The Importance of Proper Licensing for Contractors
If you have a home improvement project in your future, it is very important that you make sure the person you hire is licensed by the Maryland Home Improvement Commission. The Commission regulates contractors and the sales force involved with the home improvement industry, including remodels and repairs.
It may be tempting to hire an unlicensed contractor who delivers a cheaper estimate, but if the home improvement repair goes wrong, you have few options for recovery.
Also consider that a licensed contractor must have at least two years of experience and is required to pass a licensing exam. Your properly licensed contractor understands how to get the job done with the correct permits and on time, all conditions of his licensing.
Part of being a professional involves carrying $50,000 in liability insurance to protect everyone from bodily injury and personal and property damage that could occur during the home improvement.
No one expects problems to occur, but large-scale projects can come with potential dangers on-site. Additionally, when it comes time to sell your home, the fact that your home improvement had the correct permits pulled and the work done up to code will make selling your home that much more hassle-free.
Why Proper Licensing is Important
You undergo a home improvement project, but unfortunately the roof leaked, and the leak ruined your floors.
In Maryland, if your contractor is licensed, the Maryland Home Improvement Commission (MHIC) will investigate any complaint filed by the homeowner and prosecute those contractors who violate the home improvement laws. The homeowner could be awarded monetary damages against the contractor.
The fund has the ability to reimburse homeowners due to poor workmanship or a failure to fulfill a home improvement contract. It only applies to work done by a licensed contractor.
A homeowner can be awarded up to $20,000 for poor workmanship.
General Contracting
Builders should acquire a construction license. Out-of-state contractors should obtain a nonresident construction license. Maryland eliminated subcontractor licensing in July 2016. A subcontractor must work under an MHIC licensed contractor.
Most home improvements do require the licensing of contractors. You can call the Maryland Department of Labor to verify the license status of any contractor before beginning a home renovation at (410) 230-6231.
Home Improvements – License Required:
- Installing patios and retaining walls
- Installing a pole building
- Install a movable shed
- For the installation of solar panels, regardless of whether they are on the home or an outbuilding
- Tree experts and trimmers are licensed by the Maryland Department of Natural Resources
- Gravel driveways
- Roof work or installation
- Painting
- An addition
- Installing a central vacuum system
- Installing tile, wood or other flooring is considered a home improvement
Home Improvements – License Not Required:
- Demolition and cleanup of a property
- For the installation of carpeting, for example, a license is not required
- Installing a wall mounted television is not considered a home improvement so no license is required
- Chimney sweep
Do be careful of someone who comes to your home to offer you a driveway sealcoating, for example. This is a common scam in Maryland that could cost you thousands of dollars if the materials used are below par.
Look at someone’s business card to see if it contains a Maryland contractor’s number.
Types of Licensing
You do not need a license to perform general contractor work in Maryland. The license is required by the state if you are doing home improvement projects or for plumbing, electrical systems, or HVAC work.
- Master Electrician License – Required for home improvement projects
- Plumber’s License- Requires a Master or Journey Plumbing License
- HVACR License- Also requires a master, limited contractor or journeyman license
There are several types of licensing violations committed by certified contractors, some common violations include:
Omitting or Misrepresenting a Material Fact when Obtaining or Renewing a License
Some certified contractors should not be licensed in the first place. This is because when they applied for a license (or applied to renew an existing license), they either failed to report an important fact or misrepresented that fact. Had they been truthful on the application, their license application or renewal may not have been approved.
Failure to Obtain a Required Work Permit
Many licensed contractors perform work in municipalities all over the state of Maryland, and each locality has their own specific permitting requirements. Contractors who are busy all the time and perform a high volume of work sometimes have a hard time keeping up with all the various permit requirements. When a contractor fails to pull the required permits, the property owner is at risk of being cited for building code violations, being subject to fines and penalties, and having to pay to tear out and rework the project. The local governing agency determines how permit violation penalties are assessed, and many times, the property owner is the one stuck paying to fix this violation.
Hiring an Unqualified Subcontractor
The contractor may be licensed, but the subcontractors they hire to perform various tasks at the construction site may not be. Some contractors try to get around this by hiring a subcontractor through a middle man who is fully licensed and vouching for the legitimacy of the subcontractors. In October, a new law went into effect that will make it more difficult for contractors to avoid responsibility for the subcontractors they hire. The law is called the General Contractor Liability for Unpaid Wages Act. This law makes contractors responsible for wage and hour law violations of subcontractors who work directly under them (first-tier subcontractors), as well as second and third-tier subcontractors.
Abandoning the Construction Project
If a contractor does not start and/or complete a project within a reasonable period of time, or the contractor simply stops showing up, this may be considered abandonment of a construction project. There are some instances in which project abandonment may be justified because of the actions of the property owner. If, however, a contractor abandons a project without just cause and without properly notifying the owner, it may be a licensing violation. One common example of just cause for abandoning a project may be failure to pay the contractor as agreed for work completed. It should be noted that project abandonment may also occur if a contractor fails to pay subcontractors for their work, thus causing them not to show up at the job site.
Things to Know Before Entering into a Contractor / Subcontractor Agreement
In general, subcontractor agreements detail the project’s precise timeline, communication protocols, the scope of work, and payment. Some agreements contain specifics such as “pay when paid” or “pay if paid.” Such phrases decide when the subcontractor will get paid.
Other subcontractor agreements are fair to both the subcontractor and contractor. Subcontractor agreements can be more beneficial to them than common verbal agreements, depending on the contract’s specific terms.
Advantages of Subcontractor Agreements to Subcontractors
A subcontractor agreement may seem like a way for contractors to protect their interests rather than subs. Still, it can actually be more advantageous to subcontractors rather than contractors. This formal written document contains essential aspects of the construction project, such as timelines, work, and other factors.
It can be beneficial for subcontractors to know all these factors as they can show what the owner or subcontractor was supposed to do. Also, subcontractors can prevent unreasonable clauses by reviewing and not accepting unreasonable risks in their subcontractor agreement. These agreements offer subcontractors an opportunity to uphold their rights and create more favorable business terms.
Elements of a Subcontractor Agreement
A subcontractor agreement must contain various essential elements. In addition, there are some aspects that the subcontractors should be wary of. Such features can affect the agreement in a positive or negative manner.
Scope of Work
The work scope, which the subcontractor is hired to undertake, should always be clearly laid out in a subcontractor agreement. If the scope of work is broad or vague, it can be difficult for subcontractors to complete. As the work is not adequately defined, it is easy to allege that the subcontractor did not perform good work on the construction job. Thus, it is critical that the scope of work is well-defined.
Supply Chain
The supply chain and other operational risks are another critical aspect to note in a subcontractor agreement. All to often, the supply chain or owner-specified materials are not within the control of the subcontractor. In such cases, the subcontractor should not be held at fault. But some agreements hold subcontractors accountable for such risks. Supply chain risks can be minimized by reviewing and negotiating the subcontractor agreement.
Defense & Indemnification
Defense and indemnification are a common element in a subcontractor agreement. In many subcontractor agreements, contractors add defense and indemnification clauses. But these clauses can sometimes be unfair towards the subcontractor. Certain states have passed regulations to protect subcontractors from unjust indemnification clauses. Other states also have laws that void unfair indemnification. Subcontractors should be mindful of defense and indemnification clauses in a subcontractor agreement.
Insurance, Bonds, & Liens
Insurance, bonds, and liens are specified in many subcontractor agreements. A subcontractor needs to understand the exact provisions in their contract for insurance and bonds. However, at times, a contractor will specify in the subcontractor agreement whether or not a subcontractor can take out a lien. Such a clause limits or prevents a subcontractor from using a mechanics lien in the event of late payment or non-payment.
Warranty
Depending on the project, a subcontractor agreement might detail the warranty on work. This part of the agreement is beneficial for the contractor, but it can also be advantageous to the subcontractor. If the subcontractor provides solid, well-documented work, their reputation is untarnished. Also, it offers the subcontractor the opportunity to fix any unexpected issues and save their reputation.
Arbitration
Arbitration clauses are more common in a subcontractor agreement. But they force subcontractors to pursue claims via binding arbitration, instead of through a court. This prevents subcontractors from taking any potential disputes to court. This might not be a problem, depending on your business. Still, it is something you should review before signing a subcontractor agreement.
Conditional Payment
An increasing number of subcontractor agreements have conditional payment clauses, such as “Pay if Paid” and “Pay when Paid.” Sometimes, this clause can cause delays in subcontractor payment and even result in non-payment. Subcontractors must understand whether or not the agreement contains this clause before signing. Otherwise, they may risk their business.
A Professional Experienced Real Estate Lawyer
There is so much that can go wrong during a home improvement project and you can prevent having any regrets about the hiring of an unlicensed contractor. At that point you have very few options to make it right.
Contact us for a complimentary consultation at 410-431-2599 in our Annapolis or Severna Park offices. Attorney Matthew Evans wants to make sure your project is protected from the beginning until the end.
