HIC EXAM | Questions Perfectly
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Solved | Maryland Home Improvement
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[DOMAIN 1: MHIC LICENSING & REGULATIONS - 40 Questions]
Question 1
Which Maryland state department houses the Home Improvement Commission (MHIC)?
A) Maryland Department of Commerce
B) Maryland Department of Labor [CORRECT]
C) Maryland Department of Housing and Community Development
D) Maryland Department of Business Regulation
Rationale: The MHIC is a unit within the Maryland Department of Labor. This is established
under Maryland Business Regulation Article, Title 8. The Commission licenses and regulates
home improvement contractors throughout the state.
Question 2
How many members serve on the Home Improvement Commission?
A) 5 members
B) 7 members
C) 9 members [CORRECT]
D) 11 members
Rationale: The Commission consists of 9 members appointed by the Governor, as specified in
Maryland Business Regulation Article §8-102. These members represent various stakeholders
in the home improvement industry.
Question 3
Which Maryland law does the MHIC enforce?
A) Maryland Consumer Protection Act
B) Maryland Home Improvement Law (Business Regulation Article, Title 8) [CORRECT]
C) Maryland Construction Licensing Act
D) Maryland Contractor Registration Act
Rationale: The MHIC enforces the Maryland Home Improvement Law, codified in Maryland
Business Regulation Article, Title 8. This statute governs all aspects of home improvement
contracting in Maryland.
Question 4
What is the maximum contract amount for a Class B MHIC license?
A) $2,500 per contract
B) $5,000 per contract
C) $10,000 per contract [CORRECT]
, ) $25,000 per contract
D
Rationale: Class B licensees may enter into home improvement contracts not exceeding
$10,000 per contract. Class C is limited to $2,500, while Class A has no monetary limit.
Question 5
What is the maximum contract amount for a Class C MHIC license?
A) $1,000 per contract
B) $2,500 per contract [CORRECT]
C) $5,000 per contract
D) $10,000 per contract
Rationale: Class C licensees are restricted to contracts of $2,500 or less. This class is designed
for smaller handyman-type operations.
Question 6
Which license class has no limit on contract amount?
A) Class A [CORRECT]
B) Class B
C) Class C
D) Class D
Rationale: Class A licenses carry no monetary restrictions on contract amounts. However, Class
A requires higher net worth, more experience, and stricter financial qualifications than Classes B
and C.
Question 7
Must a contractor obtain an MHIC license before advertising services?
A) No, advertising is allowed while the application is pending
B) Yes, the license must be obtained before advertising or performing work [CORRECT]
C) Only if the advertisement includes pricing
D) Only for Class A contractors
Rationale: Under Maryland law, a contractor must obtain the MHIC license BEFORE advertising
or performing home improvement work. Advertising without a license is a violation subject to
penalties.
Question 8
How often must an MHIC license be renewed?
A) Annually
B) Every 2 years [CORRECT]
C) Every 3 years
D) Every 4 years
Rationale: MHIC licenses must be renewed every two years. Licensees must maintain required
insurance and bond coverage continuously throughout the license period.
Question 9
Which of the following is EXEMPT from MHIC licensing requirements?
A) Remodeling a kitchen in a 1975 home
B) Building a new home (not repair/remodel) [CORRECT]
C) Installing a new roof on a residential property
D) Building a deck for a homeowner
, ationale: New home construction is exempt from MHIC licensing because the law specifically
R
covers "home improvement," defined as repair, remodeling, or alteration of existing residential
properties. New construction falls under different regulatory frameworks.
Question 10
A contractor performs work on their own primary residence. Is an MHIC license required?
A) Yes, all residential work requires a license
B) No, work on contractor's own residence is exempt [CORRECT]
C) Only if the work value exceeds $5,000
D) Only if subcontractors are used
Rationale: Work performed by a contractor on their own residence is exempt from MHIC
licensing requirements. This exemption applies only to the contractor's primary residence, not
rental properties or homes being flipped for profit.
Question 11
A handyman performs minor repairs totaling $400. Is an MHIC license required?
A) Yes, all home improvement work requires a license
B) No, work under $500 is exempt if they don't advertise as a home improvement contractor
[CORRECT]
C) Only if the work involves plumbing or electrical
D) Only if the customer requests a written contract
Rationale: Handyman work under $500 is exempt from MHIC licensing provided the individual
does not advertise as a home improvement contractor. This exemption is for small, occasional
repairs, not ongoing business operations.
Question 12
Where must a contractor display their MHIC license certificate?
A) Only in their vehicle
B) At their place of business [CORRECT]
C) Only at job sites
D) No display is required
Rationale: Licensees must display their license certificate at their place of business. They must
also carry their license card while performing work and include their license number on all
contracts, estimates, bids, and advertisements.
Question 13
Which of the following is a PROHIBITED ACT under MHIC regulations?
A) Completing work ahead of schedule
B) Abandoning a project without legal excuse [CORRECT]
C) Using high-quality materials
D) Providing written change orders
Rationale: Abandonment of a home improvement project without legal excuse is a serious
violation. Other prohibited acts include deviation from plans without consent, failure to complete
within agreed time, misrepresentation, and commingling escrow funds.
Question 14
What is the maximum recovery available from the MHIC Guaranty Fund per homeowner?
A) $10,000
B) $15,000
, ) $20,000 [CORRECT]
C
D) $50,000
Rationale: The Guaranty Fund provides up to $20,000 per homeowner for covered losses
resulting from a licensed contractor's violations. The fund is maintained through contributions
required from all licensees.
Question 15
Who can file a complaint with the MHIC against a contractor?
A) Only other licensed contractors
B) Any homeowner [CORRECT]
C) Only attorneys
D) Only if the contract value exceeds $5,000
Rationale: Any homeowner may file a complaint with the MHIC. The Commission investigates
complaints and may hold hearings, with remedies including license suspension, revocation,
fines, and ordering restitution.
Question 16
What happens to down payments over $1,000 under MHIC regulations?
A) The contractor can deposit them in their operating account immediately
B) They must be held in an escrow account until work begins [CORRECT]
C) They must be paid to subcontractors within 48 hours
D) They are subject to immediate taxation
Rationale: Down payments exceeding $1,000 must be held in an escrow account. The
contractor cannot withdraw these funds until work actually begins, protecting homeowners from
contractors who take deposits and disappear.
Question 17
Which professionals are exempt from MHIC licensing when working within their professional
scope?
A) Real estate agents
B) Licensed architects and professional engineers [CORRECT]
C) Insurance agents
D) Home inspectors
Rationale: Licensed architects and professional engineers are exempt from MHIC licensing
requirements when performing work within their professional scope. Their work is regulated by
their respective professional licensing boards.
Question 18
What is required of the "qualifying individual" for an MHIC license?
A) Must have a college degree in construction management
B) Must pass the MHIC examination [CORRECT]
C) Must be a Maryland resident for 10 years
D) Must own the contracting company
Rationale: The qualifying individual must pass the MHIC examination to demonstrate knowledge
of Maryland home improvement law, business practices, and technical requirements. This
ensures licensees understand their legal obligations.
Question 19
Can a contractor commingle escrow funds with their operating business accounts?
M
Solved | Maryland Home Improvement
License | PSI Exam Prep | Pass
Guaranteed - A+ Graded
[DOMAIN 1: MHIC LICENSING & REGULATIONS - 40 Questions]
Question 1
Which Maryland state department houses the Home Improvement Commission (MHIC)?
A) Maryland Department of Commerce
B) Maryland Department of Labor [CORRECT]
C) Maryland Department of Housing and Community Development
D) Maryland Department of Business Regulation
Rationale: The MHIC is a unit within the Maryland Department of Labor. This is established
under Maryland Business Regulation Article, Title 8. The Commission licenses and regulates
home improvement contractors throughout the state.
Question 2
How many members serve on the Home Improvement Commission?
A) 5 members
B) 7 members
C) 9 members [CORRECT]
D) 11 members
Rationale: The Commission consists of 9 members appointed by the Governor, as specified in
Maryland Business Regulation Article §8-102. These members represent various stakeholders
in the home improvement industry.
Question 3
Which Maryland law does the MHIC enforce?
A) Maryland Consumer Protection Act
B) Maryland Home Improvement Law (Business Regulation Article, Title 8) [CORRECT]
C) Maryland Construction Licensing Act
D) Maryland Contractor Registration Act
Rationale: The MHIC enforces the Maryland Home Improvement Law, codified in Maryland
Business Regulation Article, Title 8. This statute governs all aspects of home improvement
contracting in Maryland.
Question 4
What is the maximum contract amount for a Class B MHIC license?
A) $2,500 per contract
B) $5,000 per contract
C) $10,000 per contract [CORRECT]
, ) $25,000 per contract
D
Rationale: Class B licensees may enter into home improvement contracts not exceeding
$10,000 per contract. Class C is limited to $2,500, while Class A has no monetary limit.
Question 5
What is the maximum contract amount for a Class C MHIC license?
A) $1,000 per contract
B) $2,500 per contract [CORRECT]
C) $5,000 per contract
D) $10,000 per contract
Rationale: Class C licensees are restricted to contracts of $2,500 or less. This class is designed
for smaller handyman-type operations.
Question 6
Which license class has no limit on contract amount?
A) Class A [CORRECT]
B) Class B
C) Class C
D) Class D
Rationale: Class A licenses carry no monetary restrictions on contract amounts. However, Class
A requires higher net worth, more experience, and stricter financial qualifications than Classes B
and C.
Question 7
Must a contractor obtain an MHIC license before advertising services?
A) No, advertising is allowed while the application is pending
B) Yes, the license must be obtained before advertising or performing work [CORRECT]
C) Only if the advertisement includes pricing
D) Only for Class A contractors
Rationale: Under Maryland law, a contractor must obtain the MHIC license BEFORE advertising
or performing home improvement work. Advertising without a license is a violation subject to
penalties.
Question 8
How often must an MHIC license be renewed?
A) Annually
B) Every 2 years [CORRECT]
C) Every 3 years
D) Every 4 years
Rationale: MHIC licenses must be renewed every two years. Licensees must maintain required
insurance and bond coverage continuously throughout the license period.
Question 9
Which of the following is EXEMPT from MHIC licensing requirements?
A) Remodeling a kitchen in a 1975 home
B) Building a new home (not repair/remodel) [CORRECT]
C) Installing a new roof on a residential property
D) Building a deck for a homeowner
, ationale: New home construction is exempt from MHIC licensing because the law specifically
R
covers "home improvement," defined as repair, remodeling, or alteration of existing residential
properties. New construction falls under different regulatory frameworks.
Question 10
A contractor performs work on their own primary residence. Is an MHIC license required?
A) Yes, all residential work requires a license
B) No, work on contractor's own residence is exempt [CORRECT]
C) Only if the work value exceeds $5,000
D) Only if subcontractors are used
Rationale: Work performed by a contractor on their own residence is exempt from MHIC
licensing requirements. This exemption applies only to the contractor's primary residence, not
rental properties or homes being flipped for profit.
Question 11
A handyman performs minor repairs totaling $400. Is an MHIC license required?
A) Yes, all home improvement work requires a license
B) No, work under $500 is exempt if they don't advertise as a home improvement contractor
[CORRECT]
C) Only if the work involves plumbing or electrical
D) Only if the customer requests a written contract
Rationale: Handyman work under $500 is exempt from MHIC licensing provided the individual
does not advertise as a home improvement contractor. This exemption is for small, occasional
repairs, not ongoing business operations.
Question 12
Where must a contractor display their MHIC license certificate?
A) Only in their vehicle
B) At their place of business [CORRECT]
C) Only at job sites
D) No display is required
Rationale: Licensees must display their license certificate at their place of business. They must
also carry their license card while performing work and include their license number on all
contracts, estimates, bids, and advertisements.
Question 13
Which of the following is a PROHIBITED ACT under MHIC regulations?
A) Completing work ahead of schedule
B) Abandoning a project without legal excuse [CORRECT]
C) Using high-quality materials
D) Providing written change orders
Rationale: Abandonment of a home improvement project without legal excuse is a serious
violation. Other prohibited acts include deviation from plans without consent, failure to complete
within agreed time, misrepresentation, and commingling escrow funds.
Question 14
What is the maximum recovery available from the MHIC Guaranty Fund per homeowner?
A) $10,000
B) $15,000
, ) $20,000 [CORRECT]
C
D) $50,000
Rationale: The Guaranty Fund provides up to $20,000 per homeowner for covered losses
resulting from a licensed contractor's violations. The fund is maintained through contributions
required from all licensees.
Question 15
Who can file a complaint with the MHIC against a contractor?
A) Only other licensed contractors
B) Any homeowner [CORRECT]
C) Only attorneys
D) Only if the contract value exceeds $5,000
Rationale: Any homeowner may file a complaint with the MHIC. The Commission investigates
complaints and may hold hearings, with remedies including license suspension, revocation,
fines, and ordering restitution.
Question 16
What happens to down payments over $1,000 under MHIC regulations?
A) The contractor can deposit them in their operating account immediately
B) They must be held in an escrow account until work begins [CORRECT]
C) They must be paid to subcontractors within 48 hours
D) They are subject to immediate taxation
Rationale: Down payments exceeding $1,000 must be held in an escrow account. The
contractor cannot withdraw these funds until work actually begins, protecting homeowners from
contractors who take deposits and disappear.
Question 17
Which professionals are exempt from MHIC licensing when working within their professional
scope?
A) Real estate agents
B) Licensed architects and professional engineers [CORRECT]
C) Insurance agents
D) Home inspectors
Rationale: Licensed architects and professional engineers are exempt from MHIC licensing
requirements when performing work within their professional scope. Their work is regulated by
their respective professional licensing boards.
Question 18
What is required of the "qualifying individual" for an MHIC license?
A) Must have a college degree in construction management
B) Must pass the MHIC examination [CORRECT]
C) Must be a Maryland resident for 10 years
D) Must own the contracting company
Rationale: The qualifying individual must pass the MHIC examination to demonstrate knowledge
of Maryland home improvement law, business practices, and technical requirements. This
ensures licensees understand their legal obligations.
Question 19
Can a contractor commingle escrow funds with their operating business accounts?
