# Business Regulation (GBR)

## Title 4.5. Home Builder Registration

### Subtitle 7. Home Builder Guaranty Fund

#### Section 4.5-701

In this subtitle, "actual loss" means:

(1) the costs of restoration, repair, replacement, or completion that arise from:

  (i) the incomplete construction of a new home or the breach of an express or implied warranty, as defined in Sec.Sec. 10-202 and 10-203 of the Real Property Article; or

  (ii) the failure to meet standards or guidelines required in Sec. 14-117 of the Real Property Article; or

(2) deposits or other payments made to a home builder required to be held in an escrow account or protected by a surety bond or irrevocable letter of credit under Sec. 10-301 or Sec. 10-504 of the Real Property Article, that are not returned to a consumer who is entitled to a return of the deposit or other payments.

#### Section 4.5-702

This subtitle does not:

(1) limit the authority of the Division to take disciplinary action against a registrant under this subtitle;

(2) limit the availability of other remedies to a claimant; or

(3) require a claimant to exhaust administrative remedies before the Division before bringing an action to court.

#### Section 4.5-703

(a) The Division shall:

  (1) establish a Home Builder Guaranty Fund; and

  (2) maintain the Guaranty Fund at a level of at least $1,000,000.

(b)

  (1) The Division shall deposit all money collected under Sec. 4.5-704 of this subtitle in the Guaranty Fund.

  (2)

    (i) The State Treasurer is the custodian of the Guaranty Fund.

    (ii) The Guaranty Fund shall be invested and reinvested in the same manner as other State funds.

    (iii) The State Treasurer shall deposit payments received from the Division under this section into the Guaranty Fund.

    (iv) Investment earnings shall be credited to the Guaranty Fund.

(c) The Division shall administer the Guaranty Fund in accordance with this subtitle.

(d) The direct and indirect costs incurred for the administration of and enforcement related to the Guaranty Fund shall be paid from the Registration Fund established under Sec. 4.5-203 of this title.

(e) The accounts and transactions of the Guaranty Fund shall be subject to audit by the Legislative Auditor in accordance with  Sec.Sec. 2-1220 through 2-1227 of the State Government Article.

#### Section 4.5-704

(a)

  (1) Subject to the provisions of subsection (c) of this section, a home builder shall pay to a county or a municipal corporation a Guaranty Fund fee per home or residential unit as set by the Division under subsection (c) of this section with each application for a permit for construction of a new home or multiple-unit development.

  (2) The home builder may collect the Guaranty Fund fee from the consumer.

  (3)

    (i) Subject to the provisions of subparagraph (ii) of this paragraph, each month, a county or municipal corporation shall remit all the Guaranty Fund fees to the Division to be deposited in the Guaranty Fund.

    (ii) A county or municipal corporation may retain up to 2% of the Guaranty Fund fee revenue that it collects under this subtitle to cover reasonable administrative costs for collection and processing of the Guaranty Fund fee.

  (4) The Guaranty Fund fee may be deposited only in the Guaranty Fund.

(b) If a registrant fails to pay the Guaranty Fund fee, the registrant's home builder registration is suspended until the fee is paid.

(c) The Division shall set the amount of the Guaranty Fund fee required under subsection (a) of this section so as to not exceed $50 per residential unit and to maintain the Guaranty Fund level required under Sec. 4.5-703(a) of this subtitle.

#### Section 4.5-705

(a) Subject to this subtitle a claimant may recover compensation from the Guaranty Fund for an actual loss that results from an act or omission by a registrant as found by the Division or a court of competent jurisdiction.

(b) Before submitting a claim to the Guaranty Fund, a consumer shall:

  (1) send a registrant a written notice describing the alleged defect or other claim for which the consumer intends to seek recovery; and

  (2) permit the registrant access, during regular business hours, to the consumer's property to inspect, determine the cause of, and remedy the alleged defect or other claim within a reasonable period of time.

(c)

  (1)

    (i) If a consumer has a new home warranty security plan, the consumer may also seek recovery from the Guaranty Fund if the consumer has first:

      (1) filed a claim with the new home warranty security plan; and

      (2) exhausted the plan's claim process.

    (ii) A consumer seeking recovery under subparagraph (i) of this paragraph may not receive more than one recovery for the same actual loss.

  (2) A claimant who has also filed a claim with a new home warranty security plan shall include with the claim against the Guaranty Fund:

    (i) a copy or description of the claim filed with the new home warranty security plan;

    (ii) any documents submitted by the claimant in support of the warranty claim, including engineering or inspection reports;

    (iii) any documents submitted on behalf of the home builder or warranty plan in connection with the warranty claim, including engineering or inspection reports;

    (iv) disclosure of any recoveries received in connection with the warranty claim; and

    (v) if all or part of the warranty claim was denied, a copy of the denial.

(d)

  (1) The Division may deny a claim if the Division finds that the claimant unreasonably rejected good faith efforts by the registrant to resolve the claim.

  (2) In determining whether a claim should be denied under paragraph (1) of this subsection, the Division shall consider whether the claimant provided the registrant with notice and a reasonable opportunity to access and inspect and repair the claimed defect as required under subsection (b) of this section.

(e) The Division may not award from the Guaranty Fund:

  (1) more than $50,000 to one claimant for acts or omissions of one registrant;

  (2) more than $500,000 to all claimants for acts or omissions of one registrant unless, after the Division has paid out $500,000 on account of acts or omissions of the registrant, the registrant reimburses $500,000 to the Guaranty Fund; or

  (3) an amount for attorney's fees, consequential damages, court costs, interest, personal injury damages, or punitive damages.

(f) A claim against the Guaranty Fund based on the act or omission of a particular registrant may not be made by:

  (1) a spouse or other immediate relative of the registrant;

  (2) an employee or principal of the registrant; or

  (3) an immediate relative of an employee or principal of the registrant.

(g)

  (1) A claimant may bring a claim against the Guaranty Fund within 2 years after the claimant discovered or, should have discovered the loss or damage or within 2 years after the expiration of the warranty under Sec. 10-204 of the Real Property Article, whichever occurs first.

  (2) If a claimant has filed a claim with a new home warranty security plan, a claimant may bring a claim against the Guaranty Fund within 4 months after the claims process of the home warranty security plan is exhausted.

#### Section 4.5-706

(a) To begin a proceeding to recover from the Guaranty Fund, a claimant shall submit to the Division's mediation unit a written complaint that states:

  (1) the amount claimed based on the actual loss;

  (2) the facts giving rise to the claim;

  (3) whether there is other evidence that supports the claim, including expert reports, photographs, or videotapes and that the evidence is included with the complaint;

  (4) what documents are related to the claim and that copies of the documents are attached, including the contract of sale; and

  (5) any other information that the Division requires.

(b) The Division's mediation unit shall:

  (1) send a copy of the complaint to the registrant alleged to be responsible for the actual loss;

  (2) require a written response to the complaint within 30 days that includes:

    (i) any evidence the registrant has concerning the claim, including expert reports, photographs, or videotapes; and

    (ii) any other information that the Division requires;

  (3) attempt to resolve the complaint through mediation, taking into consideration applicable laws, including express and implied warranties and the provisions of Sec. 4.5-401 of this title; and

  (4) refer the complaint to the Division as a claim against the Guaranty Fund if:

    (i)

      (1) the home builder fails to respond as required by this section;

      (2) the mediation unit concludes that the complaint cannot be resolved through mediation; or

      (3) in mediation, the parties do not mutually agree to an arbitrator; and

    (ii) the claimant executes a claim form prepared by the Division stating under oath that the claimant wishes to seek recovery from the Guaranty Fund.

(c)

  (1) If a claimant's new home contract includes a written agreement with a registrant to submit a dispute to arbitration and the agreement authorizes:

    (i) the registrant to select the arbitrator or the arbitration service, the claimant may elect whether to first seek recovery from the Guaranty Fund or submit the dispute to arbitration; or

    (ii) if the claimant's new home contract provides for mutual selection of the arbitration service and the claimant and registrant have mutually agreed on an arbitration service, the claimant must submit the dispute to arbitration prior to seeking recovery from the Guaranty Fund.

  (2) If the claimant and the registrant submit the dispute to arbitration under the written agreement in the contract and the arbitrator makes a final judgment or final award in favor of the claimant:

    (i) the claimant may make a claim against the Guaranty Fund; but

    (ii) if the registrant pays the award amount to the claimant within 90 days of the final award, the Division shall dismiss the claim against the Guaranty Fund.

#### Section 4.5-707

(a) The procedures for notice, hearings, and judicial review that apply to proceedings under Title 3, Subtitle 2 of the Courts and Judicial Proceedings Article also apply to proceedings to recover from the Guaranty Fund.

(b) On receipt of a claim, the Division shall:

  (1) send a copy of the claim to the registrant alleged to be responsible for the actual loss; and

  (2) require a written response to the claim within 30 days.

(c)

  (1) The Division:

    (i) shall review the claim and any response to it; and

    (ii) may refer the claim for investigation.

  (2) On the basis of its review and any investigation, the Division may:

    (i) set the matter for a hearing with the Office of Administrative Hearings;

    (ii) dismiss the claim, if the claim is frivolous, legally insufficient, or made in bad faith; or

    (iii) if the total claim against a particular registrant does not exceed $7,500, issue a proposed order to pay all or part of the claim or deny the claim.

(d)

  (1) The Division shall send a proposed order issued under subsection (c)(2)(iii) of this section to the claimant and the registrant, at the most recent address on record with the Division, by:

    (i) personal delivery; or

    (ii) both regular mail and certified mail, return receipt requested.

  (2) Within 21 days after service, receipt, or attempted delivery of the proposed order, the claimant or registrant may submit to the Division:

    (i) a written request for a hearing before the Division; or

    (ii) a written exception to the proposed order.

  (3) If the claimant or registrant submits a timely exception to the proposed order, the Division may:

    (i) issue a revised proposed order;

    (ii) set a hearing on the claim; or

    (iii) dismiss the claim.

  (4) Unless the claimant or registrant submits a timely request for a hearing or timely exception, the proposed order is final.

(e) At a hearing on a claim, the claimant has the burden of proof.

(f) A claimant and registrant may participate in a Guaranty Fund proceeding without representation by counsel.

#### Section 4.5-708

(a)

  (1) The Division may join a proceeding on a claim against the Guaranty Fund with a disciplinary proceeding against a registrant under this subtitle if the disciplinary hearing is based on the same facts alleged in the claim.

  (2) In a consolidated proceeding the claimant is a party, and may participate in the hearing to the extent necessary to establish the claim.

(b)

  (1) Notwithstanding Sec. 4.5-702(2) of this subtitle, a claimant may not concurrently submit a claim to recover from the Guaranty Fund and bring an action in a court of competent jurisdiction against a registrant based on the same facts alleged in the claim.

  (2) If, after filing a claim, the claimant brings an action in a court of competent jurisdiction based on the same facts alleged in the pending claim, the Division shall stay its proceedings on the claim until there is a final judgment and all rights to appeal are exhausted.

  (3) To the extent that a final judgment or final award in arbitration is based on the same factual and legal issues alleged in a pending claim, the Division shall:

    (i) approve the claim against the Guaranty Fund, if the judgment or award is decided in favor of the claimant and the registrant has failed to pay the judgment or award; or

    (ii) dismiss the claim against the Guaranty Fund, if the judgment or award is decided in favor of the registrant.

#### Section 4.5-709

A party to a proceeding before the Division who is aggrieved by a final decision of the Division in a contested case, as defined in Sec. 10-202 of the State Government Article, may take an appeal as allowed in Sec.Sec. 10-222 and 10-223 of the State Government Article.

#### Section 4.5-710

(a) The Division may order payment of a claim against the Guaranty Fund only if:

  (1) the decision or order of the Division is final in accordance with Title 10, Subtitle 2 of the State Government Article and all rights of appeal are exhausted; or

  (2) the claimant provides the Division with a certified copy of a final judgment of a court of competent jurisdiction or a final award in arbitration, with all rights of appeal exhausted, in which the court or arbitrator:

    (i) expressly made findings of fact that support the claimant's right to recover under Sec. 4.5-705(a) of this subtitle; and

    (ii) has found the value of the actual loss.

(b)

  (1) Except as otherwise provided in this subsection, the Division shall pay approved claims in the order submitted.

  (2) If approved claims submitted to the Division against a registrant exceed $500,000, less the amount of unreimbursed claim payments previously made for the registrant, the Division may pay the approved claims proportionately so that each claimant receives the same percentage payment of the claims.

  (3) After the Guaranty Fund is reimbursed, the Division shall pay unsatisfied approved claims.

(c) If there is not enough money in the Guaranty Fund to pay an approved claim wholly or partially, the Division shall pay the unpaid claim:

  (1) when enough money is deposited in the Guaranty Fund; and

  (2) in the order that each claim originally was filed with a court of competent jurisdiction or submitted to the Division.

#### Section 4.5-711

(a)

  (1) After the Division pays a claim from the Guaranty Fund:

    (i) the Division is subrogated to all rights of the claimant in the claim up to the amount paid;

    (ii) the claimant shall assign to the Division all rights of the claimant in the claim up to the amount paid; and

    (iii) the Division has a right to reimbursement of the Guaranty Fund by the registrant whom the Division finds responsible for the act or omission giving rise to the claim for:

      (1) the amount paid from the Guaranty Fund; and

      (2) interest on that amount at a rate determined by the Division so as not to exceed the legal rate of interest on a judgment in place at the time the claim is approved.

  (2) All money that the Division recovers on a claim shall be deposited in the Guaranty Fund.

(b) If, within 60 days after the Division gives notice, a registrant on whose account a claim was paid does not reimburse the Guaranty Fund in full, the Division may sue the registrant in a court of competent jurisdiction for the unreimbursed amount.

(c) The Division is entitled to a judgment for the unreimbursed amount if the Division proves that:

  (1) a claim was paid from the Guaranty Fund on account of the registrant;

  (2) the registrant has not reimbursed the Guaranty Fund in full;

  (3) the registrant was given notice and an opportunity to participate in a hearing on the claim before the Division; and

  (4)

    (i) the Division directed payment based on a final judgment of a court of competent jurisdiction or a final award in arbitration; or

    (ii) the decision or order of the Division is final in accordance with Title 10, Subtitle 2 of the State Government Article and there is no pending appeal.

(d) The Division may refer to the Central Collection Unit for collection under Sec.Sec. 13-912 through 13-919 of the Tax - General Article a debt owed to the Division by a registrant on whose account a claim was paid from the Guaranty Fund and who is at least 12 months behind in reimbursement payments to the Guaranty Fund.

(e) For the purpose of excepting to a discharge of a registrant under federal bankruptcy law, the Division is a creditor of the registrant for the amount paid from the Guaranty Fund.

(f)

  (1)

    (i) If a person liable for reimbursing the Guaranty Fund under this section receives a demand for reimbursement and fails to reimburse the Guaranty Fund, the reimbursement amount and any accrued interest or costs are a lien in favor of the State on any real property of the person if the lien is recorded and indexed as provided in this subsection.

    (ii) Interest shall continue at the rate of interest on a judgment as provided in Sec. 11-107(a) of the Courts Article until the full amount due the Guaranty Fund is paid.

  (2) The lien in favor of the State created by this subsection may not attach to specific property until the State Central Collection Unit records written notice of the lien in the office of the clerk of the court for the county in which the property subject to the lien or any part of the property is located.

  (3) The lien in favor of the State created by this subsection does not have priority as to any specific property over any person who is a lienholder of record at the time the notice required under paragraph (2) of this subsection is recorded.

  (4) The notice required under paragraph (2) of this subsection shall contain:

    (i) the name and address of the person against whose property the lien exists;

    (ii) the amount of the lien;

    (iii) a description of or reference to the property subject to the lien; and

    (iv) the date the Guaranty Fund paid the claim giving rise to the lien.

  (5) On presentation of a release of any lien in favor of the State created by this subsection, the clerk of the court in which the lien is recorded and indexed shall record and index the release and shall note in the lien docket the date the release is filed and the fact that the lien is released.

  (6) The notice required under paragraph (2) of this subsection and any release filed under paragraph (5) of this subsection shall be indexed with the judgment lien records maintained by the office of the clerk of the court where the notice is recorded.

  (7) The clerk may collect a reasonable fee for recording and indexing each notice of lien or release of any lien under this subsection.

#### Section 4.5-712

(a) If the Division pays a claim against the Guaranty Fund based on an act or omission of a registrant, the Division may suspend the home builder registration until the registrant reimburses the Fund in full for:

  (1) the amount paid from the Guaranty Fund; and

  (2) interest on that amount at a rate determined by the Division so as not to exceed the legal rate of interest on a judgment in place at the time a claim is approved.

(b) Reimbursement of the Guaranty Fund in full by a registrant, by itself, does not nullify or modify the effect of a disciplinary proceeding against a registrant.

(c) If a home builder holds a license or registration in Montgomery County, the county may suspend the license as provided in this section.

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Md. Code Ann., Bus. Reg. (as displayed at mgaleg.maryland.gov, October 16, 2026)