Disclaimer
What is a Stop Notice?
Why Stop Notices Are Important?
Who Can File a Stop Notice?
When Can a Stop Notice be Filed?
Note on Spurious Claims.
Disclaimer:
Stop Notices and related issues represent an extremely complex and evolving area of law that cannot be adequately explained in a single page. The information provided below does not constitute legal advice and is not intended to provide all possible information regarding Stop Notices. If you have an issue regarding Stop Notices, you should contact an attorney.
What is a Stop Notice?:
A Stop Notice is a relatively new device in Arizona, borrowed from California and added to lien laws in 1998. A Stop Notice is a notice served on an owner or construction lender in which the claimant described the work completed and the unpaid balance and demands that the owner or construction lender specifically withhold funds from the party to whom the services and materials were rendered. Specifically a Stop Notice contains:
Why Are Stop Notices Important?:
Unlike Mechanic's Liens which attend to the building or improvements actually provided, a Stop Notice attaches to and essentially sets aside specific funds for payment. In that respect, use of a Stop Notice can be superior to the filing of a Mechanic's Lien.
Who Can File a Stop Notice?:
Any person entitled to record a Mechanic's Lien and who has provided preliminary 20-day notice (for more information please see our Mechanic's Lien page) with the exception of the prime contractor may serve a Stop Notice on the owner. As to construction lenders, the rule is essentially the same except a prime contractor may serve a Stop Notice against a construction lender.
When Can a Stop Notice be Filed?:
A Stop Notice may be served upon an owner by delivery to the owner, personally, or by leaving the Stop Notice at the owner's residence or place of business with a person of suitable age and discretion any time prior to the expiration of the persons lien rights (See our Mechanic's Liens page for more information). If, however, an owner or construction lender makes a written demand that a Stop Notice be served, all notices must be served within thirty days of the demand or the claimant will forfeit all Stop Notice rights.
An action against an owner or construction lender after service of the notice may be commenced any time after ten days from the date of service but no more than 3 months after date of service. If all parties agree, this time may be extended an additional three months. In an action to enforce a Stop Notice all interested parties should be included. This means any one above the claimant in the chain of contract (i.e. other subcontractors, etc.) and the subcontractors and suppliers of the claimant who may have served their own Stop Notices. Within five days of commencing the action, the claimant must serve all of these parties with a notice of commencement of Action. This should be accomplished in the same manner as the service of the Stop Notice itself.
Spurious Claims:
Those intending to file Stop Notices and those against whom notices have been filed should also be aware of the consequences and remedies for filing a baseless claim. Arizona statutes provide that if a Stop Notice is filed and the claimant knows or has reason to know that the document has no merit or contains a misstatement or false claim, the claimant is liable to the owner for the greater of $5,000.00 or treble damages caused to the owner plus reasonable attorney's fees and costs. A.R.S. 33-420. The false claimant will also forfeit their right to record a Mechanic's Lien. See A.R.S. 33-1061.
