Construction projects involve a lot of people. Just one house or commercial building requires the knowledge and skill of builders, plumbers, electricians, and more. With so much money changing hands, it can be hard to keep track of who gets paid and where the cash goes.
Unfortunately, if money ends up in the wrong hands, or it doesn’t make it to the right hands – in the right way – supervisors and project managers in Colorado could wind up facing criminal charges.
That’s right. Criminal charges.
In this post, we’re going to help you understand the laws around construction trust fund theft and the ways that this charge could put you behind bars. The best way to prevent a conviction is to educate yourself.
What Exactly Is Construction Trust Fund Theft in Colorado?
Our state has specific laws about how and when to pay contractors on a building project:
Specifically, CO Rev Stat § 38-22-127 says: “All 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.”
Basically, when a contractor receives payment for a project, they will have to put that payment into a trust fund that is first and foremost used to pay hired contractors and subcontractors.
Colorado put these laws in place to protect workers and make them a priority over other expenses that builders might face. If a project manager has not paid the appropriate amount to contractors, they will have to take care of these payments before the lien on the property is lifted. If contractors or subcontractors are not paid, they have a right to file a claim or press charges.
However, not all construction trust fund theft charges are so simple and straightforward.
Let’s look at some of the ways that you can be charged with Colorado construction trust fund theft.
Not Knowing the Law
While many crimes require that you intend to do harm, you can be convicted of construction trust fund theft even if you planned to pay your workers and either made a mistake or just didn’t know the law. You do not even need to make a profit off of the alleged crime to be charged. Make sure you know how to set up the correct trust fund before you start making payments.
Using Your Own Payment System
It may seem easier to just draw up a simple contract between you and your subcontractors.
However, these contracts don’t offer as many protections as a proper trust fund. Don’t skimp on the few steps that it takes to establish the trust.
Then, make sure you conduct all payments through the construction trust fund. Even if you paid contractors through other means, you may still face legal consequences.
If you are confused or have questions about how to set up a lawful trust fund for your subcontractors, reach out to an experienced lawyer with knowledge in this area. If you are worried that you might have made a mistake that could open you up to charges, give our office a call.
Failing to Put Funds in the Trust on Time
Colorado law doesn’t just require managers to pay their contractors – it requires timely payments. Since the funds should already be in the trust fund soon after the project begins, it should not take long for the payments to process. If the trust does not have funds in it, you can be charged with trust fund theft.
Remember, paying the contractors and subcontractors should be the top priority.
Hiding the Funds
If the funds are present, they need to go to the appropriate subcontractors or contractors. If the plaintiffs believe that you somehow hid, concealed, or moved the funds rather than making the lawful payments, you could be charged.
The best way to prevent this situation is to be transparent with all of the contractors and subcontractors that you are working with throughout the entire building process.
Keeping Things Separate
Contractors or project managers do not have to set up individual trust funds for every single person who works on a construction project. You can use a single trust fund to complete multiple transactions and manage multiple expenses. Contractors may even use a trust fund to buy materials for the project, but these transactions must be distinguishable from paying contractors and you must pay your workers first.
If it appears that you are using money to fund your personal obligations before paying your contractors, you may have to appear in court. Keep precise records of the dates and amounts that were included in every transaction that involves your construction trust fund.
Penalties for Colorado Construction Trust Fund Theft are Serious
Contractors can rack up tens – or even hundreds – of thousands of dollars for a single project, which puts defendants at a high risk of serious penalties for theft charges. If you fail to pay a contractor $5,000 and are found guilty of construction trust fund theft, you may have to pay upwards of $15,000 in restitution. That’s a heavy price for what could be a simple mistake.
Again, if you have difficulties understanding the law related to construction trust fund theft, reach out to a Colorado lawyer with expertise in this area.
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.