By Maya Kushner, Esq. and Marc Emden, Esq.
The criminal penalties for violating the licensing requirements can be quite severe; a person who violates the requirements can be prosecuted for a misdemeanor and, on first conviction, is subject to a fine not exceeding $1,000 or imprisonment not exceeding 6 months and, on a second or subsequent conviction, is subject to a fine not exceeding $5,000 or imprisonment not exceeding 2 years or both. Further, the person deemed to have violated the statute may be forced to repay all money earned through unlicensed work, as it is considered to be profit of an unlawful activity. Upon conviction, you can also be barred from receiving a home improvement license for one year.
Maryland has specific rules for persons wishing to engage in the business of home improvement. Licensing and compliance with the rules is overseen by the Maryland Home Improvement Commission (MHIC). For more information on obtaining a license, visit the MHIC website.
Home improvement is defined broadly as building, alteration, repair, or replacement of a dwelling, or any structure or land adjacent to the dwelling. Thus home improvement covers a wide spectrum of activities and can include installing a dishwasher, building a fence, paving a drive-way, resurfacing a deck, and landscaping, among others. Performing such work requires a license unless the homeowner is performing the work himself/herself on his/her own house. A home improvement license is not necessary for specialists who are already required by state law to meet standards of competency or experience before engaging in their work, such as electricians, plumbers, and heating and air-conditioning specialists.
Maryland’s Business Article 8-601 prohibits persons and businesses from acting as a contractor without a license, acting as a subcontractor without a license, and selling or offering to sell a home improvement contract without a license. This means that the head of every home improvement business must be properly licensed, as must be the head of every subcontracting crew. It is not necessary for each laborer or employee of the business or crew to possess a license. This exception also applies to clerical employees, retail clerks, and other employees.
However, there are special requirements for salespeople. Unlike laborers and employees who are not required to have an individual license, each person who offers or negotiates home improvement contracts with homeowners must have an individual salesperson license.
If you are thinking of starting a home improvement business, or already have a business and have been charged with a crime, here are some helpful tips:
- Become familiar with the business you are getting into, so you can have a better oversight over all the operations.
- Incorporate your business. Being the head of a corporation, rather than a sole proprietorship or partnership, shields you from personal financial liability. In other words, if someone sues your company and wins, they can recover damages from the company, but cannot reach your personal assets.
- Obtain proper licenses. You may know other people and businesses that are operating without a license and you may think that you can do the same. But if you are serious about running your business the right way, do your own research about licensing requirements and obtain proper licensing. Keep in mind that each state has its own rules and regulations, so your Maryland home improvement license will not be valid for jobs you do in Virginia. Also, you and your business can be held responsible if the work is performed by unlicensed subcontractor crews, so check the credentials of the crews your hire. The licensing process is not as difficult as you may think, and doing your due diligence to comply with the law on the front end will limit your liability if your business gets in trouble later.
- Have a standard and consistent way of communicating with your customers. For example, establish a customer service phone line or customer service email address. Keep records of all those communications by retaining the emails and phone transcripts for at least three years. The contracts between your business and your customers should always be in writing, typed (not handwritten), and should include any disclosures that are pertinent to your area of work. For example, if your work is weather-dependent, then include a description of the necessary weather conditions on the contract, so your customers know what to expect.
- Have a central database with customer information and keep it secure. It’s important to have a record of all your customers in a standardized format, so that you can easily access any information when asked by your lawyer or the court. However, limit the number of employees who have access to this database to prevent unauthorized disclosures of information. This is especially important if you obtain and record customers’ sensitive information, such as addresses or credit card numbers.
- If you do get in trouble, face the problem head on and don’t hide. Even if you think a customer’s complaint is unfounded, ignoring it will not make it go away. If a customer is unhappy and cannot reach you, he/she may file a complaint with the Better Business Bureau (BBB), the MHIC, or even with the police. If a customer is unhappy, contact him/her promptly to devise a mutually agreeable resolution. If you are contacted by police, let them know that you are open to communicating with them, but you can also ask to postpone answering any questions before you speak with a lawyer.
- Pay restitution. If a customer wants a refund, negotiate an amount that both of you believe to be fair and pay him/her. When police and MHIC look at home improvement cases gone wrong, their primary concern is that the customer is made whole, so you can avoid a lot of trouble simply by paying the customer back.
- Get a lawyer. If unhappy customers end up reporting you to the police or MHIC, a lawyer can help you navigate the complexities of the legal requirements you may be facing. For example, a lawyer will explain to you the applicable statute of limitations: a law that prohibits certain cases to go forward because a certain time has passed. A lawyer can also speak to the authorities on your behalf, and of course, represent you in court if the case goes to trial.