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Proposed New Regulations for New Home Warranty Security Plans in Maryland

The Consumer Protection Division of the Office of the Attorney General of the State of Maryland has proposed new regulations affecting the administration of new home warranty security plans. Last week the OAG held a public hearing on the proposed regulations. Representatives from several new-home warranty companies attended the public hearing.

If adopted, these proposed regulations will affect not only the warranty plans, but also the builders that participate in them. Some of the proposed material changes in the new regulations are:

1. New required disclosure forms to be provided to homebuyers before the execution of the contract of sale to disclose whether the builder participates in a warranty plan.
2. An additional required disclosure form to be provided to homebuyers at the time of settlement to evidence that the home is covered by a warranty plan.
3. The establishment of a minimum period of time for filing a claim under a warranty plan. The new regulations require that a homebuyer shall have at least two years after the defect was discovered or should have been discovered or two years after the expiration of the warranty, whichever comes first, to file a claim. This is significantly longer than the time frame currently allowed under most warranty plans (most plans require claims to be filed within 30 days of the expiration of the warranty period).
4. The proposed new forms do not permit any exclusions of warranty coverage beyond those listed in § 10-604(a)(2) of the Real Property Article of the Annotated Code of Maryland. Previously, although the Code listed permitted exclusions, there was no language expressly prohibiting a plan from providing additional exclusions.
5. A plan may not require any payment from a homebuyer for the mediation or arbitration of a claim.
6. Increased involvement of the Division of Consumer Protection in the administration and oversight of warranty plans.

Builders with specific concerns regarding the implementation of these regulations should reach out to the Maryland State Builder's Association or a representative of your warranty plan. Alternatively, you may wish to contact the Consumer Protection Division of the Office of the Attorney General directly with your comments.