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

What This Bill Actually Does

At its core, HB26-1245 addresses the age-old problem of contractors "robbing Peter to pay Paul"—taking a deposit for a new job just to buy materials to finish the last one. The bill explicitly amends Colorado's criminal code (Section 18-4-401) to define Theft by Contractor. Under this new definition, it becomes criminal theft if a person takes an advance payment for a specific construction project, knowingly uses it for an unrelated purpose, and that diversion results in the delay, abandonment, or material nonperformance of the project.

To stop the problem before it starts, the bill also adds a brand-new compliance layer to property law. Before a contractor can accept an advance payment of more than $300, they must provide the customer with an Advance Payment Usage Disclosure. This legally required document must outline exactly what the money will be used for—such as materials, labor, permits, or overhead. It also must include a timeline of when those expenses will occur, the project's anticipated start date, and a specific legal warning that misusing the funds could constitute criminal theft.

Here is the part with real legal teeth: the bill changes how intent is proven in court. In the past, bad actors could avoid theft charges by claiming their business simply ran out of money, making it a civil contract dispute rather than a crime. This legislation states that if a contractor fails to provide the required disclosure, or if they spend the money in a way that contradicts their written disclosure, prosecutors and civil attorneys can use that as direct evidence of their intent to commit theft. It essentially closes the "bad at business" loophole for contractors who walk away with client cash.

What It Means for You

If you are planning a kitchen remodel, a basement finish, or even a modest landscaping project, this bill gives you significant leverage and peace of mind. Right now, handing over a 50% deposit requires a huge leap of faith. If this bill passes, any deposit over $300 requires the contractor to show their math. You will receive a legally binding document detailing exactly how your money will be spent and when your project will actually start.

More importantly, this changes your options if things go south. Currently, if a contractor takes your $15,000 deposit and disappears, local police will often refuse to take a report, telling you it is a "civil matter" and advising you to sue them in court. By explicitly carving out Theft by Contractor in the criminal code, you have a much clearer path to getting law enforcement involved and holding bad actors accountable for stealing your hard-earned cash.

Here is what you should do right now:

• Watch the $300 threshold: If you are hiring anyone for a home improvement project this summer, start asking how they handle their deposits. Even if the law hasn't passed yet, asking for an itemized breakdown of your advance payment is a smart consumer move.
• Share your story: Have you been burned by a shady contractor who walked off with your deposit? The House Business Affairs & Labor Committee needs to hear real-world examples. Contact your state representative to share your experience and advocate for the bill's passage.

What It Means for Your Business

If you are a general contractor, roofer, landscaper, or specialty trade business in Colorado, this bill represents a massive shift in how you handle your cash flow and compliance. The $300 threshold is incredibly low—meaning almost every residential and commercial job requiring a deposit will trigger this new paperwork. You will no longer be able to just send a generic invoice for a "50% upfront materials deposit." Instead, you must issue a specific Advance Payment Usage Disclosure detailing materials, labor, permits, and overhead, along with strict timelines.

The biggest risk here is for businesses that routinely "float" funds between jobs. If you use a deposit from Job B to buy the final materials for Job A, you are stepping into dangerous territory. The bill explicitly criminalizes using an advance payment for an unrelated purpose if it results in material delay or nonperformance of the paying customer's project. The good news? The bill explicitly allows you to list overhead as an intended use of funds, meaning you can still pay your team and keep the lights on—you just have to document it transparently.

Here is what you need to do THIS WEEK to prepare:

• Audit your cash flow: Take a hard look at your books. Can your business survive if every client deposit must be strictly ring-fenced for that specific project? If you rely on floating funds, you need to adjust your accounting immediately.
• Draft a compliant template: Review your standard contract language. Start drafting an addendum that meets the new disclosure requirements, including the mandatory criminal warning clause. Consult with your attorney to ensure it holds up.
• Contact your industry association: Reach out to the Associated General Contractors (AGC) or the Colorado Association of Home Builders. Lobbyists are likely analyzing this bill right now to ensure the paperwork requirements do not unnecessarily strangle small businesses.

Follow the Money

Because HB26-1245 was just introduced, the nonpartisan Legislative Council Staff has not yet released the official fiscal note detailing exact dollar amounts. However, we can confidently anticipate a few fiscal realities based on how the bill is written.

The primary cost to the state will fall on the judicial system and local law enforcement. By clearly defining contractor fraud as a specific, actionable type of theft, we are likely to see an uptick in criminal investigations, district attorney prosecutions, and civil court filings. This means more hours logged by state and county personnel. On the flip side, it costs the state absolutely nothing to force private businesses to change their paperwork, though small contractors will certainly bear the administrative and legal costs of updating their contracts and accounting practices to stay compliant.

Where This Bill Stands

As of mid-February 2026, HB26-1245 was just introduced in the House by Representative Rebecca Keltie and has been assigned to the House Business Affairs & Labor Committee. This is the critical first hurdle for the legislation.

Expect a lively committee hearing in the coming weeks. Consumer protection advocates and homeowners who have lost tens of thousands of dollars will likely show up in force to support it. Meanwhile, construction industry representatives will likely push back, arguing that the $300 threshold is impractically low and creates an administrative nightmare for simple, everyday repair jobs. If the bill survives committee and passes both chambers, it is slated to take effect on August 15, 2026.