Stop-Notice

STOP NOTICE AND DIRECTIVE TO WITHHOLD PAYMENT

(Ohio Mechanic’s Lien Law – Ohio Rev. Code Ann. § 1311 et seq.)

I. DOCUMENT HEADER

1. Parties
   1.1 Claimant: [FULL LEGAL NAME OF CLAIMANT], a [STATE OF FORMATION] [TYPE OF ENTITY] with its principal place of business at [ADDRESS] (“Claimant”).
   1.2 Owner: [FULL LEGAL NAME OF RECORD OWNER], a [STATE OF FORMATION] [TYPE OF ENTITY] with its principal place of business at [ADDRESS] (“Owner”).
   1.3 Direct Contractor (if different from Owner): [FULL LEGAL NAME] (“Contractor”).
   1.4 Construction Lender (optional): [FULL LEGAL NAME] (“Lender”).

2. Project Information
   2.1 Project Description: [BRIEF DESCRIPTION OF IMPROVEMENT].
   2.2 Project Address / Legal Description: [ADDRESS OR LEGAL DESCRIPTION].
   2.3 Original Contract Amount: $[AMOUNT].
   2.4 Claimant’s Contract Amount: $[AMOUNT].

3. Effective Date
   This Stop Notice is effective as of [DATE] (“Effective Date”).

4. Governing Law & Forum
   This Stop Notice and any ensuing dispute shall be construed in accordance with the mechanic’s lien statutes of the State of Ohio and adjudicated exclusively in the state courts of [COUNTY], Ohio.

II. DEFINITIONS

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

“Bond” – A surety bond meeting the requirements of Ohio Rev. Code Ann. § 1311 et seq. for the discharge or substitution of a mechanic’s lien or Stop Notice claim.
“Claim Amount” – The unpaid sum of $[AMOUNT] claimed by Claimant for labor, services, equipment, or materials furnished to the Project.
“Release Instrument” – A written, unconditional release of Stop Notice rights executed by Claimant in recordable form.
“Stop Notice” – This instrument, duly served in compliance with Ohio law, directing the withholding of Contract Funds.
“Contract Funds” – Any undisbursed monies owed or to become owed by Owner or Lender under the prime contract for the Project.

III. OPERATIVE PROVISIONS

3.1 Stop Payment Directive
(a) Pursuant to Ohio’s mechanic’s lien law and applicable equitable principles, Claimant hereby directs Owner, Contractor, and Lender to withhold from disbursement an amount equal to the Claim Amount, plus statutory interest, costs, and reasonable attorney fees (“Withheld Sum”), until such time as this Stop Notice is duly released in accordance with Section 3.4.

(b) The Withheld Sum shall be held in trust, segregated from other funds, and shall not be disbursed to Contractor or any lower-tier claimant absent Claimant’s prior written Release Instrument.

3.2 Supporting Affidavit
Contemporaneously with this Stop Notice, Claimant has executed and attached a sworn statement of account itemizing labor, materials, and equipment furnished, the dates of furnishing, and amounts due.

3.3 Bonding Option & Indemnification
(a) Owner or Contractor may, at any time, discharge the Stop Notice by procuring a Bond in an amount not less than the Withheld Sum plus thirty percent (30%) to secure potential interest, costs, and fees.
(b) Upon receipt of the Bond that strictly conforms to this Section, Claimant shall execute a Release Instrument within five (5) business days.
(c) Owner and Contractor shall indemnify and hold Claimant harmless from any impairment of its security interest resulting from failure to post a conforming Bond.

3.4 Release Procedure
(a) Claimant shall record and serve the Release Instrument within ten (10) business days after:
(i) receipt of full payment of the Withheld Sum in good funds; or
(ii) receipt of a conforming Bond as provided in Section 3.3; or
(iii) final, non-appealable judgment determining that no sum is due to Claimant.
(b) Failure to issue a timely Release Instrument shall subject Claimant to liability for actual damages proven by Owner or Contractor.

3.5 Conditions Precedent
Owner’s and Lender’s obligation to withhold Contract Funds is conditioned upon Claimant’s strict compliance with all Ohio statutory prerequisites for lien perfection, including timely filing and service of any Affidavit of Mechanic’s Lien or Notice of Furnishing, where applicable.

IV. REPRESENTATIONS & WARRANTIES

4.1 Claimant represents and warrants that:
(a) it has furnished labor, materials, or equipment to the Project;
(b) the Claim Amount stated herein is true, correct, and just;
(c) all prior payments received have been credited;
(d) Claimant has complied with Ohio Rev. Code Ann. § 1311 et seq., including any pre-lien notice requirements.

4.2 These representations survive service of the Stop Notice and any subsequent payment or bonding.

V. COVENANTS

5.1 Claimant covenants not to interfere with Project progress except as necessary to enforce statutory rights.
5.2 Owner covenants to:
(i) maintain the Withheld Sum unsullied by set-off unrelated to Claimant’s performance; and
(ii) promptly provide Claimant written notice of any bonding action or dispute affecting the Claim Amount.
5.3 Contractor covenants to cooperate in the prompt resolution of the Claim Amount.

VI. DEFAULT & REMEDIES

6.1 Events of Default
(a) Owner’s disbursement of any portion of the Withheld Sum in violation of this Stop Notice.
(b) Failure of any party to post a conforming Bond when elected.
(c) Material breach of any representation, warranty, or covenant herein.

6.2 Cure Period
The defaulting party shall have five (5) business days after written notice by the non-defaulting party to cure, except where disbursement has already occurred, in which event no cure period applies.

6.3 Remedies
In addition to statutory remedies:
(a) Claimant may seek injunctive relief compelling compliance with the Stop Notice;
(b) Claimant is entitled to recover reasonable attorney fees and costs incurred in enforcing this instrument;
(c) Any disbursing party in default shall be personally liable to Claimant up to the amount improperly disbursed, notwithstanding any contractual limitations of liability.

VII. RISK ALLOCATION

7.1 Indemnification (Bonding Requirements)
Owner and Contractor jointly and severally indemnify Claimant against any loss or expense arising from a defective or inadequate Bond posted to discharge the Stop Notice.

7.2 Limitation of Liability (Payment Withheld)
The liability of Owner and Lender to Claimant under this Stop Notice shall not exceed the lesser of (i) the Withheld Sum or (ii) the amount Owner or Lender was otherwise obligated to pay Contractor at the time this Stop Notice was served.

7.3 Force Majeure
No party shall be liable for delays in performance of non-monetary obligations under this Stop Notice caused by events beyond its reasonable control; monetary obligations are expressly excluded from force majeure relief.

VIII. DISPUTE RESOLUTION

8.1 Governing Law: Ohio.
8.2 Forum Selection: The Court of Common Pleas of [COUNTY], Ohio shall have exclusive jurisdiction.
8.3 Arbitration: Not Applicable.
8.4 Jury Waiver: Not Applicable.
8.5 Equitable Relief: The parties acknowledge that monetary damages may be inadequate and consent to injunctive relief to enforce Sections 3 and 6 without the necessity of posting a bond by Claimant.

IX. GENERAL PROVISIONS

9.1 Amendments & Waivers
Any amendment or waiver must be in writing, signed by the affected parties.

9.2 Assignment
Claimant may assign its rights hereunder only in connection with an assignment of the underlying mechanic’s lien claim; any other assignment is void.

9.3 Successors & Assigns
This Stop Notice binds and inures to the benefit of the parties and their respective successors and permitted assigns.

9.4 Severability
If any provision is held unenforceable, the balance shall remain in full force and effect, and the unenforceable provision shall be reformed to the minimum extent necessary.

9.5 Entire Agreement
This Stop Notice constitutes the entire agreement regarding the withholding of Contract Funds pending lien resolution and supersedes all prior or contemporaneous communications on the subject.

9.6 Counterparts; Electronic Signatures
This instrument may be executed in counterparts, each deemed an original, and electronic signatures are deemed originals for all purposes.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the parties have executed this Stop Notice as of the Effective Date.

[Optional – Direct Contractor Acknowledgment]
_______________________________
[NAME & TITLE]
Date: _________________________

[Optional – Lender Acknowledgment]
_______________________________
[NAME & TITLE]
Date: _________________________

NOTARY ACKNOWLEDGMENT (RECOMMENDED)
State of ____________ )
County of __________ ) SS:
On this ___ day of __________, 20__, before me, a Notary Public, personally appeared ____________________, who acknowledged that (s)he executed the foregoing instrument on behalf of the entity therein named and acknowledged the same to be the free act and deed of said entity.
_______________________________
Notary Public
My Commission Expires: ___________