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Stop Notices
A stop notice is the second most misunderstood document used in the construction business. It is the name that is confusing. A logical assumption is that a contractor is stopping work for non payment. Not even close. A stop notice stops the flow of the construction funds.
When a subcontractor or material supplier has not been paid and serves a stop notice on the property owner, a lien is created on the money owed to the prime contractor by the owner. Thus, the owner must pay off the stop notice or file a stop notice release bond before paying the prime contractor.
A prime contractor, subcontractor or material supplier can serve a stop notice on the construction lender. This places a lien on the construction loan funds. A bonded stop notice is required when a stop notice is filed on a construction lender. The stop notice claimant has to post a bond for 125% of the amount of the stop notice. Most bonding companies will not issue stop notice bonds unless their payment and performance bonds are in place on the project.
In the right circumstances, a stop notice is a more effective collection tool than a Smith and Wesson.
A blank stop notice is available here, and a blank stop notice release is available here.
The information contained in this site is for informational purposes only; it is not intended to constitute legal advice. Users of information from this site do so at their own risk.
A stop notice is the second most misunderstood document used in the construction business. It is the name that is confusing. A logical assumption is that a contractor is stopping work for non payment. Not even close. A stop notice stops the flow of the construction funds.
When a subcontractor or material supplier has not been paid and serves a stop notice on the property owner, a lien is created on the money owed to the prime contractor by the owner. Thus, the owner must pay off the stop notice or file a stop notice release bond before paying the prime contractor.
A prime contractor, subcontractor or material supplier can serve a stop notice on the construction lender. This places a lien on the construction loan funds. A bonded stop notice is required when a stop notice is filed on a construction lender. The stop notice claimant has to post a bond for 125% of the amount of the stop notice. Most bonding companies will not issue stop notice bonds unless their payment and performance bonds are in place on the project.
In the right circumstances, a stop notice is a more effective collection tool than a Smith and Wesson.
A blank stop notice is available here, and a blank stop notice release is available here.
The information contained in this site is for informational purposes only; it is not intended to constitute legal advice. Users of information from this site do so at their own risk.