We at Jurisco know that the construction industry in California is humming again. New projects, both public and private are being executed all over the state. And so largely gone are the days where shrinking fund availability leads to many unpaid (and unhappy) contractors. Largely gone but not completely. Every day in California, aggrieved contractors are using lien remedies to collect on what they are owed. The two available in this state are the ‘Mechanic’s Lien’ and the lesser used ‘Stop Payment Notice’. What many people may not know is that a Stop Payment Notice Bond must be filed along with the Stop Payment Notice. This Surety Bond protects the lender and the prime contractor from any monies withheld wrongfully. The bond must be in the amount of 125% of the claim.
For those of you who wish to learn more about the the Mechanic’s Lien and the Stop Payment Notice remedies, please see this wonderful article: http://www.zlien.com/articles/the-differences-between-a-stop-notice-and-a-mechanics-lien/ Mr. Wolfe provides a very clear explanation; and attempting to best his efforts would be a waste of my energy. I will summarize, though. A Stop Notice is used when a subcontractor or supplier has not been paid for their goods or services. The Stop Notice requires the lending authority to withhold future payments to the general contractor in the amount described in the Stop Notice claim. This is only done, however, if the Claimant has procured a stop payment notice bond to be filed with the claim. The lender will only withhold money if the notice is bonded. (More information on the Stop Payment Notice requirements in sections 3083 and 3103 in the California Civil Code)
I could muddy the waters by also describing the other bond that can be used as a remedy to the lender; called the Release of Stop Payment Notice Bond. But I’ll save that for another post. In the meantime, if you have any questions regarding Stop Payment Notice Bonds or any other surety bond matter, please contact the bond experts at Jurisco and an actual human being will answer all your queries.