§ 4005a. Fund held in trust; commingling; no effect on title to real property
(a) As used in this section:
(1) “Claim” means any valid claim for materials furnished or services rendered in the
construction, repair, remodeling, improvement, or renovation of any building or structure
for which the claimant has a lien or the right to claim a lien.
(2) “Express trust” means funds that have been paid by an owner, for or in connection
with services, labor, or materials used in an improvement of real property, which
are to be held by a contractor or subcontractor, in express trust, for those services,
labor, or materials. Any such contractor or subcontractor who accepts money from any
owner or contractor shall become the trustee of the express trust that is created
pursuant to this section. The amounts received by such contractor or subcontractor
under or in connection with each building project shall be a separate trust and the
contractor or subcontractor, or any successor or assign or both of such contractor
or subcontractor that hold such trust funds, shall be a trustee thereof. These funds
are not required to be held in any separate account by a contractor or subcontractor.
Such trust shall be effective against and shall have priority over any unsecured interest
of a party seeking payment from such contractor or subcontractor for claims other
than those that are due and owing by reason of the specific building project for which
the trust was created, whether such creditors are foreign attachment or other judicial
lien creditors, a trustee in bankruptcy, or similar creditors or representatives or
creditors of the contractor or subcontractor.
(b) Funds held in express trust are not required to be held in any separate account by
a contractor or subcontractor.
(c) No express trust shall be required for a federal, State, or municipal project.
(d) The amount payable to any contractor or subcontractor under any contract for the construction,
repair, remodeling, improvement, or renovation of any building or structure shall,
upon receipt by such contractor or subcontractor, be held in express trust by such
contractor or subcontractor for the payment of all claims that are due and owing,
or to become due and owing, by such contractor or subcontractor by reason of such
construction, repair, remodeling, improvement, or renovation.
(e) Any amount required to be held in express trust under this section shall be applied
to the payment of the corresponding claims specified in this section.
(f) Nothing in this section shall be construed to create a lien on real property. The
existence of an express trust under this section shall not prohibit the filing or
enforcement of a lien against the affected real property pursuant to chapter 51 of
this title by any claimant. A priority lien of a secured lender shall not be subordinate
to an express trust.
(g) In the case of an express trust that is not held by a corporation, limited liability
partnership, or limited liability company, liability for sums due under this section
shall only attach to the principal or head of the company which holds the funds under
the express trust. (Added 2007, No. 211 (Adj. Sess.), § 2; amended 2021, No. 20, § 34.)