This guide will give you general information about using a Stop Payment Notice to collect on unpaid invoices on public works construction projects in California.
What is a Stop Payment Notice?
A stop notice directs the public entity owner to set aside money that is otherwise owed to the contractor until your claim gets paid. A Stop Payment Notice is a powerful tool that will create a fund that will be available to satisfy your unpaid bill. Just about everyone who contributes to a construction project has the right to file a Stop Payment Notice. You can file a Stop Payment Notice anytime during a construction project if you are owed money that has not been paid to you. You do not have to complete your work before filing a Stop Payment Notice.
What Documents Do I Need to File a Stop Payment Notice?
If you have a contract with the prime contractor, you need to get your contract, along with any change orders, the contact information for the public entity, the payment history and the correct property address. It is also helpful to have the contract number of the project so the public entity can correctly identify the project. This information can be obtained from the public entity, the contractor or the prime contract. If you are not in direct contract with the prime contractor, then you also need to have a valid Preliminary Notice. A Preliminary Notice should be sent out before any services or materials are performed by you or your company on the project. Be sure that your Preliminary Notice has been sent by registered or certified United States mail, return receipt requested (the green card), although other methods of service are also allowed, such as by an overnight delivery service..
How Do I Fill Out the Stop Payment Notice?
Get a Stop Payment Notice form from a publisher of construction forms, such as BNI Books (www.bnibooks.com). Use a current form. The notice needs to be directed to the owner, identify the project name and the location of the job site. You need to describe the general nature of the materials, labor or other services provided, the person who was provided with the materials, labor or services, i.e., the person or company you have a contract with. You then need to provide the total amount of your contract, the value of the work you have provided so far, and how much you have been paid. You then need to note the amount that has not been paid, and the amount of interest that you are allowed to claim under your contract. You need to sign and date the Stop Payment Notice in two places. One place is for your signature, and the other is for what is called a "verification." A verification means that you are swearing that the information you are submitting is true of your own knowledge.
When Do I File the Stop Payment Notice?
If you have sent out an invoice to a contractor and the due date for the invoice has passed, call the contractor and ask him or her why you have not been paid. Unless payment is imminent, you should consider filing a Stop Payment Notice. Stop Payment Notices put a claim only on the money that remains in the construction funds at the time of your notice, so the sooner you send your Stop Payment Notice, the more likely there will be money remaining in the construction fund for your claim. The last day to file a Stop Payment Notice is tied to the official date of completion. You usually have 90 days from the date of completion to file a Stop Payment Notice. However, if a timely Notice of Completion is recorded, the deadline goes from 90 days to 30 days.
How Do I File a Stop Payment Notice?
The Stop Payment Notice may be delivered in person, by registered or certified mail, by an overnight delivery service, such as Federal Express. It is best to send it by registered or certified mail, return receipt requested (the green card) or overnight delivery, so that you have some proof of the date of delivery. The Stop Payment Notice needs to be sent to the person working for the public entity who is in charge of disbursing funds for the project. Be sure to send a copy to the Prime Contractor, as well as the person with whom you have a contract for the work.
What Do I Do After I Filed My Stop Payment Notice?
After you have filed your Stop Payment Notice, you have until 90 days after the last date that a Stop Payment Notice can be filed in which to file a lawsuit. That means that you have either 180 days after the official date of completion to file a lawsuit, or, if a valid notice of completion is recorded, then you only have 120 days after the official date of completion. To file a lawsuit, you will need the help of a lawyer. Do not wait until the last minute to take your case to a lawyer to file a lawsuit. Give your lawyer at least a couple of weeks to investigate the case and prepare the papers necessary for filing a lawsuit. Good luck!
Additional resources provided by the author
California Mechanics Liens and Related Construction Remedies, published by the Continuing Education of the Bar (available at most law libraries).