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Construction Law: Maryland Construction Trust Statute Protection for Subcontractors in Maryland

The Maryland Construction Trust statute provides another tool for subcontractors to obtain payment by requiring higher tiered contractors on a construction project to hold monies paid in a trust for the subcontractor who provided work or furnished materials on a project. 

For example, if an owner of a project makes payment to the general contractor for work performed or materials furnished by the general contractor’s electrical subcontractor, the monies paid should be held in trust and earmarked for payment to the electrical subcontractor.  In the event that payment is not made, the electrical subcontractor may bring a claim under the Maryland Construction Trust statute.

Further, the Maryland Construction Trust Statute allows the lower tiered subcontractor to bring a claim against any officer, director, or managing agent of any contractor who knowingly retains or uses the monies held in trust for any other purpose than to pay those subcontractor for whom the monies are due and owing.  Essentially, individually owners of construction companies can be individually liable for violation of the Maryland Construction Trust Statute. 

The Maryland Construction Trust Statute applies to commercial projects, but does not apply to residential single family homes or home improvement projects.  A subcontractor seeking to impose personal liability must prove that the money paid to the higher tiered contractor was actually earmarked for the subcontractor’s work. Tracing the payment often becomes the most difficult burden to meet in litigation involving violations of the Maryland Construction Trust Statute.

Despite some of its limitations, however, the Maryland Construction Trust Statute is another means of securing payment for work performed and materials furnished on a construction project in Maryland.  For more information, contact Michael W. Siri at siri@bowie-jensen.com or at 410-583-2400.  

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