Raymond W. Hackbarth, Jr.

Construction Industry Newsletter
By Attorney Raymond W. Hackbarth, Jr.

Stop Notices Also Insure You Get Paid

Stop Notices, although often overlooked, are powerful tools to ensure contractors and suppliers get paid. The benefit of a Stop Notice is that it can be used in both private and public works projects, and can be utilized in conjunction with a Mechanics' Lien on a private works project to secure your payment. Here are some helpful tips to protect your legal rights and to insure that you get paid.

Written Contracts

First, maintain your license in good standing with the Contractors State License Board. Otherwise, the courts will not allow you to prosecute your claim for payment. Secondly, always use a written contract. All the terms of your agreement should be in writing. Your bid is an offer that can be accepted by the owner, tenant, or prime contractor making you legally bound to its terms. Therefore, be sure that all relevant terms and conditions are clearly stated in your bid. If through error or omission, you make a mistake drafting your bid, you may be bound nevertheless. So, scrutinize your bid or contract carefully. Remember to put your contract, all change orders, and extras in writing signed by the parties. During the bid/contract process be sure to obtain the legal description and mailing address of the job site. Get the names and addresses of the owner, prime contractor, construction lender and any applicable sureties.

Preliminary Notice

Within twenty (20) days from first furnishing labor and/or materials to the job, subcontractors and suppliers should serve a Preliminary (20 Day) Notice on the owner, prime contractor, construction lender, and surety(ies). Only one Preliminary Notice is required unless you furnish materials or services under separate contracts or with more than one contractor. Then, you must serve separate Preliminary Notices on each. State law sets forth requirements for a valid Preliminary Notice. Be sure you include all of the required information and be sure you serve all parties properly. You may file a copy of the Preliminary Notice with the County Recorder, so that you will be notified if the owner records a notice of Cessation or Notice of Completion.

Stop Notices

While A Mechanics' Lien is a lien on property, a Stop Notice creates a lien on construction funds to secure payment for those whose labor and materials have improved the property. As with a Mechanics' Lien, a Stop Notice serves to secure payment for contractors and suppliers, who are not in direct contractual relationship with the owner of the property. In private works projects you may record a Mechanics' Lien while also pursing Stop Notice remedies. In contrast on a public works project, government entities will not allow you to file a lien their property. Therefore, a Stop Notice is the exclusive remedy to secure payment on public works projects by subcontractors and suppliers against the owner.. Additionally, if the property is over encumbered, a Stop Notice is the preferred remedy. Anyone other than the original contractor, who has Mechanics' Lien rights has the right to serve a Stop Notice. An original contractor can also serve Stop Notices on a lender, but not an owner.

Notice and Response

To be valid, a stop notice must be filed before the expiration of the Mechanics' Lien period. This means that the Stop Notice must be filed within thirty (30) days after notice of completion, or within ninety (90) days after completion of the work of improvement. Once properly served, the recipient must withhold from the builder or contractor enough money to satisfy the claim.

Enforcing the Stop Notice

If you are not paid after serving the Stop Notice, you must file a lawsuit to enforce the Stop Notice within ninety (90) days after the expiration of the Mechanics' Lien period.

Be Careful

As with Mechanics' Liens, Stop Notices are very technical. There are strict requirements including specific time frames for determining the validity of a Stop Notice. Be sure to strictly follow the Stop Notice law to the letter or risk losing this powerful tool. If you have any questions whatsoever seek the expert advice of an experienced construction law attorney.