Stop Notice

Every person who provides labor, professional services, materials, machinery, fixtures, or tools in the construction, alteration, or repair of any building, or other structure, or improvement, shall have a lien on such building, structure, or improvement for the work, labor, professional services, materials, machinery, fixtures or tools furnished.^[1]

Design professionals are also protected by Arizona stop notice laws. In order to have stop notice rights, the design professional must have an agreement with the owner of the property or with an architect, engineer, or contractor who has an agreement with the owner of the property.^[2]

The general/prime contractor may not serve a stop notice upon the owner, but can serve a stop notice against the construction lender (if any).^[3] Furthermore, a sub-contractor or other lower tier contractor/material supplier may serve a stop notice against the property owner and/or the construction lender.^[4]

Contractors may not serve a stop notice involving residential owner-occupied properties unless the contractor has a written contract directly with the owner.^[5] This rule will affect subcontractors and other lower tier contractors, but not general contractors.

List of Cited Statutes and Case Laws for further research

• ^[1] Arizona Revised Statutes §§ 33-1054 and 33-981(A).
• ^[2] Arizona Revised Statutes §§ 33-1054 and 33-981(F).
• ^[3] Arizona Revised Statutes §§ 33-1054.
• ^[4] Arizona Revised Statutes §§ 33-1055.
• ^[5] Arizona Revised Statutes §§ 33-1054 and 33-1002.

In order to have stop notice rights in Arizona, a "preliminary 20-day notice" must be served to the property owner, the general contractor, and the construction lender (if any).^[1] The term claimant refers to any person or company supplying materials and/or labor to a work of improvement. (The term claimant refers to you.)

Every person who furnishes labor, professional services, materials, machinery, fixtures, or tools must serve the preliminary 20-day notice otherwise he/she may lose lien rights. Persons performing actual labor for wages are exempt from having to serve this notice.^[2] The preliminary 20-day notice shall be served no later than twenty days (20) after the claimant has first provided labor, professional services, materials, machinery, fixtures or tools to the job site.^[3]

If the notice is not served within the required time frame, it may still be served late. However, a late notice will limit stop notice rights to twenty days (20) prior to the service of the notice and anytime thereafter.^[4] Below is an example of the limited stop notice rights of a preliminary 20-day notice served late:

• Example: ABC Construction is a subcontractor that commenced work at the job site on August 1, 2005 but did not serve the Preliminary 20-day Notices until August 31, 2005. According to Arizona law, the notices must be served no later than 20 days from the start date and ABC Construction has served their notice 10 days late. Although the notice can still be served on the 31st of August, their stop notice rights will be limited.

• Since the notice was served 10 days late, ABC Construction will lose stop notice rights for all of the work that was completed during the first 10 days on the job site. Let’s assume that the work provided during the first 10 days was worth $2,500 and the total price of the construction project is $75,000. There are no rights to a stop notice for the $2,500 but ABC Construction still retains the right to serve a stop notice for $72,500.

Arizona law also requires the claimant to provide a secondary preliminary 20-day notice if the actual estimated total price for the labor, professional services, materials, machinery, fixtures or tools furnished or to be furnished exceeds the estimated total price in any prior original or subsequent preliminary notice by twenty percent (20%) or more.^[5] It is recommended that claimants immediately serve a secondary preliminary 20-day notice for the overage.

Service of the preliminary 20-day notice is considered complete once the notice has been delivered to the Post Office.^[6] Actual receipt of the preliminary 20-day notice is not required.^[7]

The term "days" are calculated by calendar days and NOT business days unless otherwise stated. Time is calculated by excluding the first day and including the last day, unless the last day is a holiday, then it is also excluded.^[8]

List of Cited Statutes and Case Laws for further research

• ^[1] Arizona Revised Statutes §§ 33-1056(B) and 33-992.01(B).
• ^[2] Ibid.
• ^[3] Arizona Revised Statutes §§ 33-1056(B) and 33-992.01(C).
• ^[4] Arizona Revised Statutes §§ 33-1056(B) and 33-992.01(E).
• ^[5] Arizona Revised Statutes §§ 33-1056(B) and 33-992.01(G).
• ^[6] Arizona Revised Statutes §§ 33-1056(B) and 33-992.01(F).
• ^[7] Columbia Group Inc v. Jackson, 151 Ariz. 76, 725 P.2d 1110 (1986)
• ^[8] Arizona Revised Statutes § 1-243(A).

The stop notice must be filed within 120 days after the "completion" of the project.^[1] If a notice of completion was filed, the claimant has 60 days from the date that the notice of completion was filed to file a stop notice.^[2] However, notices of completion are often filed/served improperly and may be invalid. In order for this notice to be effective, the property owner must, within 15 days after filing the notice, serve a copy of the document by certified mail to the general contractor, original contractor, and any potential lien claimants who supplied a preliminary 20-day notice.^[3] If proper notification was not delivered, stop notice claimants will have the full 120 days to file a lien.

The term "completion" is defined as the earliest of the following events:

• 30 days after final inspection and written final acceptance by the governmental body which issued the building permit for the building, structure or improvement;^[4]

OR

• Cessation of labor for a period of sixty consecutive days, except when such cessation of labor is due to a strike, shortage of materials or act of God;^[5]

OR

• If a governmental body does not issue final acceptances or its equivalent, then from the last date on which any labor, materials, fixtures or tools were furnished to the property.^[6]

The term "days" are calculated by calendar days and NOT business days unless otherwise stated. Time is calculated by excluding the first day and including the last day, unless the last day is a holiday, then it is also excluded.^[7]

List of Cited Statutes and Case Laws for further research

• ^[1] Arizona Revised Statutes §§ 33-1056(B)(1) and 33-993(A).
• ^[2] Ibid.
• ^[3] Arizona Revised Statutes §§ 33-1056(B)(1) and 33-993(I).
• ^[4] Arizona Revised Statutes §§ 33-1056(B)(1) and 33-993(C)(1).
• ^[5] Arizona Revised Statutes §§ 33-1056(B)(1) and 33-993(C)(2).
• ^[6] Arizona Revised Statutes §§ 33-1056(B)(1) and 33-993(D).
• ^[7] Arizona Revised Statutes § 1-243(A).

A stop notice can be enforced by filing a lawsuit. The lawsuit is often very complex and should be processed by an attorney licensed to practice law in the state where the property is located. If you need a referral to a construction law attorney in your area, please contact our office.

The stop notice lawsuit may be commenced after 10 days from the date of service of the stop notice but not later than 3 months after the expiration of the period within which liens must be recorded.^[1] Basically, the stop notice expires 120 days plus 3 months after the "projects completion date" if no notice of completion/cessation was filed. If a notice of completion/cessation was filed, then the stop notice expires 60 days plus 3 months from the date the notice of completion/cessation was filed. This timeframe may be extended even further if all parties stipulate in writing to an extension of time not longer than 3 additional months.^[2]

Due to expensive court costs and long waiting periods it is best to use the stop notice as leverage to obtain payment and avoid the court system. However, if full payment is not received before the expiration date, the claimant should consider moving forward with the lawsuit to enforce the stop notice.

List of Cited Statutes and Case Laws for further research

• ^[1] Arizona Revised § Section 33-1063.
• ^[2] Ibid.

Contractors, subcontractors, material suppliers, equipment lessors, laborers, design professionals, and other persons who perform work authorized for a “work of improvement” will have Stop Notice rights.^[1]

A “work of improvement” is very broadly defined as, but not limited to, construction, alteration, addition to, or repair, in whole or in part, of any building, wharf, bridge, ditch, flume, aqueduct, well, tunnel, fence, machinery, railroad, or road, the seeding, sodding, or planting of any lot or tract of land for landscaping purposes, the filling, leveling, or grading of any lot or tract of land, the demolition of buildings, and the removal of buildings.^[2]

The general/prime contractor may not serve a stop notice upon the property owner or public entity, but may serve a stop notice against a construction lender.^[3] Furthermore, a lower tier contractor or material supplier may serve a stop notice against the property owner, public entity, and/or the construction lender.^[4]

Furthermore, an “express trust fund” to which a portion of a laborer's total compensation is to be paid pursuant to an employment agreement or a collective bargaining agreement for benefits may also file a stop notice against any undisbursed construction funds.^[5]

List of Cited Statutes and Case Laws for further research

• ^[1] California Civil Code §§ 8400 and 8500
• ^[2] California Civil Code § 8050
• ^[3] California Civil Code §§ 8250, 8530, and 9100
• ^[4] Ibid.
• ^[5] California Civil Code §§ 8024, 8520, 8530, and 9100

In order to have stop notice rights in California, a “preliminary notice” must be served to the property owner or public entity, the general contractor, the construction lender, the surety bond, and the person with whom the claimant has contracted with.^[1]

The term claimant refers to any person or company supplying materials and/or labor to a work of improvement. (The term claimant refers to you.)

Every person who furnishes labor, professional services, materials, machinery, fixtures, or tools must serve the preliminary notice otherwise he/she may lose his/her stop notice rights. Contractors who have a direct contract with the property owner or any “laborer” are generally exempt from having to serve this notice.^[2] However, if there is a construction lender, direct contractors must still serve a Preliminary Notice to such lender. Furthermore, if the project is public works, the Preliminary Notice is not required for laborers or contractors who have a direct contract with the prime contractor; all other lower tier contractors in a public works project are required to serve this notice.^[3] The preliminary notice should be served no later than twenty days (20) from when the claimant first provided labor, professional services, materials, machinery, fixtures or tools to the job site.^[4]

If the notice is not served within the required time frame, it may still be served late. However, late notices will limit your stop notice rights to twenty days (20) prior to the service of the notice and anytime thereafter.^[5] Below is an example of the limited lien rights of a preliminary notice served late:

Example: ABC Construction is a subcontractor that commenced work at the job site on August 1, 2005 but did not serve the preliminary notice until August 31, 2005. According to California law, the notices must be served no later than 20 days from the start date and ABC Construction has served their notice 10 days late. Although the notice can still be served on the 31st of August, their stop notice rights will be limited.

Since the notice was served 10 days late, ABC Construction will lose stop notice rights for all of the work that was completed during the first 10 days on the job site. Let’s assume that the work provided during the first 10 days was worth $2,500 and the total price of the construction project is $75,000. There are no rights to a stop notice for the $2,500 but ABC Construction still retains the right to serve a stop notice for $72,500.

If the estimated price listed on the preliminary notice has changed substantially, the claimant should consider serving a “pre-lien amendment” to document the change. Service of the preliminary notice is considered complete once the notice has been delivered to the Post Office.^[6]

The term “days” are calculated by calendar days and NOT business days unless otherwise stated. Time is calculated by excluding the first day, and including the last, unless the last day is a holiday or weekend, then it is also excluded.^[7]

List of Cited Statutes and Case Laws for further research

• ^[1] California Civil Code §§ 8200 and 9300.
• ^[2] Ibid.
• ^[3] California Civil Code § 9300.
• ^[4] California Civil Code §§ 8204 and 9304.
• ^[5] lbid.
• ^[6] California Civil Code § 8116.
• ^[7] California Code of Civil Procedure §§ 12, 12(a).

In order to have an enforceable stop notice, any general/prime contractor must serve the stop notice to the construction lender within 90 calendar days from the date of “completion.”^[1] If a “notice of completion” or “notice of cessation” is filed, the general/prime contractors have 60 calendar days from the date that the “notice of completion” or “notice of cessation” was filed to serve the stop notice.^[2]

All other contractors (subcontractors, material suppliers, equipment renters, etc.), are given 90 calendar days to serve a stop notice to a property owner, public entity, and/or construction lender.^[3] If a “notice of completion” or “notice of cessation” is filed, all other contractors have 30 calendar days from the date that the “notice of completion” or “notice of cessation” was filed to serve a stop notice.^[4]

A “notice of completion” or “notice of cessation” is often filed improperly and can become legally ineffective. A notice of completion must be filed within 15 calendar days of the true date of completion.^[5] A notice of cessation is only effective if the document is filed after 30 calendar days of continuous cessation of labor.^[6] In a private works project, the property owner must also serve a copy of the filed notice to the general contractor, original contractors, and any contractor that served a preliminary notice.^[7] The notification must be sent within 10 days from the date the notice of completion or cessation is filed.^[8] Residential owner-occupied homes that have four units or less are exempt from having to notify the contractors of the filing of a notice of completion or cessation and these notice provisions are also exempt for public work projects.^[9] If these strict requirements are not met, the notice of completion or cessation may be invalidated and all claimants should have the entire 90 days to file a lien.

A project is deemed “complete” under a private works project if any one of the followings have occurred:

• Actual completion of the work of improvement;^[10]

or

• The work of improvement supplied is being used or occupied by the owner or his agent accompanied by cessation of work;^[11]

or

• A cessation of work for 60 continuous calendar days;^[12]

or

• The filing of a notice of cessation provided that the notice was filed after 30 calendar days of continuous cessation of labor.^[13]

SPECIAL NOTE FOR PUBLIC WORK PROJECTS: Civil Code Section 9200 defines “completion” for a public works project as acceptance of work by the public entity or a cessation of labor of a work of improvement for a continuous period of 60 days.

The term “days” are calculated by calendar days and NOT business days unless otherwise stated. Time is calculated by excluding the first day, and including the last, unless the last day is a holiday or weekend, then it is also excluded.^[14]

List of Cited Statutes and Case Laws for further research

• ^[1] California Civil Code §§ 8412 and 8508.
• ^[2] Ibid.
• ^[3] California Civil Code §§ 8414 and 8508.
• ^[4] Ibid.
• ^[5] California Civil Code § 8188.
• ^[6] California Civil Code § 8180.
• ^[7] California Civil Code § 8190.
• ^[8] Ibid.
• ^[9] Ibid.
• ^[10] California Civil Code § 8180.
• ^[11] Ibid.
• ^[12] Ibid.
• ^[13] Ibid.
• ^[14] California Code of Civil Procedure §§ 12, 12(a).

A stop notice can be enforced by filing a lawsuit. The lawsuit is often very complex and should be processed by an attorney licensed to practice law in the state where the property is located. If you need a referral to a construction law attorney in your area, please contact our office.

The stop notice lawsuit may be commenced after 10 days from the date of service of the Stop Notice but not later than 90 days after the expiration of the period within which liens must be recorded (if private works) or stop notices must be served (if public works).^[1] Basically the stop notice expires 180 days after the “projects completion date” for all contractors when no notice of completion/cessation was filed.^[2] If a “notice of completion” or “notice of cessation” is filed, the general/prime contractors have 150 days to serve a stop notice to the construction lender, and all other contractors will only have 120 days from the date that the “notice of completion” or “notice of cessation” was filed to serve a stop notice to a property owner, public entity, and/or construction lender.^[3]

Due to expensive court costs and long waiting periods it is best to use the stop notice as leverage to obtain payment and avoid the court system. However, if full payment is not received before the expiration date, the claimant should consider moving forward with the lawsuit to enforce the stop notice.

List of Cited Statutes and Case Laws for further research

• ^[1] California Civil Code § 8550.
• ^[2] California Civil Code §§ 8412, 8414, 8550, and 9502.
• ^[3] Ibid.