STOP-PAYMENT NOTICE
(Utah Mechanics’ Lien – Private Project)
[// GUIDANCE: This template is designed for use on PRIVATE construction projects in Utah. For public projects or federal work, consult the Utah Little Miller Act, Utah Code Ann. § 63G-6a-1103 et seq., and applicable federal statutes.*
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
Page numbers intentionally omitted – insert during final formatting.
1. DOCUMENT HEADER
STOP-PAYMENT NOTICE (this “Notice”) is delivered and effective as of [EFFECTIVE DATE] (the “Effective Date”) by [CLAIMANT LEGAL NAME], a [STATE] [ENTITY TYPE] (“Claimant”), to:
a. [OWNER LEGAL NAME & ADDRESS] (“Owner”);
b. [DIRECT CONTRACTOR LEGAL NAME & ADDRESS] (“Direct Contractor”); and
c. [CONSTRUCTION LENDER OR DISBURSING PARTY] (“Disbursing Party,” and together with Owner and Direct Contractor, the “Obligated Parties”).
Project: [PROJECT NAME / DESCRIPTION] located at [STREET ADDRESS, CITY, COUNTY, UTAH ZIP] (the “Project”).
Contract: Claimant furnished labor, services, materials, or equipment to the Project pursuant to [SUBCONTRACT / PURCHASE ORDER] dated [DATE] (the “Underlying Contract”) with [CONTRACT COUNTER-PARTY].
Consideration & Purpose: Claimant seeks to (i) perfect its right to payment, and (ii) compel the Obligated Parties to withhold contract funds otherwise payable to the Direct Contractor in accordance with Utah Mechanics’ Lien law, Utah Code Ann. Title 38, Chapter 1a (the “Lien Act”).
2. DEFINITIONS
“Bond” – A payment bond issued by a surety company authorized to do business in Utah naming Claimant as an obligee, complying with Section [____] of the Lien Act, in a penal sum not less than 125 % of the Claim Amount.
“Claim Amount” – US $[AMOUNT] representing the unpaid balance for labor, services, materials, or equipment furnished by Claimant through [LAST DATE OF WORK].
“Claim Documents” – Collectively, (a) this Notice, (b) Claimant’s Preliminary Notice (if any), (c) any recorded Notice of Construction Lien, and (d) supporting invoices, statements, and delivery tickets.
“Release Event” – (i) full satisfaction of the Claim Amount; (ii) posting of a Bond; (iii) written, unconditional waiver and release executed by Claimant; or (iv) final non-appealable court order extinguishing Claimant’s lien rights.
All capitalized terms used but not defined herein have the meanings assigned in the Lien Act.
3. OPERATIVE PROVISIONS
3.1 Stop-Payment Demand. Under §§ 38-1a-601 et seq. of the Lien Act, Claimant hereby demands that each Obligated Party immediately withhold, and continue to withhold, contract funds or progress payments otherwise due or to become due to the Direct Contractor in an amount not less than the Claim Amount, plus reasonable allowance for interest, costs, and attorneys’ fees as authorized by law (collectively, the “Withheld Funds”).
3.2 Scope of Withheld Funds. The Withheld Funds shall constitute trust funds for the sole and exclusive benefit of Claimant until a Release Event occurs.
3.3 Service & Proof. Claimant shall serve this Notice by (i) certified mail, return receipt requested, (ii) personal delivery, or (iii) any alternative method permitted by § 38-1a-602. Proof of service shall be made by affidavit attached hereto as Exhibit A.
3.4 Claim Amendment. Claimant may amend this Notice to increase or decrease the Claim Amount by written notice served in compliance with Section 3.3.
3.5 Bonding Option.
(a) Owner’s Right to Bond Off. Owner may discharge this Notice by procuring and delivering a Bond satisfying the requirements set forth in the Lien Act.
(b) Claimant’s Review. Within five (5) Business Days after receipt of a Bond, Claimant shall review and either (i) accept in writing, or (ii) provide written objections stating specific deficiencies.
3.6 Release of Notice. Upon the occurrence of a Release Event, Claimant shall execute and deliver to Owner a written release, substantially in the form attached as Exhibit B (“Release of Stop-Payment Notice”), within five (5) Business Days.
3.7 Conditions Subsequent. Failure of Claimant to timely commence a lien foreclosure action or bond claim within statutory deadlines shall automatically terminate this Notice and require Claimant, upon demand, to execute a release in accordance with Section 3.6.
4. REPRESENTATIONS & WARRANTIES
4.1 Authorization. Claimant is duly organized, validly existing, and in good standing, and has full authority to issue this Notice.
4.2 Valid Claim. The Claim Amount is (i) presently due and owing, (ii) not the subject of any bona fide dispute, and (iii) computed in compliance with the Lien Act.
4.3 Timeliness & Compliance. Claimant has complied in all material respects with all notice, filing, and recording prerequisites under the Lien Act, including any Preliminary Notice requirements.
4.4 Survival. The representations and warranties set forth in this Article 4 shall survive until the earlier of (a) a Release Event, or (b) final resolution of any litigation arising herefrom.
5. COVENANTS & RESTRICTIONS
5.1 Cooperation. Claimant shall furnish supplemental documentation reasonably requested by an Obligated Party to verify the Claim Amount.
5.2 No Unreasonable Withholding. Upon a Release Event, Claimant shall not unreasonably withhold, condition, or delay execution of the Release of Stop-Payment Notice.
5.3 Litigation Covenant. Claimant shall commence foreclosure or bond proceedings on or before the statutory deadline; failure to do so constitutes a Release Event.
5.4 Notice of Changes. Each party shall provide prompt written notice of (i) bankruptcy, receivership, or similar insolvency event, or (ii) commencement of arbitration or litigation concerning the Claim Documents.
6. DEFAULT & REMEDIES
6.1 Events of Default.
a. Owner or Disbursing Party releases Withheld Funds in violation of this Notice prior to a Release Event;
b. Claimant materially misrepresents any fact in the Claim Documents;
c. Any party fails to perform a covenant, obligation, or condition herein and such failure continues for ten (10) days after written notice.
6.2 Cure Periods. Defaults are subject to a five-(5-) Business-Day opportunity to cure, unless otherwise expressly stated.
6.3 Remedies. Upon default, the non-defaulting party may pursue cumulatively:
i. Injunctive relief compelling compliance with this Notice;
ii. Monetary damages, including consequential damages capped as set forth in Section 7.2;
iii. Recovery of reasonable attorneys’ fees and costs incurred in enforcement;
iv. Any statutory remedies under the Lien Act.
7. RISK ALLOCATION
7.1 Indemnification (Bonding Requirements). If Owner procures a Bond, Owner shall indemnify, defend, and hold harmless Claimant from and against any costs, losses, or expenses incurred due to the surety’s failure to honor its obligations under the Bond.
7.2 Limitation of Liability. The aggregate liability of Owner, Direct Contractor, and Disbursing Party for monetary damages under this Notice shall not exceed the lesser of (a) the Withheld Funds, or (b) the unpaid contract balance then owed to the Direct Contractor.
7.3 Insurance. Each Obligated Party represents that it maintains commercially reasonable liability insurance covering the Project in accordance with its primary contract documents.
7.4 Force Majeure. No party shall be liable for delay or failure in performance caused by events beyond its reasonable control, including acts of God, government actions, or labor disputes, provided that such party gives prompt written notice and uses diligent efforts to mitigate the impact.
8. DISPUTE RESOLUTION
8.1 Governing Law. This Notice and all disputes arising hereunder shall be governed by and construed in accordance with the laws of the State of Utah, without regard to its conflict-of-laws rules.
8.2 Forum Selection. The parties irrevocably submit to the exclusive jurisdiction of the District Courts of the State of Utah located in the county where the Project is situated.
8.3 Arbitration. Not applicable.
8.4 Jury Waiver. Not applicable.
8.5 Injunctive Relief. Nothing herein shall limit Claimant’s statutory right to seek provisional or injunctive relief, including an order preventing release of the Withheld Funds.
9. GENERAL PROVISIONS
9.1 Amendments; Waivers. No amendment or waiver of any provision of this Notice is effective unless in writing and signed by the party against whom the amendment or waiver is sought to be enforced.
9.2 Assignment. Claimant may not assign this Notice or any rights hereunder without Owner’s prior written consent, except to a surety or financing party for purposes of enforcing payment. Any prohibited assignment is void.
9.3 Successors & Assigns. This Notice binds and benefits the parties and their respective successors and permitted assigns.
9.4 Severability. If any provision of this Notice is held invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be construed to the maximum extent possible to effectuate its original intent.
9.5 Integration. This Notice, together with the Claim Documents, constitutes the entire agreement of the parties with respect to the subject matter hereof, superseding all prior oral or written communications.
9.6 Counterparts; Electronic Signatures. This Notice may be executed in counterparts, each of which is deemed an original, and all of which constitute one instrument. Signatures delivered by electronic means (e.g., PDF, DocuSign) are deemed original and enforceable.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, Claimant has executed and delivered this Stop-Payment Notice as of the Effective Date.
CLAIMANT:
[CLAIMANT LEGAL NAME]
By: _____
Name: [AUTHORIZED SIGNATORY]
Title: [OFFICER TITLE]
Date: ____
[// GUIDANCE: Attach additional signature blocks if Owner, Direct Contractor, or Lender wish to formally acknowledge receipt. Utah law does not require their signatures for effectiveness, but voluntary acknowledgment may support evidentiary proof.]
NOTARIZATION (optional but recommended):
State of ____ )
County of ___ ) ss.
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 within instrument and acknowledged that he/she executed the same in his/her authorized capacity.
Witness my hand and official seal.
Notary Public
My commission expires: _______
EXHIBIT A – AFFIDAVIT OF SERVICE
Attach executed affidavit detailing method, date, and recipients of service.
EXHIBIT B – RELEASE OF STOP-PAYMENT NOTICE
Form of unconditional release for use upon a Release Event.
[// GUIDANCE:
1. Verify all statutory deadlines: (a) Preliminary Notice (if required) must be filed within 20 days of first furnishing on most residential projects; (b) Construction lien must typically be recorded within 180 days after final completion or 90 days after filing a Notice of Completion.
2. Ensure the Claim Amount excludes unapproved extras that may jeopardize lien validity.
3. Cross-check any bonding provisions in the prime contract that may alter or shorten timelines.
4. If the Project is owner-occupied residential, additional consumer protection disclosures may apply.
]