Baltimore, MD asked in Real Estate Law and Construction Law for Maryland

Q: I own over 3 properties and I'm not able to file my claim against the guaranty fund for a bad contractor. Any advice?

I was working with the Maryland investigator regarding a contractor using someone else's license. He was paid by me. In September 2020 the case was concluded in the District Court of MD and I was giving the approval to file against the guaranty fund. The MD investigator told me she would help with the process. After receiving the application I informed the MD investigator that I own more than 3 properties. Their response was then I will not be able to file against the fund. Trying to get guidance or help now the State has created this road block that was never mentioned over the course of the year when I was working with the investigator on my case.

1 Lawyer Answer
Mark Oakley
Mark Oakley
  • Construction Law Lawyer
  • Rockville, MD
  • Licensed in Maryland

A: The Home Improvement Act is a regulatory statutory scheme for the benefit of protecting consumers, and the Guaranty Fund is established to provide a certain amount (up to $20,000) is available to reimburse a homeoewner for losses sustained at the hands of an unlicensed contractor or unworkmanlike work. However, a line had to be drawn between when a homeowner is a consumer and when a homeowner has crossed over to being "in the business" of a commercial investor, manager or flipper of real estate. That line --arbitrary though it is-- was drawn at owning more than three residences. If the home in question is your primary residence, then you still qualify to make a claim regardless of how many other residences you own, but not for any of the other residences in your portfolio. Further, the bar does not apply to undeveloped lots, commercial properties or other real estate that cannot meet the definition of a "residence." The statute is untested as far as appellate opinions go regarding whether a house under renovation and not issued an occupancy permit qalifies as a "residence" (legally, it cannot be used as a residence, so arguably it cannot be characterized as a legal residence). The statute is also maddeningly unclear as to when the ownership of more than 3 residences matters--at the time the property which is the subject of the claim was being worked on by the contractor, at the time the original MHIC complaint is filed, at the time the Guaranty Fund caim is filed, or at the time the claim reaches a hearing before the Adminsitratie Law Judge? If you have owned four or more residences throughout all the time relevant to the proceedings, then the answer is pretty clear: you do not qualify for filing a claim against the Fund. You can still sue the contractor in court, however, within the 3 year statute of limitations.

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