July 19, 2018
a. Preliminary Notice Requirement
Private Works: A private works stop payment notice is not valid if the claimant has not previously served a preliminary notice on the owner or reputed owner, the direct contractor or reputed direct contractor, and the construction lender or reputed construction lender, if any. Civ.
Code §§ 8200, 8508. A direct contractor need not serve a preliminary notice on the owner, but it must serve a preliminary notice on the construction lender, if any. Id.
Public Works: Service of a preliminary notice also is a condition to a valid public works stop payment notice. Civ. Code § 9300. For public works, the preliminary notice must be given to the public entity and the direct contractor to which the claimant provides work. A laborer, however, is not required to give preliminary notice, nor is a claimant that has a direct contractual relationship with a direct contractor required to serve a preliminary notice. Id.
b. Contents of a Stop Payment Notice
A stop payment notice must be signed and verified by the claimant or its agent and must contain the following information:
1. A general description of work to be provided and an estimate of the total value of the work to be provided;
2. The amount due the claimant through the date of the notice;
3. The name and address of the owner or reputed owner;
4. The name and address of the direct contractor;
5. The name and address of the construction lender, if any;
6. The name, address and relationship to the parties of the person giving the notice;
7. A general statement of the work actually provided;
8. The name of the person for whom the work was provided; and
9. A statement of the claimant’s demand after deducting all just credits and offsets.
See Civ. Code, §§ 8102, 8502, 8066 (private works) and Civ. Code § 9352 (public works). The stop payment notice also should include a description of the project site sufficient for identification, including a street address and legal description if possible. Civ. Code § 8102.
Including the date when the claimed amount became due and a demand that the amount be withheld also is recommended.
While statutes mandate certain information, there is no particular form required by law. However, the stop payment notice must substantially comply with the statutory requirements. If the notice does not substantially comply, it will be considered invalid. Sample Stop Payment Notice forms are included in the last pages of this section. Some public entities, such as the California Department of Transportation(“Caltrans”), may have their own preferred forms. A copy of Caltrans’ current form is included with the sample forms.
c. Service of a Stop Payment Notice
Private Works: A stop payment notice to an owner must be served on the owner or to the owner’s architect, if any. Civ. Code § 8506. It must be delivered to the owner personally, left at the owner’s residence or place of business with some person in charge, or delivered to the owner’s architect, if any. Civ. Code §§ 8106 and 8108.
Alternatively, a stop notice may be served by mail. Civ. Code § 8106. If served by mail, it must be by registered or certified mail, express mail, or overnight delivery by an express service carrier. Civ. Code § 8110. The address to be used must be the owner’s address shown
on the direct contract, the building permit, or a construction trust deed. Civ. Code § 8108. A stop payment notice to a construction lender must be given to the manager or other responsible officer or person at the office or branch of the lender administering or holding the
construction funds. Civ. Code § 8506. The address for the lender is the construction lender’s address shown on the construction loan agreement or construction trust deed. Civ. Code § 8108.
Public Works: A stop payment notice to a public entity must be served personally or by mail (registered or certified mail, express mail, or overnight delivery by an express service carrier) at the office of the public entity or another address specified by the public entity in the
contract or elsewhere for service of notices, papers, and other documents. Civ. Code § 8108. The person to be served is, “[i]n the case of a public works contract of the state, the director of the department that awarded the contract,” or “[i]n the case of a public works contract of a public entity other than the state, the office of the controller, auditor, or other public disbursing officer whose duty it is to make payment pursuant to the contract, or the commissioners, managers, trustees, officers, board of supervisors, board of trustees, common council, or other body by which the contract was awarded.” Civ. Code § 9354.
Proof of Service: In order to establish effective service, a claimant also must prepare a “proof of notice declaration” that includes:
(1) The type or description of the notice given.
(2) The date, place, and manner of notice, and facts showing that notice was given in the manner required by statute.
(3) The name and address of the person to which notice was given, and, if appropriate, the title or capacity in which the person was given notice. Civ. Code § 8118(a).
If the stop notice is given by mail, the declaration also must include one of the following:
(1) Documentation provided by the United States Postal Service showing that payment was made to mail the notice using registered or certified mail, or express mail.
(2) Documentation provided by an express service carrier showing that payment was made to send the notice using an overnight delivery service.
(3) A return receipt, delivery confirmation, signature confirmation, tracking record, or other proof of delivery or attempted delivery provided by the United States Postal Service, or a photocopy of the record of delivery and receipt maintained by the United States
Postal Service, showing the date of delivery and to whom delivered, or in the event of nondelivery, by the returned envelope itself.
(4) A tracking record or other documentation provided by an express service carrier showing delivery or attempted delivery of the notice. Civ. Code § 8118(b).
d. Time Period for Service of a Stop Payment Notice
The time within which a stop payment notice must be recorded varies depending on the claimant and whether a notice of completion or cessation of labor is properly recorded. Private Works: For private works, a claimant must serve the stop payment notice before expiration of the period within which a claim of mechanics’ lien must be recorded. Civ. Code 8508(b). For most claimants, therefore, other than a direct contractor, a stop notice must be served within 30 days after a notice of completion or cessation of labor is recorded, or within 90 days of completion if no notice of completion or cessation is recorded. Civ. Code § 8414. For a direct contractor, a stop notice must be served within 60 days after a notice of completion or cessation is recorded, or within 90 of completion of the work of improvement if a notice of completion or cessation is not recorded. Civ. Code § 8412.
Public Works: For public works, a claimant must serve a stop payment notice within 30 days of a recorded notice of completion, acceptance, or cessation, or within 90 days of completion or cessation of labor if a notice of completion, acceptance, or cessation is not
recorded. Civ. Code § 9356.