What does the Colorado Trust Fund Statute say? If you are a contractor, read carefully, research this statute, and do not get this wrong.
C.R.S. § 38-22-127 states:
“[a]ll funds disbursed to any contractor or subcontractor under any building, construction, or remodeling contract or on any construction project shall be held in trust for the payment of the subcontractors, laborer or material suppliers, or laborers who have furnished laborers, materials, services, or labor, who have a lien, or may have a lien, against the property, or who claim, or may claim, against a principal and surety under the provisions of this article and for which such disbursement was made.”
Violation of this statute is considered theft under Colorado's criminal theft law (C.R.S. 18-4-401). In addition to criminal fines and prison, this means that a civil theft claim can also attach, penalizing triple the amount stolen in damages and assessing attorney's fees. C.R.S. 18-4-405. Rights in stolen property.
All property obtained by theft, robbery, or burglary shall be restored to the owner, and no sale, whether in good faith on the part of the purchaser or not, shall divest the owner of his right to such property. The owner may maintain an action not only against the taker thereof but also against any person in whose possession he finds the property. In any such action, the owner may recover two hundred dollars or three times the amount of the actual damages sustained by him, whichever is greater, and may also recover costs of the action and reasonable attorney fees; but monetary damages and attorney fees shall not be recoverable from a good-faith purchaser or good-faith holder of the property.
Moreover, the Trust Fund Statute also requires proper accounting and records to be maintained by the contractor. C.R.S. § 38-22-127(4) ("Every contractor or subcontractor shall maintain separate records of account for each project or contract"). A contractor has a fiduciary duty to handle these funds appropriately.
For more information on topics related to construction contracts and the trust fund laws, give us a call at 720-441-3328, complete a consultation request form, or see our practice page on drafting construction contracts in Colorado.
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