STOP WORK STATUTE

2- How It Works

If you have not been paid within 35 days after submitting your progress payment, and if there are no disputes with the Owner that would allow the progress payment to be withheld, the statute allows you to inform the Owner that if you are not paid within 10 days, you will stop work. After you have given 10 days written notice to the Owner, and all lenders and subs, you also need to post a further notice in a conspicuous place on the construction site 5 days ahead of the time that you will be stopping work.

In order to avail yourself of the stop work provision in the Code, there cannot be any dispute that the payment is due and owing. Typically the Owner will have some reason for not paying you, but assuming it is simply a cash flow issue that the Owner has and not a problem with your work, this stop work remedy is available. Plainly this factual prerequisite is going to be difficult to satisfy in most circumstances.

If you properly send the notice, and then properly post the notice on site, and if there is no dispute that you are owed the funds, you can stop work after the 10-day period. If you exercise this right, and do it properly, you have no liability for delays that the stop work may have caused. There is also a right to an expedited court hearing to determine whether you should be paid.

If the Owner pays you, or the situation is otherwise resolved, you need to provide notice that you will be returning to work. This notice is provided to the Owner, lender, and subs; all the folks that you informed in the first place that you would be stopping work on the project. The notice of your return to work and the cancellation or resolution of the dispute must be posted in a conspicuous place on the project.

STOP WORK STATUTE

1- The Stop Work Statute

Stopping work on a project can be dangerous. For one thing, it gives the other party to the contract a terrific defense to any claim that you may make. Any time work is stopped by one party, there will be the contention that it is unjustified, and therefore is a material breach of the contract that entitles the other side to suspend its own performance, demand your performance, or declare the contract breached and immediately sue for damages.

However, for private contract work, the Legislature has crafted a right that allows the contractor to stop work under certain circumstances. The right to stop work is actually a lot of work in and of itself, and it involves a fairly precise series of steps that need to be completed in the proper sequence or you may inadvertently find yourself in a breach situation, the very situation that you wanted to avoid by taking the proper steps to stop work.

The next series of blogs will tell you how the statute works and what you need to do to make it work for you.

STOP NOTICES- WHAT TO DO WHEN YOU ARE NOT GETTING PAID

7- Time Limits to File the Stop Notice Action

A lawsuit to perfect rights under the Stop Notice can be filed as early as10 days after the Stop Notice is filed, but no later than 90 days after the last day to file a Stop Notice. The last day to file a Stop Notice will be determined by whether the Owner’s records a Notice of Completion or Notice of Cessation. If the Owner does record the Notice, then a General/Prime has 60 days to file its Stop Notice and 90 days more to file suit; 150 days from completion. If no Notice is recorded, the General/Prime has 90 days to file the Stop Notice and 90 days to file suit.

A subcontractor’s time frame is slightly less if the Owner records the Notice. In that case, the sub has 30 days to file its Stop Notice and then 90 days to file suit. If no Notice is recorded, the sub has the same amount of time as the General/Prime; 90 days to file and 90 days to initiate the lawsuit. Review the discussion in the Mechanic Lien section about how the time limits apply, depending on whether the Owner does or does not record Notice, and depending on whether you are a General/Prime or a subcontractor. The same concerns are relevant for Stop Notices.

Within 5 days after filing the lawsuit, notice must be sent to all parties involved in the action informing them that the litigation has been commenced. The Notice of Commencement of action is ordinarily sent along with the lawsuit that is being served, but sometimes, and for tactical reasons, the lawsuit might not be immediately served on the other parties, so the Notice of Commencement is sent by itself. However you do it, be sure to serve the Notice of Commencement of Action on all parties involved in your Stop Notice action, especially on the Owner or lender. This is to assure that the lender and/or the Owner continue to hold the Stop Notice funds because they know there is a lawsuit related to those funds.

If there is a Stop Notice Release Bond in place, then the bond surety is the proper party to name in your foreclosure action. If there is a payment bond on the project, and the Owner or lender have relied on that bond and ignored your Stop Notice, then name the surety in the suit and provide notice to all of them; the Owner, the construction lender, and the bond surety. You want to be paid by one of these parties; you don’t care which one.

No Stop Notice action can come to trial before the conclusion of the 90-day period to file a Stop Notice. If you file your Stop Notice early, you still need to wait until the time period expires for filing Stop Notices on the project, and that time frame is dependent on the Owner’s recording (or not recording) a Notice of Completion or Notice of Cessation. If no Stop Notice action is brought within the applicable time frame, then the funds that were withheld must be released.

Be sure to monitor the recording of any Notice of Completion or Notice of Cessation. Be sure to calendar the time limits for filing your action. Do NOT miss this deadline. As we discuss later in the litigation section, you can file your action to preserve your rights, and then you can amend your lawsuit to bring in other claims. If you intend to bring the Stop Notice action, however, it must be brought within a specific time, so make sure you do.

STOP NOTICES- WHAT TO DO WHEN YOU ARE NOT GETTING PAID

6- The Stop Notice Foreclosure Action

In order to perfect your rights on the Stop Notice, you will need to file a lawsuit. The Stop Notice claim is typically part of a more involved and comprehensive lawsuit. It can be brought as a stand-alone litigation, but that is not typical. The Stop Notice foreclosure action is intended to determine your rights to the funds that are withheld. Unlike the Mechanic Lien foreclosure action, the Stop Notice lawsuit is not brought against the property but against the construction funds that are, or should be, available.

The parties to the Stop Notice foreclosure action are; 1- the lender or Owner, depending on whom you told to withhold the funds; 2- the party that you wanted the payment from in the first place, either the General or the Owner, whoever was not paying you; or 3, if there is a Stop Notice Release Bond or if there is a payment bond for the project, then the surety that issued the Bond is a required party. You do not need to name any other parties in the Stop Notice cause of action. The action is to determine your rights to the funds being withheld because of your Stop Notice.