STOP NOTICE AND DEMAND TO WITHHOLD FUNDS
(New Jersey Construction Project)
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
Stop Notice and Demand to Withhold Funds Pending Lien Resolution
1.2 Parties
a. Claimant: [NAME OF SUBCONTRACTOR/SUPPLIER], a [STATE] [ENTITY TYPE], with its principal place of business at [ADDRESS] (“Claimant”).
b. Recipient(s) (each, a “Recipient” and collectively, the “Recipients”):
i. Owner: [NAME OF REAL PROPERTY OWNER], a [STATE] [ENTITY TYPE], with its principal place of business at [ADDRESS].
ii. Contractor/Construction Manager (if different from Owner): [NAME], a [STATE] [ENTITY TYPE], with its principal place of business at [ADDRESS].
iii. Construction Lender (if any): [NAME OF LENDER], a [STATE/NATIONAL BANK], with its principal place of business at [ADDRESS].
1.3 Project
The construction, improvement, alteration, or repair of the real property commonly known as [PROJECT NAME / STREET ADDRESS / TAX BLOCK & LOT], located in [COUNTY], New Jersey (the “Project”).
1.4 Effective Date
This Stop Notice is effective on the date the last Recipient receives valid service as provided in Section 3.6 (the “Effective Date”).
1.5 Governing Law & Jurisdiction
This Stop Notice is governed by and shall be construed in accordance with the New Jersey Construction Lien Law, N.J. Stat. Ann. § 2A:44A-1 et seq., and other applicable New Jersey law (“State Lien Law”). The Superior Court of New Jersey, [COUNTY] County, shall have exclusive jurisdiction.
2. DEFINITIONS
For ease of reference, the following capitalized terms are used throughout this Stop Notice:
“Bond” – A lien discharge bond issued by a surety licensed in New Jersey in the statutory form and in an amount not less than 110 percent of the Claim Amount.
“Claim Amount” – The sum of $[AMOUNT] currently due and owing to Claimant for labor, services, materials, or equipment furnished to the Project under the Contract.
“Contract” – That certain agreement dated [DATE] between Claimant and [CONTRACTING PARTY] covering the work, services, materials, or equipment identified on Exhibit A attached hereto.
“Lien” – A construction lien claim that Claimant is entitled to file against the Project pursuant to State Lien Law.
“Release” – A written instrument in the form of Exhibit B executed by Claimant, discharging this Stop Notice upon satisfaction of the Release Conditions.
“Release Conditions” – (i) Payment in full of the Claim Amount (plus interest and costs, if any), or (ii) substitution of a Bond, or (iii) final adjudication denying the validity of Claimant’s Lien.
“Stop Notice” – This document, together with all exhibits, attachments, and any amendments hereafter executed in accordance with Section 9.1.
3. OPERATIVE PROVISIONS
3.1 Purpose and Scope
Claimant, pursuant to State Lien Law and as a matter of contract and equity, hereby demands that each Recipient immediately withhold, set aside, and preserve from disbursement an amount not less than the Claim Amount from any undisbursed construction funds otherwise payable in connection with the Project (the “Withheld Funds”).
3.2 Itemized Statement of Claim
Attached hereto as Exhibit A is an itemized and verified statement of labor performed, services rendered, materials furnished, and/or equipment supplied, including dates of last furnishing and a description sufficient to identify the work to the Project.
3.3 Conditions Precedent
Claimant represents that, as of the Effective Date:
a. All notices required under the Contract have been timely given;
b. Claimant’s last date of furnishing was [DATE], which is within the statutory period for filing a Lien; and
c. Claimant has served (or contemporaneously is serving) a Notice of Unpaid Balance and Right to File Lien (“NUB”) in compliance with N.J. Stat. Ann. § 2A:44A-20.
3.4 Duration
Unless earlier released pursuant to Section 5.3, this Stop Notice shall remain in effect until the earlier of (i) 120 days from the Effective Date, or (ii) resolution of the Lien through payment, bonding, or final adjudication.
3.5 Obligation to Maintain Withheld Funds
Recipients shall hold the Withheld Funds in trust for the benefit of Claimant pending resolution of the Lien. Recipients shall not disburse or otherwise encumber the Withheld Funds without Claimant’s prior written consent or court order.
3.6 Service and Proof of Delivery
Claimant has served this Stop Notice by (i) personal delivery with signed acknowledgment, and/or (ii) certified mail, return receipt requested, to each Recipient at the addresses set forth in Section 1.2. Proofs of service are attached hereto as Exhibit C.
[// GUIDANCE: Modify service method if your contract or loan documents specify a different notice protocol. Ensure that service strictly follows the contract AND N.J. Court Rules for maximum enforceability.]
4. REPRESENTATIONS & WARRANTIES
Claimant hereby represents, warrants, and certifies to Recipients that:
4.1 The Claim Amount is justly due and unpaid;
4.2 All work, services, materials, or equipment for which payment is sought were furnished in accordance with the Contract and applicable law;
4.3 Claimant has not waived, assigned, or otherwise impaired its right to payment or to record a Lien;
4.4 Claimant will prosecute the Lien in good faith and with reasonable diligence; and
4.5 Claimant is duly organized, validly existing, and authorized to transact business in New Jersey.
The foregoing representations and warranties shall survive service of this Stop Notice and any subsequent Release.
5. COVENANTS & RESTRICTIONS
5.1 Claimant Covenants
a. To file its Lien within the statutory period and in the manner prescribed by State Lien Law;
b. To provide Recipients with prompt written notice of any amendment, settlement, or withdrawal of the Lien;
c. Upon satisfaction of the Release Conditions, to deliver an executed Release within three (3) business days.
5.2 Recipient Covenants
a. To withhold and preserve the Withheld Funds;
b. To provide Claimant with written confirmation of the amount set aside within five (5) business days of the Effective Date;
c. To notify Claimant in writing at least five (5) business days prior to making any disbursement that would reduce the Withheld Funds below the Claim Amount.
5.3 Release Procedure
Upon the occurrence of any Release Condition, Claimant shall execute and deliver the Release in the form of Exhibit B. Within five (5) business days after receiving the Release, Recipients may disburse previously Withheld Funds.
5.4 Bonding to Discharge Stop Notice
Any Recipient may procure a Bond that fully satisfies the Release Conditions. Upon receipt of a conforming Bond, Claimant shall deliver the Release.
[// GUIDANCE: New Jersey permits discharge of construction liens by posting a bond under N.J. Stat. Ann. § 2A:44A-31. This contractual Stop Notice adopts the same standard. Adjust the bond percentage if statutory amendments occur.]
6. DEFAULT & REMEDIES
6.1 Events of Default
a. Recipient fails to withhold the Withheld Funds as required herein;
b. Recipient disburses or otherwise impairs the Withheld Funds without Claimant’s written consent;
c. Claimant materially misrepresents any fact in this Stop Notice or Lien;
d. Claimant fails to prosecute the Lien with reasonable diligence.
6.2 Notice and Cure
The non-defaulting party shall provide written notice of default. The defaulting party shall have five (5) business days to cure, except that disbursement of Withheld Funds in violation of Section 5.2 shall constitute an immediate Event of Default without cure.
6.3 Remedies
a. Injunctive Relief: Claimant is entitled to temporary, preliminary, and permanent injunctive relief to prevent disbursement of Withheld Funds.
b. Monetary Damages: The defaulting party shall be liable for the Claim Amount, consequential damages reasonably foreseeable at the time of contracting, and attorney fees per Section 6.4.
c. Escalating Remedies: If Recipient fails to honor a final judgment, Claimant may levy execution, garnish construction loan proceeds, and seek appointment of a receiver.
6.4 Attorneys’ Fees and Costs
The prevailing party in any dispute arising out of this Stop Notice shall recover its reasonable attorneys’ fees, court costs, and expenses.
7. RISK ALLOCATION
7.1 Indemnification by Claimant
Claimant shall indemnify, defend, and hold harmless Recipients and their respective officers, directors, members, employees, and agents from and against any and all Losses arising out of (a) a wrongful or excessive Stop Notice, or (b) an invalid or discharged Lien, in each case limited to the lesser of (i) actual Losses proven, or (ii) the Withheld Funds (“Liability Cap”).
7.2 Indemnification by Recipient
Each Recipient that fails to preserve the Withheld Funds shall indemnify and hold harmless Claimant against any Losses incurred in collecting the Claim Amount, including attorneys’ fees.
7.3 Insurance
Each Recipient represents that it maintains builders risk and commercial general liability insurance that is sufficient to cover the Claim Amount. [PLACEHOLDER: Insert policy information or attach certificate if required.]
7.4 Force Majeure
Neither party shall be liable for delay or failure in performance caused by force majeure events beyond its reasonable control; provided, however, that financial incapacity shall not constitute force majeure.
8. DISPUTE RESOLUTION
8.1 Governing Law
This Stop Notice and any disputes hereunder shall be governed by State Lien Law and the internal laws of the State of New Jersey without regard to conflict-of-law principles.
8.2 Forum Selection
The Superior Court of New Jersey, [COUNTY] County, shall have exclusive jurisdiction and venue over all actions arising out of or relating to this Stop Notice.
8.3 Arbitration
Not applicable.
8.4 Jury Waiver
Not applicable.
8.5 Injunctive Relief
Nothing herein shall limit Claimant’s right to seek immediate equitable relief to preserve the Withheld Funds.
9. GENERAL PROVISIONS
9.1 Amendments and Waivers
Any amendment, modification, or waiver of this Stop Notice must be in writing and signed by Claimant and the affected Recipient(s).
9.2 Assignment
Neither party may assign its rights or delegate its duties under this Stop Notice without the prior written consent of the other party, except that Claimant may assign its rights to receive payment to a finance company or factor on written notice.
9.3 Successors and Assigns
This Stop Notice shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
9.4 Severability
If any provision of this Stop Notice 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 achieve its purpose.
9.5 Integration
This Stop Notice (including its exhibits) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous oral or written agreements and understandings.
9.6 Counterparts; Electronic Signatures
This Stop Notice may be executed in any number of counterparts, each of which shall be deemed an original. Signatures transmitted by facsimile or electronic means (e.g., PDF, DocuSign) shall be deemed original signatures for all purposes.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties have executed this Stop Notice and Demand to Withhold Funds as of the dates set forth below.
CLAIMANT
[NAME OF CLAIMANT]
By: ____
Name: ____
Title: _____
Date: _________
OWNER (RECIPIENT)
[NAME OF OWNER]
By: ____
Name: ____
Title: _____
Date: _________
CONTRACTOR (RECIPIENT)
(if applicable)
[NAME OF CONTRACTOR]
By: ____
Name: ____
Title: _____
Date: _________
CONSTRUCTION LENDER (RECIPIENT)
(if applicable)
[NAME OF LENDER]
By: ____
Name: ____
Title: _____
Date: _________
[NOTARY BLOCKS AS REQUIRED BY N.J. STAT. ANN. § 46:14-2.1]
EXHIBIT A
Itemized Statement of Labor, Services, Materials, and/or Equipment Furnished
| Date | Description | Quantity | Unit Price | Amount |
|---|---|---|---|---|
Total: $[CLAIM AMOUNT]
[// GUIDANCE: Attach invoices, delivery tickets, time sheets, or other supporting documentation.]
EXHIBIT B
Form of Release of Stop Notice
Upon satisfaction of the Release Conditions as defined in the Stop Notice dated [DATE], Claimant hereby releases and discharges the Stop Notice and authorizes Recipients to disburse all previously Withheld Funds.
[Signature Block Identical to Section 10]
EXHIBIT C
Proofs of Service
- Certified Mail Receipts
- Signed Acknowledgments of Personal Delivery
[// GUIDANCE:
1. File or record this Stop Notice only if your construction contract or loan agreement recognizes stop-payment rights; New Jersey statutory law provides no separate “stop notice” procedure outside the Construction Lien Law.
2. Always coordinate the timing of this Stop Notice with the filing of the NUB and subsequent lien claim to preserve statutory rights.
3. Consider bonding off the lien promptly to keep project funding on schedule.
]