What is the MHIC Guaranty Fund?

Who is covered by the MHIC Guaranty Fund?

The fund covers Maryland homeowners (or eligible tenants) who suffer an actual financial loss resulting from an MHIC-licensed contractor’s failure to perform under contract. Coverage requirements:

• The work must be on a Maryland residence. Primary residences only; investment property and out-of-state work are not covered.
• The contractor must have held an active MHIC license at the time the contract was signed. Unlicensed contractors do not contribute to the fund and their customers are not protected.
• The homeowner must have suffered an actual financial loss. Deposits taken without work performed, deficient work that requires re-do, abandonment mid-project, and similar fact patterns qualify.
• The claim must be filed within 3 years of the date of the loss. The clock starts when the homeowner reasonably should have known the loss occurred.

Out-of-state buyers of Maryland investment property, contractors who hire other contractors as subcontractors, and commercial property owners are explicitly not covered. The fund is for Maryland residential homeowners only.

How much is the maximum paid for a claim against the Guaranty Fund?

The current per-claim cap is $30,000 per transaction. This means $30,000 maximum per homeowner per contract; if multiple homeowners on the same contract each file separately, the cap applies individually to each but the aggregate is still based on actual losses up to the cap per claim.

The fund pays the actual financial loss, not punitive damages or pain and suffering. For example, if a contractor takes a $15,000 deposit and abandons the job before any work is performed, the homeowner can claim the $15,000. If the homeowner has to hire a second contractor and pay $40,000 to complete the work that was originally contracted for $25,000, the eligible claim is $15,000 (the cost differential), capped at the $30,000 statutory limit.

What information about the Guaranty Fund must be included in every Maryland sales contract?

Maryland Code Business Regulation Article 8-501 requires every home improvement contract performed by a Maryland-licensed contractor to include a specific Guaranty Fund disclosure. The standard text reads (in plain summary):

• The contractor’s full MHIC license number.
• A statement that the Maryland Home Improvement Commission maintains a Guaranty Fund.
• The current claim cap ($30,000 per transaction).
• A statement that the homeowner can file a complaint or claim with MHIC if disputes arise.
• Contact information for the Maryland Home Improvement Commission.

If this disclosure language is missing from a contract, the contract may be unenforceable, and the homeowner has additional grounds to file with MHIC. Reputable contractors include the standard disclosure as boilerplate on every contract; a missing disclosure is a serious red flag.

How do I file a Guaranty Fund claim?

1. Try to resolve the dispute with the contractor first. The Guaranty Fund is a last resort. Document every attempt to resolve directly with the contractor.
2. File a formal MHIC complaint. The MHIC complaint and claim form is available at the Maryland Department of Labor website. Include the contract, payment records, photographs of the work or lack thereof, and any correspondence with the contractor.
3. MHIC investigates. The Commission opens an investigation, typically within 30 to 60 days of receipt. They may attempt informal resolution between the parties.
4. If the contractor cannot or will not make the homeowner whole, MHIC schedules a formal hearing. The administrative law process is similar to a small claims procedure.
5. If MHIC rules in the homeowner’s favor, the fund pays the awarded amount up to the $30,000 cap. The fund then has rights against the contractor for reimbursement.

The whole process typically takes 6 to 18 months from claim filing to fund disbursement. The fund is a real protection but it is not fast; act on disputes quickly.

What if the contractor is licensed in Virginia but not Maryland?

A contractor who performs work in Maryland on a Maryland residence is required to hold a Maryland MHIC license, even if they are based in another state. A Virginia license alone is not sufficient. If a Virginia-only contractor does work on a Maryland home, that work is performed without an active MHIC license, which:

• Voids any Guaranty Fund protection (the fund applies only to licensed contractors).
• Exposes the contractor to civil and administrative penalties.
• May void the contract under Maryland consumer-protection law.

Mid-Atlantic contractors who work across the Virginia and Maryland line typically hold both a Virginia Class A or B license AND a Maryland MHIC license. Check both before signing.

What DreamHome’s MHIC license number is

DreamHome holds Maryland MHIC license #122114, registered to the corporate entity and renewed annually with the Maryland Home Improvement Commission. The license number appears on every Maryland contract and on our website footer per Maryland disclosure requirements. The full Guaranty Fund disclosure language required by Maryland Code Business Regulation Article 8-501 appears on every DreamHome Maryland contract.

(Note: confirm the MHIC license number above against your contract; license numbers are public information and can be verified at the Maryland Department of Labor website by searching MHIC and DreamHome’s name.)

Red flags on a Maryland contractor

• No MHIC license number on the contract. Required by law. Missing means either the contractor is unlicensed (illegal in Maryland) or attempting to operate informally.
• No Guaranty Fund disclosure paragraph. Required by Maryland Code Business Regulation Article 8-501. Missing disclosure may make the contract unenforceable and removes a major homeowner protection.
• Contractor licensed only in Virginia or another state, not Maryland. Maryland work requires a Maryland license. Out-of-state-only licensure means no Guaranty Fund coverage.
• Large up-front deposit (more than 1/3 of contract value). Maryland deposit rules limit the amount that can be collected up front. Large deposits are also the most common loss pattern that the Guaranty Fund sees.
• Verbal-only changes to the scope. Change orders must be in writing in Maryland. Verbal changes complicate any future claim filing.