Another optionStephen M. Phillips, Steven J. Flynn
Editor's note: Although it is Professional
Roofing's policy to provide location information for companies
mentioned in articles, some locations are missing from this article
because information about the companies in question could not be
found.
You most likely are well aware of the three most common legal
remedies you can employ when payment is not made: instituting a
legal claim for breach of contract; filing a mechanic's lien on
private projects; and making a claim on a labor and material
payment bond for public projects and bonded private projects.
However, another—and potentially potent—remedy may be
available: trust fund statutes.
Trust fund statutes have been enacted by state legislatures to
ensure payments made on construction projects are used to pay the
people and firms that provided labor and materials. At the same
time, trust fund statutes also are intended to benefit building
owners so compensation paid by an owner for a specific job will not
be misused.
In states with trust fund statutes, money paid by a building
owner to a general contractor is considered a trust fund, which
must be held in trust for subcontractors and suppliers. When an
owner pays a general contractor, the general contractor is
considered the trustee and subcontractors and suppliers are
beneficiaries of the trust. As the trustee, the general contractor
cannot use a trust fund to reimburse himself or herself or pay for
other jobs or any person until beneficiaries have been paid.
Failure to abide by a trust fund statute can result in civil and,
in some states, personal and criminal liability for the officers
and representatives who...
To read the article in its entirety, please log in or register (registration is free).
Log in or register for FREE access to this article and other Professional Roofing online content.