SHARE:

 

 

ConstructionPro Week, Volume: 2 - Issue: 44 - 11/01/2013

Are ‘Stop Notice’ Laws Unfair to Contractors?

By Bruce Jervis

 

Many states provide payment protection for subcontractors and suppliers on private projects not covered by public works payment bonds. This payment security mechanism is commonly called a “stop notice.” The unpaid sub formally notifies the project owner it is owed money by the prime contractor. The owner is then statutorily obligated to withhold that amount from the contractor pending formal resolution of the matter.

 

The Mississippi Stop Notice statute has run afoul of the U.S. Constitution. A federal appeals court noted the law’s “profound lack of procedural safeguards.” A contractor’s payment under the prime contract could be withheld for an extended period of time based essentially on the unilateral say-so of a disgruntled subcontractor. This deprived the contractor of a significant property right without due process of law.

 

The Stop Notice laws vary from state to state and afford varying degrees of procedural protection. Almost all impose civil penalties for willful filing of a false notice. But the federal appeals court said this was a modest safeguard which “carries little weight as an acceptable buttress against erroneous deprivation.” It is probably safe to say that other state statutes have the same procedural infirmities as the Mississippi law.

 

What has been your experience with Stop Notice laws? Are they an appropriate payment protection for subcontractors and suppliers? Or, are they one-sided and unfair to prime contractors, primarily providing leverage for subcontractors in disputes? I welcome your comments.

 

COMMENTS

I agree with the comments of your article. The "stop notice" should have to be verified, justified, and confirmed by an independent 3rd party before they are levied against a general contractor.
Posted by: Brent Banning - Friday, November 01, 2013 11:20 AM


I am absolutely in favor of stop notices. As an owners representative it gives me notification that something is broken on the construction side ie someone is not getting paid or underlining issues. When I get a service of a stop notice as architect/owners rep I make contact with the contractor to see what happen. What I have found out in over a majority of the times is due to late payments by contractors to subcontractors and the majority of those are the subcontractors have not provided the prescribed paperwork for payment per agreements in place. We are required to hold back funds to the contractor and this is most cases brings a brisk solution. I would like to see a subcontractor peanalized for false stop notices as this creates wasted time and effort on all parties. I would not change the process in California.
Posted by: Chris Addington FARA, AIA - Friday, November 01, 2013 11:23 AM


Tennessee's lien law requires "notice of nonpayment" when remote contractors have not been paid. This provides the owner with the needed notice that something is wrong without putting the contractor in the Catch 22 others have pointed out. May be a good middle ground?
Posted by: Tim Gibbons - Saturday, November 02, 2013 10:06 AM


For me, I welcome Stop Notice. It is good thing due to dilemma problems may created by prime contractor. The sub contractor is a lowest level in construction needs to be protected and secured under any Gimmick by.
Posted by: Suhip Kaddory - Tuesday, November 05, 2013 11:31 PM










WPL
PUBLISHING CO, INC.
WPL Publishing - 5750 Bou Avenue #1712 - Rockville, MD 20852

Phone: (301)765-9525  -  Fax: (301)983-4367

All Content and Design Copyright © 2017 WPL Publishing
About Us

Contact Us

Privacy Policy

My Account