STOP PAYMENT NOTICE
(Mechanic’s Lien—State of Alabama)
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions (Notice & Payment Stoppage)
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation (Bonding & Liability Cap)
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
Stop Payment Notice (the “Notice”)
Date: [DATE]
Claimant: [NAME OF CLAIMANT], a [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Claimant”).
Owner: [NAME OF OWNER], a [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Owner”).
Original Contractor: [NAME OF ORIGINAL CONTRACTOR], a [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Contractor”).
Construction Lender (if any): [NAME] at [ADDRESS] (“Lender”).
Project: [PROJECT NAME OR DESCRIPTION], located at [PROPERTY ADDRESS OR LEGAL DESCRIPTION] (the “Project”).
Governing Law: This Notice is issued pursuant to Ala. Code §§ 35-11-210 et seq. (the “Alabama Lien Law”) and all other applicable state lien statutes (collectively, the “Lien Law”).
[// GUIDANCE: Identify every entity that will receive service of this Notice. Service on both Owner and Lender is recommended to maximize payment protection.]
2. DEFINITIONS
Unless the context requires otherwise, capitalized terms have the following meanings:
“Amount Claimed” – The unpaid contract price, retainage, and change-order amounts owing to Claimant for Labor, Services, or Materials furnished to the Project, presently totaling $[AMOUNT].
“Bond” – A surety bond issued pursuant to Section 7.2 to secure Claimant’s obligations under this Notice.
“Labor, Services, or Materials” – The labor performed, professional services rendered, equipment rented, and/or materials supplied by Claimant to or for the benefit of the Project, specifically described in Exhibit A attached hereto.
“Release Event” – (a) written confirmation of full payment of the Amount Claimed; (b) recording of a lien-release bond that complies with Section 7.2; or (c) written, notarized waiver by Claimant.
“Stop Period” – The period beginning on Owner’s receipt of this Notice and ending upon the earliest Release Event.
3. OPERATIVE PROVISIONS (NOTICE & PAYMENT STOPPAGE)
3.1 Statutory Notice. Pursuant to the Alabama Lien Law, Claimant hereby gives formal notice of its intention to assert a mechanic’s lien against the Project and the improved real property.
3.2 Payment Stoppage Obligation. During the Stop Period, Owner and Lender shall:
(a) immediately withhold from Contractor a sum not less than the Amount Claimed, plus reasonable estimated litigation costs; and
(b) refrain from disbursing to Contractor any proceeds relating to the Labor, Services, or Materials furnished by Claimant.
3.3 Subrogation. To the fullest extent permitted by law, Claimant is subrogated to the lien and payment rights of all parties whose labor or materials have been incorporated into the Project through Claimant’s efforts.
3.4 Continuation of Work. Unless and until directed otherwise in writing by Owner, Claimant shall continue to perform under its subcontract without prejudice to its rights herein.
4. REPRESENTATIONS & WARRANTIES
4.1 Claimant represents and warrants to Owner and Lender that:
(a) it holds a valid license (if applicable) to perform the Labor, Services, or Materials;
(b) all Labor, Services, or Materials were furnished in good faith and in accordance with applicable plans, specifications, and laws;
(c) the Amount Claimed is true, correct, and just, after all lawful credits and offsets;
(d) Claimant has served this Notice on Owner, Contractor, and Lender in strict compliance with the Lien Law.
4.2 Survival. All representations and warranties survive any Release Event until the later of (i) two years after full payment, or (ii) final disposition of any litigation arising out of this Notice.
5. COVENANTS & RESTRICTIONS
5.1 Cooperation. Claimant shall reasonably cooperate with Owner’s requests for customary lien-waiver documentation upon receipt of partial or full payment.
5.2 Record Keeping. Claimant will maintain detailed invoices and delivery tickets supporting the Amount Claimed and make such records available for inspection upon ten (10) business days’ written notice.
5.3 Non-Waiver. No failure or delay by Claimant in exercising any right under this Notice constitutes a waiver of such right.
5.4 Conditional Waivers. Any waiver or release provided by Claimant prior to receipt of collected funds shall be deemed conditional and automatically void if any check or other payment instrument is dishonored.
6. DEFAULT & REMEDIES
6.1 Events of Default.
(a) Owner or Lender disburses payment to Contractor in violation of Section 3.2;
(b) Contractor files for bankruptcy without providing adequate protection to Claimant; or
(c) any party breaches a covenant, representation, or warranty contained herein.
6.2 Cure Period. Except with respect to payments made in violation of Section 3.2 (for which no cure period applies), the defaulting party shall have five (5) business days after written notice to cure the default.
6.3 Remedies. Upon an uncured Event of Default, Claimant may:
(i) file and perfect its mechanic’s lien;
(ii) commence a civil action to foreclose the lien;
(iii) seek prejudgment attachment and injunctive relief to freeze contract funds; and
(iv) recover all reasonable attorney fees, expert costs, and court costs.
7. RISK ALLOCATION (BONDING & LIABILITY CAP)
7.1 Liability Cap. The aggregate liability of Owner and Lender under this Notice is capped at the lesser of (a) the Amount Claimed, or (b) the unpaid balance owed by Owner to Contractor for Claimant’s scope of work.
7.2 Bonding Requirements.
(a) Discharge Bond. Owner or Contractor may discharge the withholding obligation by procuring a surety bond in accordance with Ala. Code § 35-11-233, in an amount equal to 150 % of the Amount Claimed, naming Claimant as beneficiary.
(b) Claimant’s Bond. If Owner reasonably contests the validity of the claim, Claimant shall, upon ten (10) business days’ written demand, post a bond or irrevocable letter of credit in the Amount Claimed, conditioned on indemnifying Owner for damages arising from a wrongful stop notice.
7.3 Indemnification. Each party posting a bond under Section 7.2 indemnifies, defends, and holds harmless the other parties from and against all losses, claims, and expenses caused by the posting party’s breach of the bond terms.
7.4 Force Majeure. No party shall be liable for delays in processing payments caused by circumstances beyond its reasonable control, including Acts of God, governmental shutdowns, or court orders.
8. DISPUTE RESOLUTION
8.1 Governing Law. This Notice and any dispute arising hereunder are governed by the laws of the State of Alabama, without regard to conflict-of-law rules.
8.2 Forum Selection. The parties irrevocably submit to the exclusive jurisdiction of the state courts located in the county where the Project is situated.
8.3 Arbitration & Jury Trial. Arbitration is not applicable. Nothing herein constitutes a waiver of any constitutional right to a jury trial.
8.4 Injunctive Relief. The parties acknowledge that violation of Section 3.2 may cause irreparable harm for which monetary damages are inadequate; accordingly, specific performance and injunctive relief are available without posting additional bond.
9. GENERAL PROVISIONS
9.1 Amendments & Waivers. Any amendment or waiver must be in a writing signed by the party against whom enforcement is sought.
9.2 Assignment. Claimant may assign its rights under this Notice to a bona fide factor or secured lender; otherwise, no assignment is permitted without prior written consent of the non-assigning parties.
9.3 Successors & Assigns. This Notice binds and benefits the parties and their respective successors and permitted assigns.
9.4 Severability. If any provision of this Notice is held unenforceable, the balance shall remain in full force and effect, and the invalid provision shall be reformed to the minimum extent necessary to achieve its intent.
9.5 Entire Agreement. This Notice constitutes the entire agreement among the parties with respect to the subject matter and supersedes all prior oral or written communications.
9.6 Counterparts; Electronic Signatures. This Notice may be executed in counterparts, each of which is deemed an original, and signatures transmitted by PDF, facsimile, or compliant e-signature platform shall be deemed original for all purposes.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the undersigned Claimant has executed this Stop Payment Notice as of the date first written above.
| CLAIMANT | |
|---|---|
| By: _________ | |
| Name: [PRINTED NAME] | |
| Title: [OFFICER TITLE] |
[CORPORATE SEAL, if applicable]
STATE OF ALABAMA )
COUNTY OF __ )
On this ___ day of _, 20_, before me, the undersigned Notary Public, personally appeared ______, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument, the entity on behalf of which the person acted executed the instrument.
WITNESS my hand and official seal.
Notary Public
My commission expires: _______
EXHIBIT A
Detailed Description of Labor, Services, or Materials Furnished
[Provide line-item detail sufficient to identify the work, quantities, invoice dates, and unit prices.]
[// GUIDANCE: Attach invoices, delivery tickets, time sheets, and any preliminary notices previously served. Such documentation strengthens enforceability and assists the Owner in properly withholding funds.]
END OF DOCUMENT