Regulation §8-101
• Md. Business Regulation §8-301
• Md. Business Regulation §8-302
• Md. Business Regulation §8-302.1
• Md. Business Regulation §8-308
• Md. Business Regulation §8-311
• Md. Business Regulation §8-401
• Md. Business Regulation §8-404
• Md. Business Regulation §8-405
• Md. Business Regulation §8-406
• Md. Business Regulation §8-409
• Md. Business Regulation §8-410

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