**STOP-NOTICE AND DEMAND TO WITHHOLD PAYMENT
(Construction Project Located in Maryland)**
[Clean, professional template – ready for attorney customization.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
1.1 Title; Parties.
This Stop-Notice and Demand to Withhold Payment (the “Stop-Notice”) is delivered by [CLAIMANT LEGAL NAME], a [state] [entity type] (“Claimant”), to:
(a) [OWNER LEGAL NAME], a [state] [entity type] (“Owner”);
(b) [DIRECT CONTRACTOR LEGAL NAME], a [state] [entity type] (“Contractor”); and, if applicable,
(c) [CONSTRUCTION LENDER LEGAL NAME] (“Lender,” and together with Owner and Contractor, the “Obligated Parties”).
1.2 Project Identification.
• Project Name: [Project Name]
• Street Address / Location: [Project Address]
• County: [County, Maryland]
• Owner’s Project No. (if any): [—]
1.3 Effective Date; Jurisdiction.
This Stop-Notice is effective on the date of last signature below (the “Effective Date”) and is governed by the laws of the State of Maryland, including Md. Code Ann., Real Prop. Title 9 (Mechanics’ Liens) (the “Maryland Lien Law”).
1.4 Recitals.
A. Claimant has furnished labor, materials, and/or equipment for the improvement of the Project pursuant to a subcontract with Contractor dated [Subcontract Date] (the “Subcontract”).
B. Claimant is owed the unpaid amount stated in Section 3.1 (the “Claimed Sum”).
C. Pursuant to Maryland Lien Law and applicable common-law equitable principles, Claimant is entitled to require withholding of undisbursed construction funds until the lien claim is resolved.
D. The parties desire to set forth the procedures, bonding options, and release mechanisms applicable to such withholding.
2. DEFINITIONS
For purposes of this Stop-Notice, capitalized terms have the meanings set forth below. Undefined capitalized terms carry the meanings given in the Maryland Lien Law.
“Bond” – A payment bond meeting the requirements of Section 7.2.
“Claimed Sum” – The aggregate amount of US $[__] alleged by Claimant to be presently due and owing for work performed through [Last Furnishing Date], exclusive of interest, costs, and attorneys’ fees.
“Completion” – Substantial completion of the Project as evidenced by [certificate of occupancy / architect certificate].
“Lien Action” – Any court action, arbitration, or other proceeding commenced by Claimant to enforce its mechanic’s lien rights.
“Obligated Parties” – Collectively, Owner, Contractor, and, if applicable, Lender.
“Release Event” – Any of the events described in Section 5.4 that obligate Claimant to issue a Release of Stop-Notice.
3. OPERATIVE PROVISIONS
3.1 Notice of Amount Due.
Pursuant to Maryland Lien Law, Claimant hereby notifies the Obligated Parties that the Claimed Sum remains unpaid.
3.2 Immediate Withholding of Undisbursed Funds.
Owner and/or Lender shall, upon receipt of this Stop-Notice, withhold from any future progress or final payments to Contractor an amount not less than the Claimed Sum (plus ten percent (10%) to cover projected interest and costs) (the “Withheld Funds”).
3.3 Duration of Withholding.
Withheld Funds shall be retained until the earliest to occur of:
(a) Posting of a Bond in accordance with Section 7.2;
(b) Resolution of the Lien Action or other written settlement executed by Claimant; or
(c) Occurrence of another Release Event under Section 5.4.
3.4 Conditions Precedent.
Claimant represents that it has (i) served any preliminary notice required by Maryland Lien Law (if applicable) and (ii) filed or will timely file any Notice of Intention to Claim a Lien within 120 days after last furnishing, as contemplated by Md. Code Ann., Real Prop. § 9-104.
[// GUIDANCE: Maryland does not mandate a preliminary notice on private projects, but statutory time limits for filing lien petitions still apply. Edit as needed.]
4. REPRESENTATIONS & WARRANTIES
4.1 Claimant.
(a) Authority. Claimant is duly organized, validly existing, and in good standing in the jurisdiction of formation.
(b) Accuracy of Claim. The Claimed Sum is a good-faith, bona fide amount presently due under the Subcontract.
(c) Compliance. Claimant will comply with all procedural requirements of Maryland Lien Law, including timely filing of a petition to establish lien in the circuit court of the county where the Project is located.
4.2 Owner & Contractor.
Each Obligated Party represents that, to its knowledge, no defense or set-off exists against the Claimed Sum other than those (if any) disclosed in a written response within ten (10) days after receipt of this Stop-Notice.
4.3 Survival.
The representations and warranties in this Section survive any Release of Stop-Notice.
5. COVENANTS & RESTRICTIONS
5.1 Owner / Lender Covenants.
(a) Segregation. Withheld Funds shall be placed in a segregated, interest-bearing account (or equivalent internal ledger) and not disbursed except in accordance with this Stop-Notice.
(b) Accounting. Owner or Lender shall, upon written request of Claimant, provide an accounting of Withheld Funds within five (5) business days.
5.2 Contractor Covenants.
Contractor shall not accept, demand, or divert any portion of the Withheld Funds pending resolution of the Stop-Notice.
5.3 Claimant Covenants.
(a) Expeditious Enforcement. Claimant shall commence any Lien Action within the statutory period (generally within one year from the date the work is finished per Md. Code Ann., Real Prop. § 9-105).
(b) Cooperation. Claimant shall reasonably cooperate in any dispute-resolution process and provide backup documentation upon request.
5.4 Release Procedures.
Claimant shall deliver a written Release of Stop-Notice (in recordable form if requested) within five (5) business days after the earliest of:
(i) Full payment of the Claimed Sum (plus accrued interest and costs);
(ii) Posting of a Bond pursuant to Section 7.2;
(iii) Final, non-appealable judgment or arbitration award denying Claimant’s lien; or
(iv) Written settlement agreement executed by Claimant resolving the claim.
6. DEFAULT & REMEDIES
6.1 Events of Default.
(a) Failure to Withhold. Disbursement of Withheld Funds in violation of Section 3.2.
(b) Failure to Post Bond. Contractor’s failure to post a Bond within ten (10) business days after Owner’s written demand.
(c) Failure to Release. Claimant’s failure to issue a Release of Stop-Notice upon a Release Event.
6.2 Cure Periods.
The defaulting party shall have five (5) business days after written notice of default to cure, except no cure period applies to unauthorized disbursement of Withheld Funds.
6.3 Remedies.
(a) Injunctive Relief. Claimant is entitled to temporary, preliminary, and permanent injunctive relief preventing disbursement of Withheld Funds.
(b) Money Damages. The non-defaulting party may recover direct damages, including consequential damages flowing from an unauthorized disbursement.
(c) Attorneys’ Fees. The prevailing party in any action to enforce this Stop-Notice is entitled to reasonable attorneys’ fees and costs.
7. RISK ALLOCATION
7.1 Liability Cap.
Owner’s liability arising solely from compliance with this Stop-Notice shall be limited to the amount of Withheld Funds.
7.2 Bonding Requirements.
(a) Amount. Contractor (or any surety on its behalf) may discharge the Stop-Notice by posting a surety bond in favor of Claimant in an amount equal to 110% of the Claimed Sum, conditioned on payment of any judgment rendered in the Lien Action.
(b) Form. The Bond shall be issued by a surety authorized to transact business in Maryland and otherwise in a form reasonably satisfactory to Claimant.
(c) Release Upon Bond Posting. Upon confirmation of Bond issuance, Owner and Lender may immediately release Withheld Funds to Contractor, and Claimant shall issue its Release of Stop-Notice.
7.3 Indemnification.
Contractor shall indemnify, defend, and hold harmless Owner and Lender from any claim, loss, or expense (including reasonable attorneys’ fees) arising out of Contractor’s failure to pay Claimant, except to the extent caused by Owner’s breach of Section 5.1.
7.4 Force Majeure.
No party shall be liable for delay or failure in performance caused by events beyond its reasonable control; however, monetary payment obligations and bonding obligations are not excused.
8. DISPUTE RESOLUTION
8.1 Governing Law.
This Stop-Notice and any dispute arising hereunder are governed by the laws of the State of Maryland without regard to conflict-of-law principles.
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, and the parties do not waive jury trial rights except as may be waived under separate agreements.
8.4 Preservation of Injunctive Relief.
Nothing in this Section limits Claimant’s right to seek injunctive relief to maintain the status quo with respect to Withheld Funds.
9. GENERAL PROVISIONS
9.1 Amendments; Waivers.
Any amendment or waiver must be in writing and signed by the party against whom enforcement is sought. No waiver of a breach constitutes a waiver of any other or subsequent breach.
9.2 Assignment.
No party may assign this Stop-Notice or any rights hereunder without prior written consent of the other parties, except that Contractor may cause an authorized surety to issue the Bond.
9.3 Successors & Assigns.
This Stop-Notice binds and benefits the parties and their respective successors and permitted assigns.
9.4 Severability.
If any provision is held unenforceable, the remaining provisions remain in full force, and the invalid provision shall be reformed to the minimum extent necessary to achieve its original intent.
9.5 Integration.
This Stop-Notice constitutes the entire understanding among the parties with respect to the subject matter and supersedes all prior or contemporaneous communications.
9.6 Counterparts; Electronic Signatures.
This Stop-Notice may be executed in multiple counterparts (including PDF or electronic signatures), each constituting an original and all together one instrument.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties have caused this Stop-Notice to be executed by their duly authorized representatives as of the Effective Date.
CLAIMANT
[CLAIMANT LEGAL NAME]
By: _____
Name: ____
Title: ____
Date: ____
OWNER
[OWNER LEGAL NAME]
By: _____
Name: ____
Title: ____
Date: ____
CONTRACTOR
[CONTRACTOR LEGAL NAME]
By: _____
Name: ____
Title: ____
Date: ____
LENDER (if applicable)
[CONSTRUCTION LENDER LEGAL NAME]
By: _____
Name: ____
Title: ____
Date: ____
(ACKNOWLEDGMENTS / NOTARIES – Add if local recording office requires.)
[// GUIDANCE:
1. Insert project-specific data in all bracketed fields.
2. Confirm statutory deadlines under current Md. Code Ann., Real Prop. Title 9.
3. For public-works projects, cross-reference Md. Code Ann., State Fin. & Proc. §17-101 et seq. (Maryland “Little Miller Act”) and adjust bonding language.
4. Recording of the Stop-Notice itself is not statutorily required but may be prudent for priority/evidence purposes.
5. Review any prime contract clauses that may affect withholding or allow Contractor cure before Owner withholds funds.]