11 practice questions

Deposits, Payments & Change Orders

Money is where most home improvement disputes start. These scenarios cover the legal limit on deposits, milestone payment schedules, collecting what you are owed, and why every change to scope, price or schedule belongs in a signed change order.

1. 01How large a deposit can a Maryland contractor take?No more than one-third of the contract price. Business Regulation §8-617 bars any payment before the contract is signed and any deposit over one-third before or at signing; a smaller deposit is the stronger practice.
2. 02Can you accept full payment up front for a home improvement job?No. Business Regulation §8-617 caps any deposit before or at signing at one-third of the contract price, and the homeowner's offer does not waive the limit. Use a milestone payment schedule instead.
3. 03Must you refund a deposit if the homeowner cancels before work starts?Generally yes, beyond your actual costs. If no materials were ordered and no work was done, keeping the deposit is legally questionable, because the MHIC and courts expect any amount you keep to reflect actual damages.
4. 04How do you collect an overdue progress payment?Send a written notice that cites the payment schedule in your contract and sets a reasonable deadline, then negotiate, and turn to legal remedies only if needed. Stopping work without a contract provision can look like abandonment.
5. 05Can a homeowner hold back part of the final payment?Not without a contractual basis. If the final payment is due at completion, a vague "just in case" holdback is not the homeowner's right. Do a walkthrough, fix any punch-list items, then collect what the contract says.

6. 06Who pays the fee when a homeowner pays by credit card?Whoever the contract says, as long as the policy was disclosed before signing. Maryland allows credit card surcharges with proper disclosure, but adding a fee to the invoice after the contract is signed is a violation.
7. 07Does added work need a written change order?Yes. Any change to scope, price, or timeline should be a written change order signed by both parties. It protects you from price disputes and the homeowner from unauthorized charges.
8. 08Can you collect for extra work that was never put in writing?Possibly not. Without a signed change order you did the extra work at your own risk, and the homeowner is within her rights to hold to the contract price. Get every change in writing before doing the work.
9. 09How do you handle a weather delay past the contract completion date?Document the rain days, issue a written change order that moves the completion date, and tell the homeowner early. Never rush structural work, such as footings in saturated soil, to meet the deadline.
10. 10What if the insurance payout is lower than your estimate?Help the homeowner challenge the payout rather than cutting the repair to fit it: a detailed scope comparison supports a re-inspection, a public adjuster, or negotiation. Any reduced scope must be spelled out in the contract.
11. 11How do you handle a client whose vision is bigger than the budget?Be honest upfront. Give a detailed estimate of what the budget covers and what it does not, offer a phased plan, and write the actual scope at the actual budget into the contract. Overpromising is a leading cause of MHIC complaints.