STOP NOTICE AND DEMAND TO WITHHOLD CONSTRUCTION FUNDS

(Colorado – Colo. Rev. Stat. §§ 38-22-101 et seq.)

TABLE OF CONTENTS

I. Document Header
II. Definitions
III. Operative Provisions
IV. Representations & Warranties
V. Covenants & Restrictions
VI. Default & Remedies
VII. Risk Allocation
VIII. Dispute Resolution
IX. General Provisions
X. Execution Block

I. DOCUMENT HEADER

1. Parties
   a. “[CLAIMANT]” – the party asserting a claim for unpaid labor, services, equipment, or materials.
   b. “[OWNER]” – the record owner of the Project real property.
   c. “[CONTRACTOR]” – the direct (prime) contractor.
   d. “[LENDER]” – any construction or project lender holding funds for the Project.

2. Project & Property
   Project Name: [PROJECT NAME]
   Street Address: [PROJECT ADDRESS]
   Legal Description: [INSERT OR “Exhibit A”]

3. Effective Date: [DATE] (the “Effective Date”).

4. Recitals
   A. Claimant furnished labor, services, equipment, and/or materials for the improvement of the Project pursuant to a contract with [CONTRACTOR/OTHER].
   B. Claimant is owed the sum of $[AMOUNT] (the “Claim Amount”), which remains unpaid after maturity.
   C. Pursuant to Colo. Rev. Stat. §§ 38-22-101 et seq., Claimant has the right to assert a mechanic’s lien and to demand that Owner and Lender withhold undistributed construction funds.
   D. Claimant delivers this Stop Notice to preserve its lien rights and to compel withholding of construction funds pending resolution of the Claim Amount.

II. DEFINITIONS

For purposes of this Stop Notice, capitalized terms have the meanings below:

1. “Bond” – a bond furnished under Colo. Rev. Stat. § 38-22-131 to release the mechanic’s lien or to secure payment of the Claim Amount.
2. “Construction Funds” – any undisbursed loan proceeds, retainage, holdbacks, or other monies payable for work on the Project.
3. “Notice” – this Stop Notice and any supplements delivered in accordance herewith.
4. “Project” – the improvement described in Section I.2 above.

[// GUIDANCE: Add or delete definitions to suit deal-specific terminology.]

III. OPERATIVE PROVISIONS

1. Demand to Withhold Construction Funds
   a. Claimant hereby demands, under Colo. Rev. Stat. § 38-22-108, that Owner and Lender immediately withhold from any payments otherwise due or to become due to Contractor an amount not less than the Claim Amount, plus statutory interest and potential costs of collection (collectively, the “Withheld Sum”).
   b. The Withheld Sum shall be retained until:
   i. Claimant provides a written Release of Stop Notice; or
   ii. Owner, Contractor, or Lender furnishes a Bond; or
   iii. A court of competent jurisdiction orders disbursement; or
   iv. The statute of limitations for enforcing Claimant’s lien expires without action.

2. Service of Notice
   a. Delivery Method: personal service, certified mail, return-receipt requested, or any method permitted under Colo. R. Civ. P. 4.
   b. Effective Date of Service: the earlier of (i) actual receipt or (ii) three (3) business days after mailing.
   c. Parties Served: Owner, Contractor, and Lender at the addresses shown on the signature page.

3. Supplemental Notice & Updates
   Claimant may serve supplemental statements updating the Claim Amount; such statements shall be deemed incorporated by reference.

4. Preservation of Lien Rights
   Nothing in this Notice limits Claimant’s right to record a mechanic’s lien statement or to commence litigation under Colo. Rev. Stat. § 38-22-110.

IV. REPRESENTATIONS & WARRANTIES

1. Good-Faith Claim
   Claimant represents that:
   a. All labor, services, equipment, and/or materials referenced herein were furnished for the Project;
   b. The Claim Amount is bona fide, presently due, and unpaid; and
   c. Claimant has complied with all prerequisite notices, including the ten-day Notice of Intent to File Lien Statement under Colo. Rev. Stat. § 38-22-109(3).

2. Authority
   Each signatory represents that it has full authority to execute and deliver this Notice on behalf of its respective party.

3. Survival
   The representations and warranties herein survive resolution or release of this Notice.

V. COVENANTS & RESTRICTIONS

1. Owner & Lender Covenants
   a. To segregate the Withheld Sum from all other funds;
   b. To provide Claimant, within seven (7) days of written request, a written statement of the amount withheld; and
   c. To refrain from further disbursement of Construction Funds in violation of Colo. Rev. Stat. § 38-22-127.

2. Claimant Covenants
   a. To promptly execute a Release of Stop Notice upon full payment or acceptable bonding;
   b. To prosecute any lien foreclosure action in good faith.

VI. DEFAULT & REMEDIES

1. Events of Default (each, an “Event of Default”):
   a. Failure of Owner or Lender to withhold the Withheld Sum;
   b. Failure of Contractor to satisfy the Claim Amount within the applicable statutory period;
   c. Failure of any party to comply with a court order relating to this Notice.

2. Cure Period
   Defaulting party has five (5) business days after written notice of default to cure, except where a shorter period is mandated by statute or court order.

3. Remedies
   a. Injunctive Relief: immediate court order to restrain improper disbursement.
   b. Money Damages: Claim Amount plus interest at the statutory rate (C.R.S. § 5-12-102) and reasonable attorney fees.
   c. Foreclosure: Claimant may foreclose its mechanic’s lien under Colo. Rev. Stat. § 38-22-113.

VII. RISK ALLOCATION

1. Indemnification
   Contractor shall indemnify and hold harmless Owner and Lender from and against any loss, cost, or expense (including reasonable attorney fees) arising out of or related to this Notice or any lien asserted by Claimant, except to the extent caused by Owner’s or Lender’s willful misconduct.

2. Limitation of Liability
   The aggregate liability of Owner and Lender for failure to withhold funds is limited to the lesser of (i) the Withheld Sum, or (ii) the amount Owner or Lender is obligated to pay Contractor under the prime contract as of the date of service of this Notice.

3. Bonding Requirements
   Any Bond offered under Colo. Rev. Stat. § 38-22-131 shall:
   a. Be in a penal sum of 150% of the Claim Amount;
   b. Name Claimant as an obligee; and
   c. Be issued by a surety licensed in Colorado with an A- rating or better by A.M. Best.

VIII. DISPUTE RESOLUTION

1. Governing Law
   This Notice and all related disputes are governed by the laws of the State of Colorado, without regard to conflict-of-laws principles.

2. Forum Selection
   Exclusive venue lies in the state courts sitting in the county where the Project is located.

3. Arbitration; Jury Trial
   The parties expressly agree that mandatory arbitration and jury waivers are not applicable to this Notice.

4. Injunctive Relief
   Claimant’s right to seek provisional or injunctive relief to preserve the Withheld Sum is preserved notwithstanding any later-executed agreement.

IX. GENERAL PROVISIONS

1. Amendment & Waiver
   No amendment or waiver is effective unless in a written instrument signed by the party against whom enforcement is sought.

2. Assignment
   Claimant may assign its rights hereunder upon written notice; Owner and Lender may not assign obligations without Claimant’s consent, except to a successor-in-interest to the Project.

3. Severability
   Any provision held invalid shall be severed and the remainder enforced to the fullest extent permitted by law.

4. Integration
   This Notice constitutes the entire agreement among the parties respecting the subject matter and supersedes all prior communications relating thereto.

5. Counterparts; Electronic Signatures
   This Notice may be executed in counterparts, each of which is deemed an original. Signatures delivered electronically shall be binding to the same extent as originals.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the undersigned have executed this Stop Notice as of the Effective Date.

(If Notarization is desired or required, add appropriate jurats here.)

[// GUIDANCE:
1. Attach Exhibit A (Legal Description) and any supporting invoices or statements.
2. Verify proper service on Owner and Lender; imperfect service may void withholding rights.
3. A Stop Notice does NOT replace the statutory lien statement—calendar the 4-month recording deadline under C.R.S. § 38-22-109(1).
4. Confirm compliance with trust fund statute (C.R.S. § 38-22-127) for additional remedies against Contractor principals.]