STOP-PAYMENT NOTICE
(South Dakota)
[// GUIDANCE: This template is intentionally comprehensive. Remove bracketed guidance before finalizing, verify all factual blanks, and confirm compliance with current South Dakota Codified Laws Title 44, Chapters 9 & 10 (Mechanic’s Liens).]
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
STOP-PAYMENT NOTICE
Date: [DATE]
To:
• Owner / Construction Lender: [OWNER/LENDER LEGAL NAME], a [STATE] [entity type]
• Prime Contractor: [CONTRACTOR NAME], a [STATE] [entity type]
From:
• Claimant: [CLAIMANT LEGAL NAME], a [STATE] [entity type]
Principal Business Address: [ADDRESS]
South Dakota Contractor/Registration No.: [NUMBER, if any]
Project: “[PROJECT NAME / DESCRIPTION]”
Project Address / Legal Description: [ADDRESS / LEGAL]
Governing Law: State of South Dakota (see S.D. Codified Laws §§ 44-9-1 et seq.)
Forum Selection: Exclusive jurisdiction in the state courts of [COUNTY], South Dakota
Recitals
A. Claimant has furnished labor, services, materials and/or equipment to the Project pursuant to its subcontract with the Prime Contractor dated [SUBCONTRACT DATE].
B. As of the date hereof, Claimant is unpaid in the principal amount of $[CLAIM AMOUNT] for work incorporated into the Project.
C. South Dakota law permits a potential lien claimant to give a stop-payment notice to the Owner and/or Construction Lender requesting that further Project funds otherwise payable to the Prime Contractor be withheld pending resolution of the unpaid amount.
D. Claimant therefore issues this Stop-Payment Notice in order to protect its lien rights and to secure payment.
NOW, THEREFORE, Claimant gives notice and demands as follows:
2. DEFINITIONS
For purposes of this Stop-Payment Notice, the following capitalized terms have the meanings set forth below. Terms defined in the singular include the plural and vice-versa.
“Bond” means a surety bond issued by a surety company licensed to transact business in South Dakota in a penal sum not less than one hundred twenty-five percent (125 %) of the Claim Amount, conditioned upon payment of any judgment rendered on the Lien Claim and otherwise conforming to S.D. Codified Laws ch. 44-10 and Section 7.2 herein.
“Claim Amount” means the unpaid contract balance of $[CLAIM AMOUNT] exclusive of statutory interest, attorneys’ fees, and recoverable costs.
“Claimant” means the person or entity identified in the Document Header that furnished Work to the Project.
“Contract Funds” means all undisbursed amounts presently or hereafter payable to the Prime Contractor or its affiliates in connection with the Project.
“Effective Date” means the earlier of (a) the date this Stop-Payment Notice is personally served, or (b) the date of actual receipt by certified mail, return receipt requested.
“Lien Claim” means any mechanic’s lien that Claimant now holds or may hereafter perfect with respect to the Project pursuant to S.D. Codified Laws ch. 44-9.
“Owner/Lender” means the addressee(s) in the Document Header obligated to make Contract Fund disbursements.
“Prime Contractor” means the entity identified in the Document Header having direct contractual privity with the Owner/Lender for construction of the Project.
“Release” means a written unconditional release of this Stop-Payment Notice in the form attached as Exhibit A or any substantially similar form acceptable to Claimant.
“Work” means the labor, services, materials, equipment, or specially fabricated materials furnished by Claimant to the Project.
3. OPERATIVE PROVISIONS
3.1 Stop-Payment Demand. Pursuant to S.D. Codified Laws § 44-9-15 and related provisions, Claimant hereby demands that Owner/Lender immediately withhold, segregate, and refrain from disbursing Contract Funds in an amount equal to the Claim Amount until the earliest of:
(a) written Release delivered by Claimant;
(b) posting of a Bond as provided in Section 7.2;
(c) written direction by a court of competent jurisdiction; or
(d) final adjudication or settlement of the Lien Claim.
3.2 Scope of Withholding. The withholding shall apply to any progress or final payment, retainage, or other sums otherwise payable to the Prime Contractor (or any person claiming through it) with respect to the Project.
3.3 Continuation of Work. Nothing herein shall be construed to obligate Claimant to continue Work absent payment, nor to waive any right to suspend performance or pursue lien foreclosure.
3.4 Notice of Disposition. Owner/Lender shall provide written notice to Claimant at least five (5) business days prior to any disposition of withheld Contract Funds, including but not limited to disbursement pursuant to court order or Bond.
3.5 Reservation of Rights. Claimant expressly reserves all mechanic’s lien and other rights and remedies available under contract and law.
4. REPRESENTATIONS & WARRANTIES
Claimant represents and warrants to Owner/Lender as of the Effective Date:
4.1 Performance. Claimant has furnished the Work described in Recital A in accordance with its subcontract.
4.2 Non-Payment. The Claim Amount remains due and owing and has not been paid, waived, released, or satisfied.
4.3 Timeliness. This Stop-Payment Notice is served within the statutory time limits for preserving mechanic’s lien rights under S.D. Codified Laws § 44-9-15.
4.4 Accuracy. The amounts stated herein are true and correct to the best of Claimant’s knowledge, formed after reasonable inquiry.
4.5 Authority. The individual executing this Stop-Payment Notice is duly authorized to bind Claimant.
The foregoing representations survive service of this Stop-Payment Notice and any Bond issued pursuant hereto.
5. COVENANTS & RESTRICTIONS
5.1 Owner/Lender Covenants. Owner/Lender shall:
(a) strictly comply with the withholding obligations set forth in Section 3;
(b) maintain accurate accounting records evidencing withheld Contract Funds; and
(c) promptly furnish Claimant with copies of any Bond, court filings, or settlement agreements affecting the Claim Amount.
5.2 Transfer Restriction. Owner/Lender shall not transfer, assign, pledge, or otherwise encumber withheld Contract Funds except in connection with a Bond or as otherwise expressly permitted herein.
5.3 Claimant Cooperation. Upon full payment of the Claim Amount (including any accrued interest and agreed legal fees), Claimant shall promptly execute and deliver a Release.
6. DEFAULT & REMEDIES
6.1 Events of Default. Each of the following constitutes a default by Owner/Lender:
(a) disbursing Contract Funds in violation of Section 3;
(b) failure to provide notice required by Section 3.4; or
(c) material breach of any covenant in Section 5.
6.2 Cure Period. Owner/Lender shall have five (5) business days after written notice of default to cure; provided, however, that unauthorized disbursement of Contract Funds constitutes an immediate default not subject to cure.
6.3 Remedies. Upon default, Claimant may, in addition to all statutory lien remedies:
(a) seek injunctive relief to restrain further disbursements;
(b) recover the Claim Amount directly from Owner/Lender to the extent of wrongfully disbursed Contract Funds;
(c) recover reasonable attorneys’ fees, costs, and statutory interest; and
(d) pursue any other remedy available at law or in equity.
6.4 Cumulative Remedies. Remedies are cumulative and may be exercised concurrently or in any order.
7. RISK ALLOCATION
7.1 Indemnification for Wrongful Notice. IF it is finally determined by a court of competent jurisdiction that this Stop-Payment Notice was willfully exaggerated or wrongfully served, Claimant shall indemnify and hold harmless Owner/Lender from and against all direct damages, reasonable attorneys’ fees, and court costs arising directly therefrom; provided, however, that punitive, consequential, or special damages are excluded.
7.2 Bonding-Off Procedure. Owner/Lender may, at any time, discharge the obligations imposed by this Stop-Payment Notice by procuring and delivering to Claimant a Bond in a penal sum not less than one hundred twenty-five percent (125 %) of the Claim Amount, conditioned in accordance with S.D. Codified Laws ch. 44-10. Upon receipt of a conforming Bond, Claimant shall execute a Release within three (3) business days.
7.3 Limitation of Liability. Claimant’s aggregate liability to Owner/Lender for wrongful notice or indemnification under Section 7.1 shall not exceed the Bond amount or, if no Bond is posted, the Claim Amount. The limitation of liability does not apply to intentional misconduct or fraud.
7.4 Insurance. Claimant represents that it maintains commercial general liability insurance with limits not less than $[LIMITS] per occurrence and $[LIMITS] aggregate.
8. DISPUTE RESOLUTION
8.1 Governing Law. This Stop-Payment Notice and any related dispute are governed by the laws of the State of South Dakota, without regard to conflict-of-laws principles.
8.2 Forum Selection. Any action arising out of or relating to this Stop-Payment Notice shall be brought exclusively in the state courts located in [COUNTY], South Dakota, and the parties hereby consent to personal jurisdiction therein.
8.3 Jury Waiver. Not applicable (intentionally omitted).
8.4 Arbitration. Not applicable (intentionally omitted).
8.5 Injunctive Relief. Claimant may seek temporary, preliminary, or permanent injunctive relief to enforce Sections 3 and 6 without the necessity of posting a bond, except as may be required by applicable court rules.
9. GENERAL PROVISIONS
9.1 Amendments; Waivers. No modification or waiver of this Stop-Payment Notice is effective unless in writing signed by Claimant. No waiver shall constitute a continuing waiver unless expressly stated.
9.2 Assignment. Claimant may assign its rights hereunder in connection with assignment of the underlying Lien Claim. Owner/Lender may not assign obligations under Sections 3 or 5 without Claimant’s prior written consent, except to a successor owner or construction lender that assumes such obligations in writing.
9.3 Successors & Assigns. This Stop-Payment Notice is binding upon and inures to the benefit of the parties and their respective successors, assigns, and legal representatives.
9.4 Severability. If any provision is held unenforceable, the remaining provisions remain in full force, and the unenforceable provision will be reformed to the minimum extent necessary to achieve its intended purpose.
9.5 Integration. This document constitutes the entire notice and understanding between Claimant and Owner/Lender with respect to the subject matter hereof and supersedes all prior oral or written communications relating thereto.
9.6 Counterparts; Electronic Signatures. This Stop-Payment Notice may be executed in counterparts and by electronic signature, each of which is deemed an original and all of which together constitute one instrument.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, Claimant has executed this Stop-Payment Notice as of the date first written above.
CLAIMANT:
[CLAIMANT LEGAL NAME]
By: ____
Name: ____
Title: ____
State of _ )
County of ______ )
This instrument was acknowledged before me on ___ / / by ___ as ____ of [CLAIMANT LEGAL NAME].
Notary Public
My commission expires: _______
[// GUIDANCE: Notarization is strongly recommended to enhance evidentiary weight, though not strictly mandated under SD lien statutes.]
EXHIBIT A
FORM OF RELEASE OF STOP-PAYMENT NOTICE
(Complete only upon satisfaction, settlement, or bonding of Claim Amount)
[Standard unconditional release language releasing Stop-Payment Notice upon payment or posting of Bond, including reservation of lien rights for amounts not covered, if any.]
[// GUIDANCE: Attach additional exhibits—e.g., proof of service declaration—if required by local rule or contract.]