STOP PAYMENT NOTICE
(Virginia – Mechanics’ Lien/Payment-Withholding Procedure)
[// GUIDANCE: This template is drafted for use by a subcontractor, supplier, or laborer (“Claimant”) to compel the Owner and/or Construction Lender (“Obligated Party”) to withhold contract funds otherwise payable to a Prime Contractor until the Claimant’s lien‐related claim is resolved. It is designed to comply with the payment-withholding framework contained in Title 43, Code of Virginia (1950), as amended. Customize bracketed items, attach all required exhibits, and confirm service/formalities before use.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
3.1 Stop-Payment Direction
3.2 Evidence Supporting Claim
3.3 Owner/Lender Obligations
3.4 Bonding & Release Mechanism
3.5 Termination/Release of Notice - Representations & Warranties
- Covenants
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block & Notarization
- Certificate of Service
1. DOCUMENT HEADER
Stop Payment Notice (the “Notice”)
Effective Date: [DATE]
Claimant: [LEGAL NAME], a [STATE] [ENTITY TYPE], having its principal place of business at [ADDRESS].
Owner: [LEGAL NAME] of the real property identified herein, whose address is [ADDRESS].
Prime Contractor: [LEGAL NAME] under prime contract dated [DATE] (the “Prime Contract”).
Construction Lender (if any): [LEGAL NAME] with an office at [ADDRESS].
Project: [PROJECT NAME OR DESCRIPTION], located at [STREET ADDRESS, CITY/COUNTY, VIRGINIA ZIP], more particularly described in Exhibit A (the “Property”).
Consideration: Performance of labor and/or furnishing of materials to the Project pursuant to that certain subcontract/purchase order dated [DATE] between Claimant and Prime Contractor (the “Subcontract”).
Governing Law; Forum: Commonwealth of Virginia; exclusive jurisdiction and venue in the state courts sitting in [COUNTY/CITY, VA].
2. DEFINITIONS
For purposes of this Notice, capitalized terms have the meanings set forth below:
“Bond” – a payment bond issued by a surety licensed in Virginia, in a penal sum of not less than [150 %] of the Claim Amount, conditioned on payment of the Claim in full.
“Claim” – the unpaid sum of $[AMOUNT] owed to Claimant for labor, materials, or equipment furnished to the Project, inclusive of any allowed interest.
“Claim Documents” – invoices, delivery tickets, timesheets, lien waivers, or other evidence substantiating the Claim, attached as Exhibit B.
“Claimant,” “Owner,” “Prime Contractor,” “Construction Lender,” “Project,” “Property,” and “Subcontract” – each as identified in Section 1.
“Stop Payment Funds” – contract funds otherwise due or to become due to Prime Contractor under the Prime Contract that are withheld by the Owner and/or Construction Lender pursuant to this Notice, up to the Claim Amount plus statutory retainage, interest, and costs.
3. OPERATIVE PROVISIONS
3.1 Stop-Payment Direction
Claimant hereby formally directs and demands that each Obligated Party immediately withhold, from any payment not yet made or earned but unpaid to Prime Contractor, an amount equal to the Claim Amount, together with any retainage required by law (collectively, the “Withheld Sum”).
3.2 Evidence Supporting Claim
Concurrently with delivery of this Notice, Claimant provides true and correct copies of the Claim Documents. Claimant will furnish additional documentation reasonably requested by any Obligated Party within five (5) Business Days of written request.
3.3 Owner/Lender Obligations
a. Upon receipt of this Notice, each Obligated Party shall withhold the Withheld Sum until the earliest of:
i. Payment in full to Claimant;
ii. Receipt of a Bond meeting the requirements of Section 3.4; or
iii. Expiration or release of Claimant’s mechanic’s lien rights in accordance with Virginia law.
b. Any disbursement in violation of this Notice may subject the disbursing party to personal liability to Claimant to the extent of the improper payment, together with interest and reasonable attorneys’ fees.
3.4 Bonding & Release Mechanism
a. Posting of Bond. The Prime Contractor, Owner, or Construction Lender may discharge the Stop-Payment obligation by procuring and delivering to Claimant a Bond in the form attached hereto as Exhibit C, executed by a surety satisfactory to Claimant.
b. Effect of Bond. Upon written confirmation of Bond receipt, Claimant shall execute and deliver a conditional release of this Notice limited to the Withheld Sum, thereby authorizing release of the Stop Payment Funds.
3.5 Termination/Release of Notice
Within three (3) Business Days after (i) receipt of collected funds satisfying the Claim in full, or (ii) written confirmation that an adequate Bond has been issued and delivered, Claimant shall serve on all Obligated Parties a written Release of Stop Payment Notice substantially in the form of Exhibit D.
4. REPRESENTATIONS & WARRANTIES
Claimant represents, warrants, and certifies to each Obligated Party that:
4.1 It furnished labor, materials, or equipment of the value and character stated in the Claim Documents strictly in accordance with the Subcontract and Prime Contract.
4.2 The Claim Amount is just, due, and unpaid, and no part thereof has been satisfied, assigned, or released.
4.3 Claimant has not waived, in whole or in part, its mechanic’s lien, stop-notice, or payment bond rights with respect to the Claim.
4.4 The person executing this Notice is duly authorized to bind Claimant and has personal knowledge of the matters stated herein.
[// GUIDANCE: Consider adding a survivability qualifier if this Notice will remain operative even after voluntary dismissal of any lien action.]
5. COVENANTS
5.1 Cooperation. Claimant shall timely cooperate with reasonable requests for information from any Obligated Party aimed at verifying the Claim.
5.2 Good-Faith Resolution. The parties shall endeavor in good faith to resolve the Claim within thirty (30) days of the Effective Date.
5.3 No Further Encumbrances. While this Notice remains in effect, Claimant covenants not to file additional liens or legal proceedings inconsistent with the obligations herein unless (a) required to preserve statutory deadlines or (b) an Event of Default (Section 6) has occurred.
6. DEFAULT & REMEDIES
6.1 Events of Default. Any of the following constitute an “Event of Default”:
a. Failure of any Obligated Party to withhold the Withheld Sum as required;
b. Failure of Prime Contractor or surety to pay the Claim within ten (10) Business Days after written demand;
c. Material misrepresentation by any party in connection with this Notice.
6.2 Remedies. Upon an Event of Default, Claimant may pursue any and all remedies available under statutory lien law, contract, or equity, including but not limited to (i) suit to enforce personal liability, (ii) foreclosure of mechanic’s lien, (iii) recovery of statutory interest, and (iv) attorneys’ fees and costs.
7. RISK ALLOCATION
7.1 Indemnification & Bonding. The Prime Contractor agrees to indemnify, defend, and hold harmless the Owner and Construction Lender from and against any loss, cost, or expense (including reasonable attorneys’ fees) arising out of this Notice, except to the extent caused by their own willful misconduct or bad faith.
7.2 Limitation of Liability. The aggregate liability of the Owner and Construction Lender under this Notice is strictly limited to the lesser of (i) the Withheld Sum, or (ii) the amount recovered by Claimant pursuant to judgment or settlement.
7.3 Force Majeure. No party shall be liable for delay or failure in performance of obligations herein to the extent caused by events beyond its reasonable control, provided that prompt notice is given and diligent efforts to mitigate are undertaken.
8. DISPUTE RESOLUTION
8.1 Governing Law. This Notice and any dispute arising hereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Virginia, without regard to conflict-of-laws rules.
8.2 Forum Selection. The parties submit to the exclusive jurisdiction of the state courts situated in [COUNTY/CITY], Virginia.
8.3 Injunctive Relief. Nothing herein limits Claimant’s right to seek provisional or injunctive relief (including an order requiring continued withholding of funds) to preserve the status quo pending resolution of the Claim.
[// GUIDANCE: Arbitration is intentionally omitted per client metadata.]
9. GENERAL PROVISIONS
9.1 Amendments. Any amendment or waiver of this Notice must be in a writing signed by Claimant.
9.2 Assignment. Claimant may assign its rights hereunder only with written consent of the Owner; provided, however, that assignment to a financing institution for the purpose of factoring receivables shall not be unreasonably withheld.
9.3 Severability. If any provision of this Notice is declared unenforceable, such provision shall be reformed to the minimum extent necessary, and the remaining provisions shall continue in full force and effect.
9.4 Entire Agreement. This Notice, together with its Exhibits, constitutes the entire understanding with respect to the subject matter hereof and supersedes all prior or contemporaneous communications relating thereto.
9.5 Counterparts; Electronic Signatures. This Notice may be executed in counterparts, each of which shall be deemed an original, and signatures transmitted electronically or by facsimile shall be binding.
10. EXECUTION BLOCK & NOTARIZATION
IN WITNESS WHEREOF, the undersigned has executed this Stop Payment Notice effective as of the date first written above.
CLAIMANT:
[LEGAL NAME]
By: _____
Name: [NAME]
Title: [TITLE]
COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF _______ to-wit:
The foregoing instrument was acknowledged before me on ____ [DATE] by [NAME], [Title] of [Claimant], on behalf of the entity.
Notary Public
My commission expires: __
Notary Registration No.: _
11. CERTIFICATE OF SERVICE
I, the undersigned, certify under penalty of perjury that on the Effective Date I served a true and correct copy of this Stop Payment Notice (with all Exhibits) upon each Obligated Party listed below by [CERTIFIED MAIL, RETURN RECEIPT REQUESTED / PERSONAL DELIVERY / OTHER METHOD COMPLYING WITH VA LAW]:
- Owner: [NAME & ADDRESS]
- Prime Contractor: [NAME & ADDRESS]
- Construction Lender (if any): [NAME & ADDRESS]
Executed on [DATE].
[NAME], on behalf of Claimant
EXHIBIT A
Legal Description of Property
EXHIBIT B
Claim Documents (Invoices, Delivery Tickets, etc.)
EXHIBIT C
Form of Statutory Payment Bond
EXHIBIT D
Form of Release of Stop Payment Notice
[// GUIDANCE:
1. Verify deadlines for serving a stop-payment notice relative to last furnishing of labor/material (generally parallel to mechanic’s lien deadlines).
2. Confirm whether the Prime Contract is bonded; if so, preserve Miller-Act-style rights on public projects.
3. Ensure mechanic’s lien memorandum is timely filed where appropriate; the Stop Payment Notice does not extend lien filing deadlines.
4. Retain proof of delivery for each service method used (e.g., USPS Form 3811).]