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Stop Notice Procedure (California)

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: AR Team, Project Managers, Legal

Purpose​

Establish the process for serving a stop notice to protect payment rights by requiring the owner or lender to withhold funds from the direct contractor.

What is a Stop Notice?​

A stop notice is a written notice that requires the recipient (owner, construction lender, or public entity) to withhold funds from a contractor to satisfy the claimant's demand for payment.

Stop Notice vs. Mechanics Lien​

FeatureStop NoticeMechanics Lien
TargetConstruction fundsReal property
EffectWithholds moneyCloud on title
BondBonded vs. unbondedNo bond option
Public WorksYES (primary remedy)NO (can't lien public property)
Private WorksYesYes

Types of Stop Notices​

1. Unbonded Stop Notice (Private Work)​

  • No bond required
  • Owner/lender may honor or contest
  • Effective but not guaranteed

2. Bonded Stop Notice (Private Work)​

  • Claimant posts bond (125% of claim)
  • Lender MUST withhold funds
  • Stronger protection
  • Higher cost

3. Public Works Stop Notice​

  • On bond-funded public projects
  • Claims against construction funds held by public entity
  • Primary remedy (no lien available on public property)

When to Use Stop Notices​

Private Work​

  • Use in ADDITION to mechanics lien
  • When construction lender is involved
  • When you want immediate fund withholding

Public Work​

  • PRIMARY remedy (no lien available)
  • Must have payment bond OR stop notice rights
  • File stop notice to claim against funds

Deadlines​

Private Work Stop Notice​

Claimant TypeDeadline
Direct ContractorBefore owner pays GC
Subcontractor30 days after Notice of Completion (or 90 days if none)
Supplier30 days after Notice of Completion (or 90 days if none)

Public Work Stop Notice​

SituationDeadline
Before Notice of CompletionAny time funds are available
After Notice of Completion30 days
If No Notice90 days from completion

Stop Notice Process (Private Work)​

Step 1: Verify Prerequisites​

  • Preliminary notice was timely sent
  • Payment is legitimately owed
  • Deadline not passed
  • Construction lender identified (if bonded)

Step 2: Prepare Stop Notice​

Required Content:

  1. Claimant information
  2. Project identification
  3. Owner name
  4. Direct contractor name
  5. Description of work/materials
  6. Amount claimed
  7. Signature (verified)

Step 3: Serve Stop Notice​

Serve On:

  • Owner (always)
  • Direct Contractor (always)
  • Construction Lender (if bonded stop notice)

Service Method:

  • Personal delivery, OR
  • Certified or registered mail

Step 4: Bonded Stop Notice (Optional)​

To make stop notice "bonded":

  1. Obtain bond from surety (125% of claim)
  2. Attach bond to stop notice
  3. Serve on construction lender
  4. Lender MUST withhold funds

Step 5: Enforcement​

If not paid, file lawsuit within:

  • 90 days after expiration of lien period, OR
  • 6 months after completion (whichever is earlier)

Stop Notice Process (Public Work)​

Step 1: Verify Eligibility​

  • Preliminary notice sent (within 20 days recommended)
  • Work was on public project
  • Funds remain available
  • Deadline not passed

Step 2: Prepare Public Works Stop Notice​

Required Content (same as private):

  1. Claimant information
  2. Project identification
  3. Public entity name
  4. Prime contractor name
  5. Description of work/materials
  6. Amount claimed
  7. Signature (verified)

Step 3: Serve Stop Notice​

Serve On:

  • Public entity (awarding body)
  • Direct contractor

Service Method:

  • Personal delivery, OR
  • Certified or registered mail

Step 4: Public Entity Response​

The public entity must:

  • Withhold sufficient funds to cover claim
  • Notify the contractor of stop notice
  • Hold funds pending resolution

Step 5: Release of Stop Notice​

Stop notice released when:

  • Claimant releases it
  • Court orders release
  • Contractor posts bond
  • Claim is satisfied

Stop Notice Form (Private Work)​

STOP NOTICE
(California Civil Code Section 8500 et seq.)

TO:     [Owner Name]
        [Owner Address]

        [Construction Lender Name] (if bonded)
        [Lender Address]

RE:     Project: [Project Name/Address]
        Owner: [Owner Name]
        Direct Contractor: [General Contractor Name]

NOTICE IS HEREBY GIVEN that the undersigned has furnished 
and/or will furnish labor, services, equipment, or materials 
for the above-described work of improvement.

CLAIMANT INFORMATION:
Name: [Your Company Name]
Address: [Your Address]

TYPE OF CLAIMANT:
☐ Direct Contractor
☐ Subcontractor
☐ Material Supplier
☐ Equipment Lessor

GENERAL DESCRIPTION OF WORK/MATERIALS:
[Description of labor, services, equipment, or materials 
furnished - e.g., "Plumbing installation including rough-in, 
fixtures, and water heater"]

AMOUNT CLAIMED:
The total amount claimed, after deducting all just credits 
and offsets, is: $[Amount]

DEMAND IS HEREBY MADE that you withhold from the direct 
contractor sufficient funds to satisfy this claim.

☐ This is an UNBONDED Stop Notice
☐ This is a BONDED Stop Notice (bond attached)

VERIFICATION:
I declare under penalty of perjury under the laws of the 
State of California that I am the claimant or am authorized 
to execute this stop notice on behalf of the claimant, and 
that the information contained herein is true and correct.

Date: _________________

_________________________________
Signature

_________________________________
Printed Name and Title

Stop Notice Form (Public Work)​

PUBLIC WORK STOP NOTICE
(California Civil Code Section 9350 et seq.)

TO:     [Public Entity Name]
        [Address]
        Attn: [Accounts Payable/Contracts]

        [Prime Contractor Name]
        [Address]

RE:     Project: [Project Name]
        Contract No.: [Contract Number]
        Owner: [Public Entity Name]

NOTICE IS HEREBY GIVEN that the undersigned has furnished 
labor, services, equipment, or materials used in the 
above-described public work.

CLAIMANT INFORMATION:
Name: [Your Company Name]
Address: [Your Address]
Phone: [Phone Number]

DESCRIPTION OF WORK/MATERIALS:
[Description of labor, services, equipment, or materials]

CONTRACT WITH:
The undersigned has a contract with:
[Name of party who hired you]

AMOUNT CLAIMED:
The total amount claimed, after deducting all just credits 
and offsets, is: $[Amount]

DEMAND IS HEREBY MADE upon you to withhold from the amounts 
now or hereafter due the contractor, sufficient funds to 
answer the above-stated claim.

VERIFICATION:
I declare under penalty of perjury under the laws of the 
State of California that the foregoing is true and correct.

Date: _________________

_________________________________
Signature

_________________________________
Printed Name and Title

[Your Company Name]

Bonding a Stop Notice​

Why Bond a Stop Notice?​

Unbonded: Owner/lender MAY withhold funds
Bonded: Lender MUST withhold funds

Bond Requirements​

  • Bond amount: 125% of claim
  • Issued by admitted surety
  • Conditioned on payment of damages if claim invalid

Obtaining Stop Notice Bond​

  1. Contact surety/bonding agent
  2. Provide claim documentation
  3. Pay premium (typically 1-3% of bond amount)
  4. Receive bond
  5. Attach to stop notice

After Serving Stop Notice​

Track Response​

  • Log date served and method
  • Note any response from owner/lender
  • Monitor for contractor response

Possible Outcomes​

1. Payment

  • Receive payment
  • Release stop notice in writing
  • Provide lien waiver

2. Bond Posted by Contractor

  • Contractor posts release bond
  • Your claim transfers to bond
  • You still have claim but funds released

3. Dispute

  • Owner/contractor contests validity
  • May require litigation
  • Deadline to sue: 90 days after lien period ends

Stop Notice Checklist​

Before Serving​

  • Preliminary notice confirmed
  • Amount owed verified
  • Deadline calculated
  • Owner/lender information obtained
  • Decision: bonded or unbonded?
  • Bond obtained (if bonded)

Serving​

  • Stop notice prepared
  • Signed and dated
  • Bond attached (if bonded)
  • Served on owner
  • Served on direct contractor
  • Served on lender (if bonded)
  • Proof of service retained

After Serving​

  • Response monitored
  • Lawsuit deadline calendared
  • Continue collection efforts
  • Prepare for potential litigation
  • Preliminary Notice Procedure
  • Mechanics Lien Filing Procedure
  • Payment Bond Claim Procedure
  • Collections Procedure

California Civil Code Sections:

  • § 8500-8538 (Private Work Stop Notices)
  • § 9350-9364 (Public Work Stop Notices)

This document provides general information. Consult with legal counsel for specific situations.

Template provided by support.construction. Verify current law with legal counsel.