If you are a contractor or other professional in the construction industry, you need to know more about how the Colorado Construction Trust Fund affects you. Otherwise, you could end up running afoul of this serious law without even realizing it, something that could sully your good name, hurt your business, and in general make your life a whole lot harder.

In this post, we’ll detail the law and how it works, as well as the associated criminal and civil penalties. Then we’ll explain how we can help you fight these charges if you find yourself facing them.

How the Trust Fund Statute Works

The Colorado Construction Trust Fund Statute is intended to ensure that any subcontractor, supplier, laborer, or rental company receives payment due to them for a construction project. It works by requiring contractors to set aside money in a trust when they are paid for a project.

The trust is used to pay for labor, subcontracted work, and supplies. According to the law, contractors must use the money in the trust to pay others before paying for any business expenses, such as overhead costs.

This law protects workers and suppliers on a construction project from deceitful practices of shady general contractors.

Who Is Liable Under the Statute

If a contractor fails to place funds in the trust, he or she can face civil theft charges and may be responsible for attorney fees and additional financial compensation to the party filing suit. A supplier, laborer, subcontractor, or other involved party can file charges against a contractor if they are not paid for their products or services.

General contractors aren’t the only parties held liable under this law. Subcontractors are also required to manage their own trust funds according to the statute. The law works to protect every party involved in a construction project all the way down the line, ensuring that all get paid for their work.

Who Is Protected Under the Statute

As mentioned above, the law offers protections to everyone working on a construction project. As a construction project gets underway, subcontractors, laborers, and others file mechanic’s liens against the property. As long as the lien is in place, the contractor has a liability to pay for the work or products. After everyone is paid, the lien can be lifted. If the lien is not lifted, all parties can still lay claim to what is due.

Property owners also have some protections under the statute. For example, if a couple hires a general contractor to build their home, but the subcontractors don’t receive payment from the general contractor, the couple can bring a claim against the general contractor. The couple cannot close on their construction loan until all liens are paid, so they have a stake in the matter as well.

The trust fund is stronger than a simple contract because it involves financial responsibility. Under Colorado law, a contractor who doesn’t obey the law can face both criminal and civil charges.

Violations of the Colorado Construction Trust Fund Statute

If you are charged with violating the statute, steep fines could result under the civil theft statute. A violation can result in triple the amount of actual damages plus attorney fees. For example, a contractor in violation to a subcontractor’s bill of $5,000 would be required to pay $15,000 to the subcontractor, plus his attorney fees. The law also prohibits the defendant from filing bankruptcy to avoid paying charges.

For a claim to hold up in court, the defendant must be proven to have intentionally deprived the plaintiff of the funds, or to have knowingly abandoned, concealed, or used the funds in a manner that would permanently deprive the plaintiff of the funds.

A violation can also result in a theft charge under the criminal theft statute. Depending on the value of the unpaid balance, the charge could be a misdemeanor or a felony. Upon conviction, a general contractor could face incarceration, fines, and probation.

Contractors affected by the law must keep a close eye on payments and documentation to protect against litigation. The law provides that you can place other funds in the trust as long as you maintain separate records. However, you are required by law to fully pay all obligations on the project before paying for your own obligations.

Seek Legal Counsel for a Violations of the Colorado Construction Trust Fund Statute

Violation

A knowledgeable Denver construction trust attorney is your best bet at successfully navigating your charges. Call us today for a free consultation. We will conduct a thorough investigation to build the strongest defense possible. A review of your financial records can prove no violation, since the law allows funds to comingle in the trust.

Our skilled staff can look for solid defenses that will protect your reputation and finances. Don’t hesitate to reach out for help today.

About the Author: 

Kimberly Diego is a criminal defense attorney in Denver practicing at The Law Office of Kimberly Diego. She obtained her undergraduate degree from Georgetown University and her law degree at the University of Colorado. She was named one of Super Lawyers’ “Rising Stars of 2012” and “Top 100 Trial Lawyers in Colorado” for 2012 and 2013 by The National Trial Lawyers. Both honors are limited to a small percentage of practicing attorneys in each state.  She has also been recognized for her work in domestic violence cases.