What Is a Trust in Construction?

March 11, 2024

Trust is a crucial element of any construction project. It is what allows you to work together as a team and accomplish goals that would otherwise be impossible. It’s also what keeps you from falling behind schedule, and what helps you find and keep employees. However, it’s not easy to build trust in the construction industry. The business model of the sector often pits contractors against each other, and the rapid rotation of teams from one project to another makes it challenging to establish deeply trusting relationships. And even once you’ve established a solid foundation of trust, the way projects are bid and awarded is sometimes disruptive to developing trustworthy communication channels.

The good news is that New York’s construction trust fund statute offers some valuable protection to ensure that project funds get to the people who earned them. The law requires that a specific amount of every payment for the improvement be set aside in a trust account separate from the general project accounts, and used exclusively to pay contractors, subcontractors, and suppliers for their services. The trustee owes a fiduciary duty to the beneficiaries of the trust, and anyone who misuses the funds faces legal sanctions ranging from a class A misdemeanor to a class B felony.

This type of safeguard can protect your company from non-payment claims and other financial risks. In addition, it’s a great way to demonstrate that your company values fair and ethical business practices, which is sure to attract more reliable subcontractors, vendors, and clients.

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