Maryland Custom Home Contracts

If there's a load limit on construction contracts, Maryland must be getting close. The legislators in Annapolis require 21 distinct notices and disclosures in custom home building contracts. As a class, buyers of custom homes in Maryland must be among the best protected anywhere. Omitting any of these disclosures carries heavy consequences. More on that later.

If you're a custom home builder in Maryland, check your contract against this list of required notices.

• · A draw (payment) schedule – Real Property Code § 10-505(1)
• · The names of the primary subcontractors – Real Property Code § 10-505(2)
• · Notice on change orders – Real Property Code § 10-505(3)
• · Statement of warranty coverage (in bold) -- Real Property Code § 10-505(4)
• · Disclosure on payment of subs & suppliers -- Real Property Code § 10-505(4)
• · Waiver of lien notice -- Real Property Code § 10-505(6)
• · Mechanics' lien laws notice - Real Property Code § 10-506(a)
• · Certification of no judgments or violations - Real Property Code § 10-506(b)(3)
• · Escrow account notice - Real Property Code § 10-506(c)
• · Sales representative notice -- Business Regulation Code § 4.5-307(c-1)

But that's just the beginning. Real Property Code § 14-117(j) is a piece of work. Required notices and disclosures include the following:

• · The builder's registration number.
• · A commitment that construction will comply with the building code.
• · Identification of the performance standards that apply (NAHB or HUD).
• · A buyer's right to receive the Home Builder Registration Act pamphlet.
• · A notice of the maximum loan interest rate acceptable to the buyer.

And then we get to Maryland's New Home Warranty Act, Code of Maryland Regulations § 09.01.09.01 to 09.01.09.09. You have to disclose either participation or non-participation in a warranty plan. If you participate, the buyer may have the choice to opt out. If that's the case, the contract has to include a waiver of coverage notice (Real Property Code § 10-607) as well as a blank rescission of waiver form (Real Property Code Annotated § 10-607(c)). Whether you participate in a warranty plan or don't participate, the contract must include a statement about any known hazardous or regulated materials on site.

It pays to be careful about compliance. Omission of any disclosure or notice required by the New Home Warranties Act can result in a fine of up to $50,000 and two years in prison. Violation of the Act is also treated as an unfair and deceptive trade practice under Maryland's Consumer Protection Act, giving an owner the right to sue for damages and collect attorney fees.

Failure to include an accurate "Certification by Builder" statement in a contract is a felony and makes the contractor eligible for a fine up to $10,000 and 15 years in prison. Omission of any disclosure required by Real Property Code § 14-117(j) or Maryland's Custom Home Protection Act is a misdemeanor punishable by a fine of up to $1,000 and a year in prison. If omitting a disclosure or notice results in a financial loss to a home buyer, a court may order the defendant to stop working as a construction contractor. Violation of the Custom Home Protection Act gives a home owner the right to sue for damages and collect attorney fees.

If you're serious about drafting construction contracts for work in Maryland, I recommend another site.