STOP NOTICE AND DEMAND TO WITHHOLD FUNDS

(Private Project – Indiana Mechanic’s Lien Law)

[// GUIDANCE: This template is drafted for PRIVATE construction projects located in the State of Indiana. For PUBLIC projects or projects in other jurisdictions, significant modifications will be required.]

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
   1.1 “[CLAIMANT]” – the person or entity asserting entitlement to payment.
   1.2 “[OWNER]” – the fee simple owner of the Project.
   1.3 “[PRIME CONTRACTOR]” – the contractor having a direct contractual relationship with Owner.
   1.4 “[CONSTRUCTION LENDER]” – any lender providing construction financing secured by the Project (if applicable).

2. Project
   2.1 Project Name: [PROJECT NAME]
   2.2 Project Address: [PROJECT ADDRESS]
   2.3 Legal Description (optional for notice): [LEGAL DESCRIPTION OR “SEE EXHIBIT A”]

3. Effective Date: [DATE]

4. Jurisdiction: State of Indiana; this Stop Notice is made pursuant to Ind. Code § 32-28-3 (Indiana Mechanic’s Lien Statute) and applicable Indiana common law (collectively, the “Indiana Lien Law”).

5. Recitals
   A. Claimant has furnished labor, services, equipment and/or materials (“Work”) for the Project pursuant to that certain agreement dated [CONTRACT DATE] between Claimant and Prime Contractor (the “Subcontract”).
   B. As of the Effective Date, Claimant is owed the unpaid sum of $[CLAIM AMOUNT] (the “Claim Amount”) for Work performed, exclusive of interest, costs, and statutory attorneys’ fees.
   C. Indiana Lien Law affords Claimant statutory lien rights and, as an ancillary remedy, the right to require Owner and/or Construction Lender to withhold from Prime Contractor sufficient funds to satisfy Claimant’s claim pending resolution.
   D. Claimant delivers this Stop Notice to protect its statutory lien rights and to require withholding of funds as provided herein.

II. DEFINITIONS

For purposes of this Stop Notice, the following capitalized terms shall have the meanings set forth below. All defined terms may be used in singular or plural form as the context requires.

“Bond” means a surety bond complying with Indiana Lien Law to discharge or secure the Mechanic’s Lien and/or this Stop Notice.

“Business Day” means any day other than Saturday, Sunday, or a day on which Indiana-chartered banks are authorized to close.

“Claim Amount” has the meaning set forth in Recital B.

“Indiana Lien Law” has the meaning set forth in Section I.4.

“Mechanic’s Lien” means any lien or claim of lien of Claimant respecting the Work under Indiana Lien Law.

“Release Event” means (a) payment in full of the Claim Amount to Claimant, (b) posting of a Bond in the penal sum and form required by Indiana Lien Law, or (c) written release by Claimant.

“Stop Notice” means this instrument, together with all exhibits, schedules, and any amendments or supplements hereto.

“Work” has the meaning set forth in Recital A.

[// GUIDANCE: Add project-specific or relationship-specific definitions here as necessary.]

III. OPERATIVE PROVISIONS

3.1 Service of Stop Notice
a. Claimant shall serve this Stop Notice upon Owner, Prime Contractor, and Construction Lender (if any) in any manner authorized under Indiana Lien Law (e.g., certified mail, return-receipt requested).
b. Proof of service shall be documented on the Certificate of Service attached hereto as Exhibit B.

3.2 Withholding Obligation
Upon receipt of this Stop Notice, Owner and/or Construction Lender (each, a “Withholding Party”) shall, in accordance with Indiana Lien Law, promptly withhold from any undisbursed contract funds otherwise payable to Prime Contractor an amount not less than the Claim Amount, together with any additional sums required to cover statutory interest and attorneys’ fees (collectively, the “Withheld Funds”).

3.3 Duration of Withholding
Withheld Funds shall remain withheld until the earliest to occur of:
a. a Release Event;
b. entry of a final, non-appealable judgment determining the rights of the parties; or
c. written joint direction executed by Claimant and Prime Contractor authorizing a different disposition.

3.4 Application of Withheld Funds
Upon the occurrence of a Release Event, Withheld Funds shall be paid or released in accordance with written instructions of the party entitled thereto; provided, however, that no disbursement shall be made in contravention of any court order or Indiana Lien Law.

3.5 Conditions Precedent and Subsequent
a. This Stop Notice is conditioned upon Claimant’s timely perfection of its Mechanic’s Lien, where required.
b. Failure of Claimant to enforce or foreclose its Mechanic’s Lien within the statutory period shall constitute an automatic Release Event as to this Stop Notice.

IV. REPRESENTATIONS & WARRANTIES

4.1 By Claimant
a. Claimant is duly organized, validly existing, and in good standing under the laws of its state of formation, and qualified to do business in Indiana.
b. Claimant has full power and authority to execute, deliver, and enforce this Stop Notice.
c. The Claim Amount is presently due and owing, is just and true, and no payments have been received thereon, except as expressly reflected herein.
d. All prerequisites to lien validity under Indiana Lien Law (including, without limitation, preliminary notices, if any) have been satisfied or are not required.
e. Claimant has not executed any unconditional waiver or release of lien rights for the Work covered by the Claim Amount.

4.2 Survival
The representations and warranties of Claimant shall survive until final resolution of the Claim Amount.

[// GUIDANCE: Additional representations (e.g., licensure, insurance, compliance with wage laws) may be inserted here if relevant to the Project.]

V. COVENANTS & RESTRICTIONS

5.1 Covenants of Claimant
a. Claimant shall cooperate in good faith to resolve the Claim Amount, including participating in reasonable settlement discussions or mediation if agreed by the parties.
b. Claimant shall execute a statutory lien release or waiver promptly upon receipt of good funds constituting full payment of the Claim Amount.

5.2 Covenants of Owner and Construction Lender
a. Each Withholding Party shall maintain the Withheld Funds in a segregated, interest-bearing account or otherwise ensure traceability of funds.
b. No Withholding Party shall disburse or release the Withheld Funds except in strict compliance with Section 3.4.
c. Within five (5) Business Days following a Release Event, the Withholding Party shall pay or release the Withheld Funds as directed under Section 3.4.

5.3 Restrictions on Prime Contractor
Prime Contractor shall not further assign, pledge, or otherwise transfer its interest in progress payments impacted by this Stop Notice without the prior written consent of Claimant and Owner.

VI. DEFAULT & REMEDIES

6.1 Events of Default
a. Failure of any Withholding Party to withhold or maintain the Withheld Funds in violation of this Stop Notice.
b. Failure of Prime Contractor to satisfy the Claim Amount or cause a Release Event within thirty (30) days after service of this Stop Notice.
c. Material misrepresentation by Claimant concerning the Claim Amount.

6.2 Notice & Cure
Except in the case of willful misappropriation of Withheld Funds or fraud, the non-defaulting party shall give written notice describing the default and provide a ten (10) Business Day cure period.

6.3 Remedies
a. Injunctive Relief – Claimant may seek an injunction compelling compliance with the Withholding Obligation (see Section 8.4).
b. Monetary Damages – Claimant may recover the Claim Amount, statutory interest, costs, and reasonable attorneys’ fees as permitted by Indiana Lien Law.
c. Graduated Remedies – At Claimant’s election, failure to comply with this Stop Notice shall constitute grounds for immediate lien foreclosure without further notice.

VII. RISK ALLOCATION

7.1 Bonding Requirements
a. Any party may discharge this Stop Notice (and any associated Mechanic’s Lien) by procuring and delivering to Claimant a Bond in the penal sum and form prescribed by Indiana Lien Law (currently not less than the Claim Amount, plus statutory allowances).
b. Upon confirmation of a compliant Bond, Claimant shall execute a conditional release of this Stop Notice.

7.2 Indemnification
a. Claimant shall indemnify and hold harmless Owner and Construction Lender from any loss, claim, or expense (including reasonable attorneys’ fees) arising solely from a material misrepresentation by Claimant in this Stop Notice.
b. Owner shall indemnify Claimant from loss or expense arising from wrongful disbursement of Withheld Funds in contravention of this Stop Notice.

7.3 Limitation of Liability
The aggregate liability of any Withholding Party for failure to withhold funds shall not exceed the lesser of (i) the Withheld Funds, or (ii) the unpaid balance of the Contract Sum owed to Prime Contractor at the time of receipt of this Stop Notice (“Liability Cap”). This Section 7.3 shall not apply to acts of gross negligence, intentional misconduct, or fraud.

7.4 Force Majeure
No party shall be liable for delay or failure in performance caused by events beyond its reasonable control, provided such party gives prompt written notice and uses commercially reasonable efforts to mitigate.

VIII. DISPUTE RESOLUTION

8.1 Governing Law
This Stop Notice and any dispute arising hereunder shall be governed by the laws of the State of Indiana, including Indiana Lien Law, without regard to conflict-of-law rules.

8.2 Forum Selection
Exclusive jurisdiction and venue shall lie in the state courts located in the county where the Project is situated (the “Designated Court”).

8.3 Arbitration
Not applicable.

8.4 Preservation of Injunctive Relief
Each party acknowledges that monetary damages may be insufficient to remedy a breach of the Withholding Obligation and agrees that the Designated Court may grant specific performance, temporary restraining orders, or preliminary and permanent injunctions to enforce this Stop Notice.

IX. GENERAL PROVISIONS

9.1 Amendment & Waiver
No amendment or waiver shall be effective unless in writing and executed by the party against whom enforcement is sought. Waiver of any provision on one occasion shall not constitute a waiver of the same or any other provision on any other occasion.

9.2 Assignment
Claimant may not assign its rights under this Stop Notice without the prior written consent of Owner, which consent shall not be unreasonably withheld, conditioned, or delayed. Any assignment in violation of this Section 9.2 shall be void.

9.3 Successors & Assigns
This Stop Notice shall bind and inure to the benefit of the parties and their respective successors, assigns, and legal representatives.

9.4 Severability
If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be reformed to the minimum extent necessary to comply with applicable law.

9.5 Integration
This Stop Notice constitutes the entire agreement by and among the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous oral or written agreements, understandings, or communications.

9.6 Counterparts; Electronic Signatures
This Stop Notice may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Signatures transmitted by facsimile, PDF, or other electronic means shall be deemed original signatures and fully enforceable.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, Claimant has executed and delivered this Stop Notice as of the Effective Date. Owner, Prime Contractor, and Construction Lender (if any) execute solely to acknowledge receipt and undertake the obligations herein.

[// GUIDANCE: Modify signature blocks to match actual party capacities (e.g., LLC, corporation, sole proprietor).]

NOTARIZATION (optional but recommended)

State of Indiana
County of [COUNTY]

On this _ day of __, 20__, before me, the undersigned Notary Public, personally appeared [NAME] who acknowledged execution of the foregoing Stop Notice for and on behalf of [ENTITY].

Notary Public: _____
My Commission Expires: ___

EXHIBIT A

(LEGAL DESCRIPTION OF PROJECT)

EXHIBIT B

(CERTIFICATE OF SERVICE)

[// GUIDANCE:
1. Service – Indiana law requires written notice; certified mail with return receipt or personal service is common.
2. Filing – Record the Mechanic’s Lien within statutory deadlines (generally within 60–90 days of last furnishing, depending on project type).
3. Bonding – To bond off a lien, follow Ind. Code § 32-28-3 bonding procedures; verify current bond amount multipliers (typically 1.5x the claim).
4. Release – Upon payment or bonding, execute the appropriate statutory release (partial or full) to avoid civil liability for slander of title.
5. Consult Local Counsel – County-level recording and procedural nuances vary. Always verify filing fees, formatting rules, and service requirements with the local recorder’s office.]