BUILDER GUARANTY FUND
The State of Maryland has established a Home Builder Guaranty
Fund that is overseen by the Consumer Protection Division. This
fund allows consumers to seek compensation for losses resulting
from an act or omission by a registered builder who constructs
a new home for a consumer.
transactions are covered by the Home Builder Guaranty
The Guaranty Fund applies to contracts
entered into with a registered home builder after
January 1, 2009 to construct a new home in
the State of Maryland.
is the Home Builder Guaranty Fund funded?
a home builder applies for a building permit, $50 of the
cost of that permit is used to fund the Home Builder Guaranty
Builders are permitted to pass this cost onto the consumer.
may file a claim?
A consumer who entered into a
contract with a registered builder to construct a new home
in the State of Maryland on or after
January 1, 2009 may file a claim against the Guaranty Fund.
Claims may not be filed by the spouse or immediate relative
of the registered
builder, an employee or principal of the registered builder,
or an immediate relative of an employee or principal of a registered
does a consumer file a claim?
to filing a claim with the Consumer Protection Division,
must send the home builder a written notice describing
the alleged claim or defect and allow the home builder
to the property during regular business hours to inspect
the defect, determine the cause and remedy the issue
within a reasonable
period of time. In addition, if a new home warranty
security plan is in place, the consumer must file a claim
the plan and exhaust the plan's claim process.
the home builder does not respond in a satisfactory manner, the
consumer should submit a written complaint to the Mediation
Unit of the Consumer Protection Division. This complaint must
amount of the claim based on actual loss
facts that give rise to the claim
evidence that supports the claim (for example, expert
video tapes, etc.)
What types of losses will the Guaranty Fund cover?
Guaranty Fund will pay for the actual loss which results from
an act or omission by a registered builder as determined
Consumer Protection Division or a court of competent jurisdiction. “Actual
loss” means the costs of restoration, repair, replacement
or completion that results from the incomplete construction
of a new home, a breach of an express or implied warranty,
failure of the builder to meet certain construction standards
What expenses will not be covered by the Guaranty Fund?
Guaranty Fund may not be used to reimburse consumers for attorney's
fees, consequential damages, court costs, interest, personal
injury damages or punitive damages.
may a claim be brought?
A consumer must file a claim
within 2 years after the consumer discovered or should have
discovered the loss or damage or within
2 years after the new home warranty expires, whichever comes
first. If the consumer files a claim against the home warranty
plan, he or she must file the claim against the Guaranty Fund
within 4 months after that claims process is exhausted.
happens after a complaint is filed?
When a complaint
is received by the Division, the Division will send the complaint,
including all documentation, to the home
builder, and require a written response within 30 days. The builder
has the opportunity to present his own set of facts such as photographs,
expert reports, and any other relevant information. The Division
will review the claim and every attempt will be made to mediate
and resolve the issues.
If the home builder fails to respond in a timely manner, or if
the Division concludes the issues cannot be resolved through mediation,
the parties have the option of choosing arbitration. If the parties
do not agree to arbitrate or cannot agree on an arbitrator, then
the claim against the Guaranty Fund may be pursued.
much can a consumer recover in damages?
Fund cannot award more than $50,000 to any one claimant for
acts of any one registered builder. In addition, the Fund
cannot award more than $300,000 on all claims against the same
registered builder, unless that builder first reimburses the
Guaranty Fund for monies paid on his or her behalf.
What does the Consumer Protection Division consider when
paying a claim from the Guaranty Fund?
whether to pay a claim against the Guaranty Fund, the Division
will consider whether the consumer has shown a loss
resulting from the act or omission of a registered home builder
and whether the consumer gave the home builder notice of the issue,
and reasonable opportunity and access to fix the problem. The Division
may reject a claim if they find that the consumer unreasonably
rejected good faith efforts to resolve the claim.
What if the consumer has the benefit of a new home warranty
the consumer has a new home warranty security plan, he or she
must first file a claim against the warranty plan.
has exhausted the warranty plan's claim process then
he or she is eligible to pursue a claim against the Guaranty
consumer may not receive payment from both the home warranty
company and the Guaranty Fund for the same actual loss.
if the new home contract contains an arbitration
If the new home contract includes a written
agreement to submit a dispute to arbitration and the agreement
allows the home builder
to select the arbitrator or arbitration service,
then the consumer may choose whether to submit the dispute
to arbitration or to seek
recovery from the Guaranty Fund. If the contract
provides for a mutually agreed upon arbitration service then
the consumer and
home builder must submit the dispute to arbitration
before seeking recovery from the Guaranty Fund.
if the claim goes to arbitration and the arbitrator makes a
final award in favor of the consumer?
award is in favor of the consumer, the consumer may make
a claim against the Guaranty Fund
in the amount
of this award, unless the home builder
pays the amount awarded to the consumer within 90 days of
the final arbitration