Stop Notices Freeze Funds Until Payment Is Made
When should a stop notice be served? How does a stop notice help me with payment? Who should receive a stop notice? All these questions are asked of our customer service representatives on a daily basis.
A Stop Notice Can Be Sent at Any Time, With a Powerful Impact
Why should I file a stop notice? Now that's a question we get a lot. Many people don't see the value in filing a stop notice, especially since mechanics liens are such valuable tools. But stop notices can enhance a mechanics lien. Stop notices can also be a gentler way to notify everyone you have not been paid before going through the more complicated mechanics lien process. In some states, those who are served with a stop notice are required to completely stop providing payments on a project until the issues relating to the stop notice have been resolved. A few tips on serving a stop notice are below:
LienItNow Stop Notice Tip #1: don't be afraid to file this document early.
Stop notices do not attach to real property, instead they attach to the project funds. So when the owner receives a stop notice, it tells him that his contractor has not paid his subcontractor or supplier, and that payments to the contractor needs to stop until the disputed balances are resolved. This ensures that the well doesn't go dry: i.e. there's still money in the pot to pay the contractor that served the stop notice.
LienItNow Mechanics Lien Tip #2: the amount claimed in the stop notice should only include work performed up to that date.
If you want to make sure you are paid the amounts you are due, don't fool around with the amount contained in your stop notice. If you serve a stop notice that contains an overstated amount, any advantage you have with the owner will be lost, and your relationship with the contractor will sour.
LienItNow Mechanics Lien Tip #3: after you served the stop notice, follow up with the owner or lender.
Just because you served the stop notice does not mean the owner will immediately turn around and pay you. In many cases, unless they are consistently reminded of the problem, the owners and lenders will not do anything other than freeze funds in the amount of your notice. Be the squeaky wheel and make sure the owner or lender are responding to your stop notice and investigating it.
For more information on Stop Notices, visit our Stop Notice FAQ page or our Lien Reference Desk for State specific information.