What is a construction trust?
A construction trust is a legal document created to protect the interests of different parties involved in a construction project. In Maryland, it is recognized by the State as a fiduciary relationship between an owner and contractor when it comes to the money associated with a construction project. A construction trust is used to ensure that the owner’s money is always available for construction related expenses and that the contractor will be paid for the work that they do. The construction trust is established through a written agreement between the owner and contractor that states the terms and conditions of the trust. The trust outlines the responsibilities of both the owner and contractor, including how the money will be distributed and managed throughout the project. The funds for the project are held in a separate trust account and the owner will only release money to the contractor when work has been completed as outlined in the trust agreement. The construction trust also allows for disputes to be resolved without involving a third party. The trust can be reviewed by a court in the event of a disagreement, so that both parties can be sure that their interests are being taken care of.
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