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.