NOTICE OF CLAIM OF LIEN UPON FUNDS

(STOP-PAYMENT NOTICE)

North Carolina – N.C. Gen. Stat. §§ 44A-18 to 44A-20

[// GUIDANCE: This form is designed for use on private construction projects in North Carolina to compel the person obligated to disburse project funds (“Obligor”) to withhold payment until the underlying lien claim is resolved. It tracks the statutory “Notice of Claim of Lien upon Funds” procedure but is drafted with enhanced contractual protections, bonding language, and release mechanics. Customize all bracketed fields before service.]

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. Title. NOTICE OF CLAIM OF LIEN UPON FUNDS AND STOP-PAYMENT NOTICE (the “Notice”).
2. Parties.
   a. Claimant: [CLAIMANT LEGAL NAME], a [state] [entity type], NC License No. [_____].
   b. Obligor(s):
   i. Owner: [OWNER NAME], a [state] [entity type].
   ii. Direct Contractor: [CONTRACTOR NAME], a [state] [entity type].
   iii. Construction Lender (if any): [LENDER NAME], a [state] [entity type].
3. Project. [PROJECT NAME / BRIEF DESCRIPTION], located at [STREET ADDRESS, CITY, NC ZIP]; legal description attached as Exhibit A (the “Project”).
4. Consideration / Basis. Claimant furnished labor, materials, and/or equipment to the Project pursuant to that certain agreement dated [DATE] (the “Subcontract”).
5. Effective Date. The earlier of (i) the date of statutory service under N.C. Gen. Stat. § 44A-19(c) or (ii) [DATE] (the “Effective Date”).
6. Governing Law & Venue. North Carolina law exclusively; state courts of the county where the Project is located.

II. DEFINITIONS

For ease of reference, capitalized terms used herein have the meanings set forth below:

1. “Bond” – A payment bond or surety undertaking meeting the requirements of N.C. Gen. Stat. §§ 44A-16 & 44A-20 to discharge or release this Notice.
2. “Claim Amount” – The principal sum of US $[AMOUNT] exclusive of prejudgment interest, attorneys’ fees, and allowable costs.
3. “Funds” – All unpaid contract balances, retainage, and other monies presently or hereafter due from any Obligor to the Direct Contractor and/or any tier of subcontractor in connection with the Project.
4. “Obligor” – Each Person identified in Section I.2.b, individually and collectively.
5. “Person” – An individual, partnership, corporation, limited liability company, trust, governmental authority, or other legal entity.
6. “Release Event” – Any of the circumstances described in Section III.6 triggering mandatory release of withheld Funds.

III. OPERATIVE PROVISIONS

1. Statutory Notice & Lien Claim.
   a. Pursuant to N.C. Gen. Stat. §§ 44A-18 through 44A-20, Claimant hereby asserts a lien upon the Funds in the Claim Amount.
   b. Claimant demands that each Obligor immediately withhold the Funds otherwise payable to the Direct Contractor or any lower-tier claimant until a Release Event occurs.

2. Amount & Account Statement. A detailed, itemized statement supporting the Claim Amount is attached as Exhibit B and incorporated herein.

3. Service & Proof. A true copy of this Notice, together with Exhibits A-B, has been served on each statutory recipient by a method authorized under N.C. Gen. Stat. § 44A-19(c). Affidavits and tracking receipts are attached as Exhibit C.

4. Statutory Withholding Period. Obligor’s withholding obligation continues until the earliest Release Event or further order of a court of competent jurisdiction.

5. Interest Accrual. The Claim Amount accrues interest at the lesser of (i) [___]% per annum or (ii) the maximum rate permitted under applicable law, commencing [DATE – typically last date labor/materials furnished].

6. Release Events. Obligor shall release withheld Funds only upon:
   a. Joint Disbursement. Receipt of mutually endorsed check(s) payable to Claimant and the person to whom the Funds are otherwise due.
   b. Bond Discharge. Production of a Bond complying with Section VII.2.
   c. Written Release. Written release executed by Claimant (in substantially the form of Exhibit D).
   d. Final Non-Appealable Order. Entry of a final court order adjudicating the claim and either (i) directing release, or (ii) finding Claimant’s lien invalid.

7. Reservation of Additional Remedies. This Notice supplements, and does not waive, Claimant’s right to record or enforce a Claim of Lien on Real Property under N.C. Gen. Stat. § 44A-12 et seq.

IV. REPRESENTATIONS & WARRANTIES

1. Authority. Claimant is duly organized, validly existing, and authorized to transact business in North Carolina.
2. Timeliness. This Notice is served within the statutory deadline of 120 days after Claimant’s last furnishing to the Project.
3. Accuracy. The information contained herein and in Exhibits A-C is true, correct, and materially complete.
4. License Compliance. Claimant holds all licenses, registrations, and governmental approvals required to perform its scope of work.
5. Survival. The representations and warranties in this Section survive any Release Event until full satisfaction of the Claim Amount and all related obligations.

V. COVENANTS & RESTRICTIONS

1. Continuing Documentation. Claimant shall furnish supplemental documentation reasonably requested by Obligor to verify the Claim Amount.
2. Notice of Changes. Claimant will promptly notify all Obligors of any material amendment, settlement, or satisfaction of the Claim Amount.
3. No Waiver of Lien Rights. Nothing herein shall be construed as a waiver of any statutory lien, bond, or payment right absent an express written release.

VI. DEFAULT & REMEDIES

1. Events of Default. Any of the following constitutes an Event of Default by an Obligor:
   a. Failure to withhold Funds in the manner required by this Notice and N.C. Gen. Stat. § 44A-20.
   b. Disbursement of Funds in contravention of an unreleased Notice.
2. Cure Period. Obligor shall have five (5) business days after written notice from Claimant to cure any Event of Default.
3. Remedies. Upon an uncured Event of Default, Claimant may, without limitation:
   a. Institute an action against the Obligor for the Claim Amount, statutory interest, and other damages;
   b. Seek injunctive relief mandating re-segregation of Funds;
   c. Recover reasonable attorneys’ fees and costs as authorized under N.C. Gen. Stat. § 44A-35.

VII. RISK ALLOCATION

1. Indemnity for Wrongful Disbursement. Each Obligor agrees to indemnify, defend, and hold harmless Claimant from any loss arising out of disbursement of Funds in violation of this Notice.

2. Bonding Requirements.
   a. Amount. To discharge this Notice, an interested Person may furnish a Bond equal to 125% of the Claim Amount or such other statutory percentage as may be amended.
   b. Form. The Bond must: (i) name Claimant as obligee; (ii) be issued by a surety licensed in North Carolina with an A.M. Best rating of A- or better; (iii) reference the Project and this Notice by date and amount; and (iv) comply with N.C. Gen. Stat. §§ 44A-16 & 44A-20.

3. Limitation of Liability. Obligors’ liability is capped at the lesser of (i) the Funds required to be withheld under statute, or (ii) the Claim Amount, except in cases of gross negligence or willful misconduct.

4. Force Majeure. Failure to withhold Funds caused solely by an unforeseeable, unavoidable, and external event of force majeure shall extend the cure period in Section VI.2, but shall not excuse ultimate compliance.

VIII. DISPUTE RESOLUTION

1. Governing Law. This Notice and any related dispute are governed by the laws of the State of North Carolina without regard to conflict-of-law principles.
2. Forum Selection. Exclusive jurisdiction and venue lie in the state courts of [COUNTY] County, North Carolina.
3. Arbitration; Jury Trial. Not applicable; all Parties knowingly waive any demand for arbitration or jury trial regarding issues arising out of or related to this Notice.
4. Equitable Relief. The Parties acknowledge that monetary damages may be inadequate and consent to injunctive and other equitable relief to enforce the withholding of Funds.

IX. GENERAL PROVISIONS

1. Amendments; Waivers. No amendment or waiver of any provision of this Notice is effective unless in a written instrument signed by Claimant.
2. Assignment. Claimant may assign its rights hereunder, including to a factoring company or successor in interest, upon written notice to Obligor.
3. Severability. Any invalid or unenforceable provision shall be reformed to the minimum extent necessary to render it valid, keeping the remaining provisions in full force.
4. Integration. This Notice, together with its Exhibits, constitutes the entire agreement and statutory notice regarding the subject matter and supersedes all prior communications.
5. Counterparts; Electronic Signatures. This Notice may be executed in counterparts, each of which is deemed an original. Signatures delivered by facsimile, PDF, or any conforming e-signature platform constitute originals for all purposes.

X. EXECUTION BLOCK

Executed and delivered as of the Effective Date.

CLAIMANT:
[CLAIMANT LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________

STATE OF __
COUNTY OF __

On this ___ day of _, 20_, before me, a Notary Public, personally appeared ______, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the foregoing instrument and acknowledged that he/she executed the same on behalf of Claimant.

Notary Public
My Commission Expires: _______

[// GUIDANCE: Attach Exhibits as follows]
• Exhibit A – Legal Property Description
• Exhibit B – Itemized Statement of Account (last furnishing date & totals)
• Exhibit C – Proofs of Service (affidavits, certified mail receipts, etc.)
• Exhibit D – Form of Conditional/Unconditional Release

[// GUIDANCE: North Carolina lien statutes are strictly construed. Strict compliance with service methods, timing (120-day service; 180-day enforcement), and content requirements is essential. Verify all statutory deadlines immediately. Failure to spell property owner name correctly or attach complete property description can invalidate the lien. When in doubt, file a concurrent Claim of Lien on Real Property under § 44A-12 to preserve rights.]