STOP-NOTICE TO WITHHOLD PAYMENT
(Montana Construction Project)
[// GUIDANCE: This template is intended for use by a potential or actual Construction Lien claimant (“Claimant”) to compel a project Owner and/or Construction Lender (“Obligor”) to withhold contract funds otherwise payable to the Prime Contractor pending resolution of the Claimant’s unpaid claim. Customize bracketed items and attach supporting exhibits before service.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
- Exhibits & Schedules
1. DOCUMENT HEADER
Stop-Notice Date: [DATE]
Effective Date: Upon actual receipt by the Obligors identified below.
Parties:
1. Claimant: [LEGAL NAME], a [STATE] [entity type] with principal address at [ADDRESS].
2. Owner / Construction Lender (“Obligor”): [LEGAL NAME(S) & CAPACITIES] with address at [ADDRESS].
3. Prime Contractor: [LEGAL NAME] with address at [ADDRESS].
Project: [PROJECT NAME / DESCRIPTION] located at [PHYSICAL ADDRESS], County of [COUNTY], State of Montana (the “Project”).
Governing Law: Title 71, Chapter 3, Part 5 of the Montana Code Annotated (“MCA Construction Lien Law”) and other applicable Montana law.
2. DEFINITIONS
For purposes of this Stop-Notice, capitalized terms have the meanings set forth below:
“Bond” – A surety bond complying with Mont. Code Ann. § 71-3-551 et seq. posted to release Withheld Funds.
“Claim Amount” – $[AMOUNT], representing the unpaid balance for Labor, Materials, and/or Equipment furnished by Claimant.
“Construction Lien” – A lien authorized under MCA §§ 71-3-501 et seq. securing payment of the Claim Amount.
“Release Conditions” – Any of the events listed in § 3.4 triggering release of Withheld Funds.
“Stop-Notice” – This written notice, duly served in accordance with § 3.6, directing Obligors to withhold sums otherwise payable to the Prime Contractor.
“Withheld Funds” – The lesser of (a) 125 % of the Claim Amount or (b) the unpaid balance due the Prime Contractor at the time of service of this Stop-Notice.
3. OPERATIVE PROVISIONS
3.1 Stop-Notice; Mandatory Withholding
Upon receipt of this Stop-Notice, each Obligor shall immediately segregate and withhold the Withheld Funds from any progress or final payments otherwise due or to become due to the Prime Contractor relating to the Project.
3.2 Amount of Withheld Funds
Obligors shall withhold a sum not less than the Claim Amount and, if practicable, not less than 125 % thereof, consistent with the bonding threshold in MCA § 71-3-551(3), to cover potential interest, fees, and costs.
3.3 Separate Trust; No Commingling
Withheld Funds shall be retained in a segregated, interest-bearing account and shall not be commingled with general operating funds, nor disbursed except in accordance with this Stop-Notice or court order.
3.4 Duration of Withholding; Release Conditions
Withheld Funds shall be retained until the earliest to occur of:
a. Claimant’s written Release of Stop-Notice (Exhibit B);
b. Filing of a valid Bond that satisfies MCA § 71-3-551;
c. Final, non-appealable judgment resolving Claimant’s Construction Lien action;
d. Expiration of the statutory period for enforcing a Construction Lien (currently 2 years from lien filing under MCA § 71-3-561) without commencement of suit by Claimant; or
e. Mutual written agreement of Claimant and Obligors.
3.5 Interest on Withheld Funds
Interest accruing on Withheld Funds shall follow the principal. Upon release, the obligated party shall disburse accrued interest together with principal.
3.6 Service of Stop-Notice
This Stop-Notice is deemed properly served if delivered by any method authorized for service of legal process in Montana and addressed to each Obligor at its address set forth above (or any updated notice address).
[// GUIDANCE: Attach proof of service to strengthen enforceability.]
3.7 No Waiver of Additional Remedies
This Stop-Notice is in addition to any preliminary notice, Construction Lien, or other remedy available to Claimant under law or contract.
4. REPRESENTATIONS & WARRANTIES
4.1 Claimant represents and warrants that:
a. It furnished Labor, Materials, and/or Equipment of a value at least equal to the Claim Amount on the Project;
b. All sums stated herein are currently due and unpaid;
c. Claimant has complied with all preliminary notice requirements, if any, under MCA §§ 71-3-521 to -523; and
d. The Claim Amount is made in good faith, is not inflated, and is subject to adjustment only by written agreement or final adjudication.
4.2 These representations survive release of Withheld Funds to the extent necessary to enforce the indemnities and remedies herein.
5. COVENANTS & RESTRICTIONS
5.1 Claimant shall prosecute any Construction Lien foreclosure action in a timely manner and keep Obligors reasonably informed.
5.2 Each Obligor shall:
a. Retain the Withheld Funds as trustee for Claimant’s benefit;
b. Provide Claimant with written notice within five (5) business days of any Bond posted; and
c. Not condition any future disbursements to the Prime Contractor on Claimant’s waiver or reduction of the Claim Amount except as expressly provided herein.
6. DEFAULT & REMEDIES
6.1 Events of Default
a. Failure of an Obligor to withhold and retain the Withheld Funds as required;
b. Failure of Claimant to commence an action to enforce its Construction Lien within the statutory period;
c. Material misrepresentation by Claimant.
6.2 Cure Period
The non-defaulting party shall provide written notice of default. The defaulting party has ten (10) calendar days to cure before remedies attach, except no cure period applies to withholding obligations under § 3.1.
6.3 Remedies
a. Injunctive relief compelling compliance;
b. Monetary damages, including statutory interest;
c. Reasonable attorneys’ fees and costs to the prevailing party; and
d. Any other remedy available at law or equity.
7. RISK ALLOCATION
7.1 Indemnification; Bonding Requirements
a. By Claimant: Claimant shall indemnify, defend, and hold each Obligor harmless from losses arising from a willfully exaggerated or fraudulent Claim Amount.
b. By Obligors: Each Obligor posting a Bond pursuant to § 71-3-551 shall procure a bond in an amount not less than 150 % of the Claim Amount, naming Claimant as obligee.
7.2 Limitation of Liability
The liability of each Obligor under this Stop-Notice is capped at the Withheld Funds plus statutory interest, except for willful failure to withhold, which is uncapped.
7.3 Force Majeure
No party is liable for failure to perform due to acts of God, governmental action, or other events beyond reasonable control, except for monetary obligations to withhold and remit the Withheld Funds.
8. DISPUTE RESOLUTION
8.1 Governing Law & Venue
This Stop-Notice and any dispute hereunder are governed by the laws of the State of Montana, without regard to conflict-of-laws principles. Exclusive venue lies in the state courts located in the county where the Project is situated.
8.2 Arbitration
The parties expressly opt out of arbitration.
8.3 Injunctive Relief Preservation
Nothing herein shall impair Claimant’s right to seek temporary or preliminary injunctive relief to enforce withholding of funds.
9. GENERAL PROVISIONS
9.1 Amendments & Waivers
No amendment or waiver is effective unless in a written instrument signed by all affected parties.
9.2 Assignment
Neither this Stop-Notice nor any rights hereunder may be assigned without prior written consent of the non-assigning parties, except Claimant may assign its rights to a bonding surety or financing institution.
9.3 Successors & Assigns
This Stop-Notice binds and benefits the parties and their permitted successors and assigns.
9.4 Severability
If any provision is held invalid, the remaining provisions remain in full force to the maximum extent permitted.
9.5 Integration
This document constitutes the entire agreement among the parties with respect to the subject matter and supersedes all prior communications relating thereto.
9.6 Counterparts; Electronic Signatures
This Stop-Notice may be executed in counterparts, each of which is deemed an original, and signatures transmitted electronically shall be deemed originals.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the undersigned have executed (or acknowledged receipt of) this Stop-Notice effective as of the Stop-Notice Date first set forth above.
CLAIMANT
[LEGAL NAME]
By: ____
Name: [PRINT]
Title: [PRINT]
Date: _
OWNER / OBLIGOR
[LEGAL NAME]
By: ____
Name: [PRINT]
Title: [PRINT]
Date: _
CONSTRUCTION LENDER / OBLIGOR (if applicable)
[LEGAL NAME]
By: ____
Name: [PRINT]
Title: [PRINT]
Date: _
[// GUIDANCE: Add notary blocks if local practice or the receiving institution requires notarization; Montana does not mandate notarization of a stop-notice but some lenders prefer it.]
11. EXHIBITS & SCHEDULES
• Exhibit A – Statement of Account & Description of Labor/Materials
• Exhibit B – Conditional Release of Stop-Notice (template)
• Exhibit C – Proof of Service
Statutory Reference: Mont. Code Ann. §§ 71-3-501 to -561 (2023).