A stop notice is a way to force movement on an unpaid construction invoice. It tells the lender, general contractor, and property owner that someone on the project hasn't been paid, and asks them to withhold funds until the issue is settled.
What a stop notice is
A stop notice, sometimes called a notice to withhold, is a formal document served by someone working on a construction project, usually a subcontractor or supplier, stating that they haven't been paid for their labor or materials. Its purpose is to hold up payment until the dispute is resolved.
When to issue a stop notice
- Delayed payments. When materials have been delivered or work has been completed and payment hasn't come on time, a stop notice is worth considering.
- Protecting interests. It's a proactive step that protects a supplier's or subcontractor's financial stake by pressing for fair payment on work already done.
The stop notice process
- Preliminary notice requirements. Some states require a preliminary notice before a stop notice can be submitted. Know your state's rules.
- Preparing the notice. Include the amount owed, the type of work or materials provided, and the relevant project details.
- Serving the notice. Deliver a copy to every relevant party, including the general contractor and the property owner.
- Monitoring the impact. After serving it, watch the situation, since it can affect the flow of money to the party that owes the debt.
Legal implications
- State laws vary. Stop notice rules differ significantly from state to state, as most construction notices do. Know the law where you work.
- Enforcement. If the payment problem continues, the party that sent the notice may need to take legal action to enforce it and recover what's owed.
Used correctly, a stop notice prompts action on unpaid invoices and helps a contractor or supplier protect its financial position.
Frequently Asked Questions
What is a stop notice in construction?
A stop notice, or notice to withhold, is a formal document served by a subcontractor or supplier who hasn't been paid, telling the lender, general contractor, and owner to hold payment until the issue is resolved.
When should you send a stop notice?
When materials have been delivered or work completed and payment hasn't arrived on time. It's a proactive step to press for fair payment before the debt drags on.
Do stop notice rules vary by state?
Yes, significantly. Some states also require a preliminary notice before a stop notice can be submitted, so a contractor needs to know the law in each state where they operate.
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