Guaranty Fund and Claims Process
Purpose and limits
The Home Improvement Guaranty Fund reimburses homeowners who lose money to a licensed contractor's unworkmanlike work, abandonment, or failure to perform. It is not insurance and not a general warranty; it pays documented, actual loss within statutory caps.
Who can be paid
- The claimant owns the improved residential property.
- The contractor held a valid MHIC license when the contract was signed.
- The loss is actual and documented: money paid plus the reasonable cost to correct or complete, less amounts still owed.
- The owner has a final court judgment against the contractor (or the contractor was convicted of a home improvement offense or ordered to pay restitution).
Process
Written complaint to MHIC, investigation, civil judgment, then a Fund claim on the Commission's form. Statutory caps have historically been $20,000 per claim and $100,000 total per contractor. When the Fund pays, the contractor must reimburse it with interest, and the license stays suspended until repayment - a Fund payout effectively ends a license until the debt is cleared.
Worked example
An owner pays $18,000 of a $25,000 roof job; the licensed contractor walks off after $6,000 of usable work. The compensable loss is the amount paid minus the value received, plus correction cost, all measured against the caps. If the contractor had been unlicensed, the claim would fail outright.
Traps
- Unlicensed contractor means no Fund claim, however sympathetic the loss.
- Filing before the judgment is final, or past the statutory filing deadline, stalls the claim.
- Claiming attorney fees, punitive damages, or upgrades never contracted for.
- Assuming payment is automatic; the Commission decides each claim.