STOP NOTICE & NOTICE OF LIEN ON FUNDS
(T.C.A. §§ 66-11-141 – 66-11-145)
[PROJECT NAME / ADDRESS]
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
- Certificate of Service
1. DOCUMENT HEADER
1.1 Title.
Stop Notice & Notice of Lien on Funds (the “Stop Notice”).
1.2 Parties.
a. Claimant: [CLAIMANT LEGAL NAME], a [STATE] [ENTITY TYPE], with principal office at [ADDRESS].
b. Owner: [OWNER LEGAL NAME], a [STATE] [ENTITY TYPE], with principal office at [ADDRESS].
c. Prime Contractor: [PRIME CONTRACTOR LEGAL NAME], with principal office at [ADDRESS].
d. Construction Lender (if any): [LENDER LEGAL NAME], with principal office at [ADDRESS].
1.3 Recitals.
WHEREAS, Claimant furnished labor, services, materials, and/or equipment to the Project known as “[PROJECT NAME]” located at [PROJECT ADDRESS] (the “Project”) pursuant to a subcontract dated [DATE] (the “Subcontract”);
WHEREAS, an unpaid balance remains due and owing to Claimant; and
WHEREAS, pursuant to Tenn. Code Ann. § 66-11-141, Claimant desires to assert a lien on funds payable by Owner to the Prime Contractor and to require withholding of such funds until the unpaid balance is resolved.
1.4 Effective Date.
This Stop Notice is effective as of [EFFECTIVE DATE] (the “Effective Date”).
1.5 Governing Law & Jurisdiction.
This Stop Notice shall be construed in accordance with, and governed by, the laws of the State of Tennessee without regard to its conflict-of-laws rules. Any proceeding arising out of or relating to this Stop Notice shall be brought exclusively in the state courts located in [COUNTY], Tennessee.
[// GUIDANCE: Obtain project-specific county to ensure proper venue under Tenn. Code Ann. § 20-4-101.]
2. DEFINITIONS
Unless otherwise indicated, capitalized terms have the meanings assigned below.
“Amount Due” means the unpaid contract balance of $[AMOUNT], exclusive of accrued statutory interest and recoverable attorney fees.
“Bond” means any corporate surety bond posted under Tenn. Code Ann. § 66-11-142 to discharge this Stop Notice.
“Claimant” has the meaning set forth in Section 1.2(a).
“Contract Price” means all sums presently or hereafter payable by Owner to the Prime Contractor under the Prime Contract.
“Lien on Funds” means the statutory lien established by Tenn. Code Ann. § 66-11-141 in favor of Claimant against the Contract Price.
“Notice of Nonpayment” means any notice required by Tenn. Code Ann. § 66-11-145 to preserve Claimant’s remote-contractor lien rights.
“Project” has the meaning set forth in Section 1.3.
“Stop Notice” has the meaning set forth in Section 1.1.
3. OPERATIVE PROVISIONS
3.1 Assertion of Lien on Funds.
Pursuant to Tenn. Code Ann. § 66-11-141, Claimant hereby asserts a Lien on Funds in the Amount Due and gives formal notice to Owner, Prime Contractor, and any Construction Lender to withhold from the Contract Price a sum not less than the Amount Due.
3.2 Amount Due; Itemization.
An itemized statement of the labor, services, materials, and/or equipment furnished, including dates of furnishing and corresponding charges, is attached hereto as Exhibit A and incorporated herein by reference.
3.3 Withholding Obligation.
Owner shall immediately withhold from current or future payments to Prime Contractor an amount equal to the Amount Due (plus an additional 10 % to cover potential interest, costs, and statutory attorney fees) until:
a. written release by Claimant;
b. satisfaction of the Amount Due; or
c. posting of a Bond that meets the requirements of Section 3.5.
3.4 Preservation of Funds.
Withheld funds shall be segregated in a separate, interest-bearing account (the “Escrow Account”) pending resolution of the claim.
3.5 Bonding & Discharge.
Owner or Prime Contractor may discharge this Stop Notice by obtaining and delivering to Claimant a Bond in a penal sum of 125 % of the Amount Due issued by a surety authorized to transact business in Tennessee, conditioned as provided in Tenn. Code Ann. § 66-11-142. Upon receipt of a compliant Bond, Claimant shall execute and deliver a partial or full release of its Lien on Funds within three (3) Business Days.
3.6 Release Procedures.
a. Conditional Release. Upon receipt of a negotiable instrument covering the Amount Due, Claimant will deliver a conditional release substantially in the form of Exhibit B.
b. Unconditional Release. Upon clearance of the instrument or, in the case of wire transfer, confirmation of irrevocable credit, Claimant will deliver an unconditional release substantially in the form of Exhibit C.
3.7 Deadline Compliance.
Claimant represents that any Notice of Nonpayment required by Tenn. Code Ann. § 66-11-145 was duly and timely served and that this Stop Notice is delivered before full payment of the Contract Price, thereby perfecting Claimant’s statutory rights.
3.8 Service of Notice.
A complete, executed copy of this Stop Notice, together with all exhibits, is being served contemporaneously on each party identified in Section 1.2 via:
i. certified mail, return receipt requested; and
ii. overnight courier with signature required.
[// GUIDANCE: Hand delivery is recommended when feasible; obtain affidavits of service for evidentiary purposes.]
4. REPRESENTATIONS & WARRANTIES
4.1 Authorization.
Claimant is duly organized, validly existing, and in good standing under the laws of its formation jurisdiction and is authorized to transact business in Tennessee.
4.2 Accuracy of Claim.
The Amount Due is a true and accurate statement of sums currently owing, exclusive of pending change orders or disputed back-charges.
4.3 Lien Compliance.
Claimant has satisfied all statutory prerequisites to perfect and maintain its Lien on Funds, including but not limited to the timely service of all required notices.
4.4 Survival.
All representations and warranties contained in this Stop Notice shall survive payment, bonding, or other resolution until expressly waived in writing by Claimant.
5. COVENANTS & RESTRICTIONS
5.1 Further Assurances.
Each party shall execute and deliver any additional instruments reasonably requested to carry out the purpose of this Stop Notice.
5.2 No Dissipation of Funds.
Owner and Prime Contractor shall not transfer, assign, or otherwise encumber the portion of the Contract Price subject to the Lien on Funds except as permitted in Section 3.5.
5.3 Notice of Bond.
Owner or Prime Contractor shall provide Claimant with written notice and a true, complete copy of any Bond posted to discharge this Stop Notice within one (1) Business Day after issuance.
5.4 Compliance with Escrow Requirements.
All parties shall comply with reasonable, commercially-standard escrow instructions mutually agreed to in writing.
6. DEFAULT & REMEDIES
6.1 Events of Default.
Any of the following constitutes a default (“Default”):
a. failure to withhold funds as required;
b. misapplication or dissipation of withheld funds;
c. failure to post a compliant Bond within ten (10) Business Days after written demand; or
d. violation of any covenant in Section 5.
6.2 Cure Period.
Claimant shall provide written notice of Default and a three-(3-)Business-Day opportunity to cure, unless the default relates to misapplication of funds, in which case cure is not applicable.
6.3 Remedies.
Upon Default:
i. Claimant may commence an action to enforce its Lien on Funds and recover the Amount Due, interest at the statutory rate, costs, and reasonable attorney fees, as provided in Tenn. Code Ann. § 66-11-126.
ii. Claimant may seek injunctive relief to prevent further disbursement of funds.
iii. If a Bond exists, Claimant may proceed directly against the surety.
6.4 Cumulative Rights.
All remedies are cumulative and non-exclusive.
7. RISK ALLOCATION
7.1 Indemnification via Bond.
The surety under any Bond posted pursuant to Section 3.5 shall indemnify Claimant against all loss, cost, damage, and expense arising from the Amount Due, including interest and attorney fees.
7.2 Limitation of Liability.
Except for willful misconduct or failure to comply with statutory withholding obligations, Owner’s liability shall be limited to the lesser of:
a. the Amount Due; or
b. the payment withheld pursuant to Section 3.3.
7.3 Force Majeure.
Delay in establishing the Escrow Account or posting a Bond due to events beyond the reasonable control of the party affected (including governmental shutdowns preventing bond issuance) shall extend related deadlines, provided that prompt written notice is given and diligent efforts to cure are undertaken.
8. DISPUTE RESOLUTION
8.1 Governing Law.
See Section 1.5.
8.2 Forum Selection.
Each party irrevocably submits to the exclusive jurisdiction of the state courts sitting in [COUNTY], Tennessee.
8.3 Arbitration.
Not applicable.
8.4 Jury Waiver.
Not applicable.
8.5 Injunctive Relief.
Nothing herein shall limit Claimant’s right to seek temporary or permanent injunctive relief to enforce the withholding mandated by Tenn. Code Ann. § 66-11-141.
9. GENERAL PROVISIONS
9.1 Amendments & Waivers.
No amendment or waiver shall be effective unless in a writing signed by Claimant. No waiver shall be deemed a continuing waiver unless expressly stated.
9.2 Assignment.
Claimant may assign its rights hereunder solely for collateral purposes in connection with traditional financing; otherwise, no party may assign or delegate rights or obligations without prior written consent of the other parties.
9.3 Successors & Assigns.
This Stop Notice is binding upon and inures to the benefit of the parties hereto and their respective successors and permitted assigns.
9.4 Severability.
If any provision is held invalid, the remainder shall be enforced to the fullest extent permitted by law.
9.5 Entire Agreement.
This Stop Notice, together with its exhibits, constitutes the entire agreement among the parties concerning the subject matter and supersedes all prior communications.
9.6 Counterparts & Electronic Signatures.
This Stop Notice may be executed in counterparts, each of which is deemed an original, and signatures transmitted electronically (e.g., PDF, DocuSign) shall be deemed originals.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the undersigned have executed this Stop Notice effective as of the Effective Date.
CLAIMANT:
[NAME]
[Title]
[Entity Name]
STATE OF [STATE] )
COUNTY OF [COUNTY] )
Acknowledged before me on [DATE] by [NAME], who is personally known to me or has produced [IDENTIFICATION] as identification.
Notary Public
My Commission Expires: [DATE]
OWNER (Receipt Acknowledged Only):
[Authorized Signatory Name & Title]
PRIME CONTRACTOR (Receipt Acknowledged Only):
[Authorized Signatory Name & Title]
LENDER (Receipt Acknowledged Only):
[Authorized Signatory Name & Title]
[// GUIDANCE: “Receipt Acknowledged Only” signature lines are optional but useful to document statutory service and to start the withholding clock.]
11. CERTIFICATE OF SERVICE
I, [NAME], certify under penalty of perjury that on [DATE] I served a true and correct copy of this Stop Notice, with all exhibits, on each party listed below via the delivery methods indicated.
-
Owner: [ADDRESS]
• Certified Mail, RRR # [NUMBER]
• Overnight Courier Tracking # [NUMBER] -
Prime Contractor: [ADDRESS]
• Certified Mail, RRR # [NUMBER]
• Overnight Courier Tracking # [NUMBER] -
Lender (if any): [ADDRESS]
• Certified Mail, RRR # [NUMBER]
• Overnight Courier Tracking # [NUMBER]
Executed on [DATE], at [CITY], [STATE].
[NAME]
Title: [POSITION]
EXHIBIT A
Itemized Statement of Amount Due
| Date Furnished | Description of Labor/Materials | Quantity | Unit Price | Extended Price |
|---|---|---|---|---|
Total Amount Due: $[AMOUNT]
EXHIBIT B
Conditional Waiver & Release on Payment [FORM]
EXHIBIT C
Unconditional Waiver & Release on Final Payment [FORM]
[// GUIDANCE: Attach Lien Waiver forms consistent with Tenn. Code Ann. § 66-11-205 et seq.; ensure conditional waivers expressly condition effectiveness on actual receipt of funds.]