Paying a Contractor Upfront? How Colorado Plans to Protect Your Deposit

The Bottom Line

Ever handed over a massive deposit for a home remodel, only for the contractor to disappear or delay the project for months? This proposal aims to make it a criminal theft offense for contractors to use your advance payments for unrelated expenses. It also requires construction professionals to give you a detailed, written breakdown of exactly where your money is going before they can accept any upfront payment over $300.

What This Bill Actually Does

Under current law, proving a contractor intentionally stole your deposit—rather than just being terrible at managing their business—is a high legal hurdle. Disputes over unfinished work usually end up in civil court, where a homeowner might win a judgment but never actually recover their cash. This bill changes the game by adding a specific trigger to Colorado's existing criminal theft statute (Section 18-4-401). It specifies that a person commits theft if they knowingly use, transfer, or divert money provided as an advance payment for an unrelated purpose, and that diversion causes the delay, cessation, abandonment, or material nonperformance of the agreed-upon project.

To make this enforceable, the bill introduces a strict new Advance Payment Usage Disclosure (Section 38-46-201). Before a contractor can accept an advance payment of more than $300, they must hand the customer a written document. This disclosure has to explicitly state the intended use of the funds—such as materials, labor, permits, or overhead—along with the anticipated timing of those expenses and a projected project start date. It also requires a prominent legal warning that using the funds in a way that is materially inconsistent with the disclosure could constitute criminal theft.

Here is where the legal mechanics get interesting: the bill creates an evidentiary hook. It specifies that if a contractor fails to provide this required disclosure, or if they blatantly ignore the budget they outlined in it, that failure can be used as evidence of criminal intent in court. By legally tying the advance payment to a specific, written promise, the legislation sharpens the blurry line between a standard contract dispute and an actionable crime.

What It Means for You

For anyone planning a home renovation, roof repair, or landscaping overhaul, this bill acts as a heavy layer of financial armor. Handing over a 30% or 50% deposit upfront is standard practice in the construction world, but it leaves you incredibly vulnerable if the contractor uses your cash to plug holes in their failing business. By reclassifying this specific type of fund diversion as theft, you gain serious leverage if a project goes south. You aren't just limited to suing a contractor in civil court; you have a clearer path to report them to law enforcement for a criminal investigation.

If this legal standard takes effect, your early interactions with contractors will fundamentally change. Before you write a check or authorize a credit card charge, you should expect to receive a formal Advance Payment Usage Disclosure. This isn't just a generic estimate; it is a legally binding roadmap for your money. When reviewing this document, you should specifically look for:

• Clear expense breakdowns: Know exactly how much of your deposit goes to buying lumber versus securing permits or covering the contractor's general business overhead.
• A purchasing timeline: A clear indication of when those materials will actually be ordered.
• A firm project start date: A written commitment to when boots will be on the ground.

Keep in mind, this doesn't mean a contractor goes to jail just because a cabinet delivery is late or a project runs reasonably over budget. The law specifically targets situations where your money is used for an unrelated purpose and causes a material delay or abandonment of your specific job. Moving forward, you should absolutely demand this written disclosure for any upfront payment over $300. It establishes a vital paper trail that protects your hard-earned money from day one.

What It Means for Your Business

For general contractors, custom builders, remodelers, and tradespeople, this bill represents a massive shift in how you manage cash flow and client onboarding. If you routinely take deposits to secure schedule spots or order custom materials, you will need to overhaul your standard contract packets. The financial threshold here is incredibly low—any advance payment over $300 triggers the new compliance rules. This means almost every standard job will require you to issue a formal Advance Payment Usage Disclosure before a single dollar changes hands.

The biggest operational hurdle for many small construction firms will be the strict separation of project funds. In the industry, it isn't uncommon for a contractor to use a deposit from Project B to finish buying materials for Project A, fully intending to balance the books when the final checks clear. Under this legislation, doing so knowingly puts you at risk of criminal theft charges if Project B gets delayed or abandoned as a result. You will need to ensure your accounting practices are airtight. You don't necessarily need separate bank accounts for every client, but you do need meticulous ledger tracking to prove that the funds for a specific property were spent strictly on that property or on the overhead you explicitly disclosed.

To protect your business and stay fully compliant, you should consider implementing a few structural changes to your workflow:

• Update your standard contracts: Ensure you include the exact statutory language warning that inconsistent use of funds constitutes theft.
• Define 'Specific Construction Project': The bill requires identifying the exact property location and scope of work in your written proposal.
• Itemize your deposit requests: Categorize upfront asks clearly into labor, materials, permits, and overhead.
• Keep meticulous, date-stamped receipts: You need an immediate paper trail that ties directly back to the dates and expenses you listed in your initial disclosure.

Because failing to provide this paperwork can be used against you as evidence of criminal intent in a dispute, treating the disclosure as a non-negotiable part of your sales process is your best defense against misunderstandings with clients.

Follow the Money

According to the nonpartisan legislative fiscal note, this bill carries a surprisingly small price tag for the state—effectively zero dollars in new state expenditures. Because the legislation applies to a very specific, narrow scope of conduct, analysts project minimal additional criminal case filings. The prevailing expectation is that the vast majority of Colorado contractors will simply adjust their paperwork, comply with the new disclosure rules, and carry on with business.

If there is a slight uptick in prosecutions, any resulting criminal fines and court fees would generate a tiny amount of state revenue, which is subject to TABOR limits. Meanwhile, the administrative costs to the Judicial Department, public defenders, and county district attorneys are expected to be so low that they can be easily absorbed into their existing annual budgets. Ultimately, this is a regulatory shift designed to change private business behavior and deter bad actors, rather than a sweeping new government enforcement program.

Where This Bill Stands

HB26-1245 is currently In Committee. The latest official action came on 04/21/2026: House Third Reading Lost - No Amendments.

That means the bill is still in the committee stage, and it is currently sitting in the Business Affairs & Labor. To keep moving, it would need to clear committee and then survive floor votes in both chambers.