California Public Works Projects: Stop Notices and Payment Bonds
Since there are no mechanics' lien rights on public projects, the only way for a construction professional to protect himself is to serve a stop notice. This is a similar procedure to the private stop notice, but no bond need be obtained.
If you have questions about stop notices, turn to the Law Offices of Steven R. Lovett. Our firm has the reputation for efficiency, experience and ethics that has gained the trust of clients throughout Southern California. Contact us today for a free telephonic consultation.
Stop Notice on Public Works
A stop notice claimant who had no direct contractual relationship with the contractor must give a 20-day preliminary notice within 20 days of commencing work as a condition of filing the stop notice. California Civil Code Section 3098.
The notice must be served upon the public entity responsible within 30 days of recording notice of completion or cessation, or 90 days after actual completion or cessation. The stop notice must be served personally or by certified mail on the contractor and the director of the department which let the contract for the state of California, or the public disbursing officer responsible to make payments under the contract, or with the body by whom the contract was awarded.
The claimant on the stop notice cannot sue for 10 days after service and must file suit within 90 days of the period that the stop notice could be filed, 30 days after recording of notice of completion or notice of acceptance, or 90 days after completion or cessation. If no timely suit is filed, there is a mandatory duty to release the funds. A claimant can file the notice before the payment due date. The claimant must give the public entity notice of commencing the action within five days, by personal service or certified mail.
If the claim is disputed, the contractor can file a 125 % release bond, enforceable against the contractor and surety, but not the entity. Cc 3196. The contractor can also file a summary proceeding within 20 days to resolve the issue. If a release bond is filed, it makes the stop notice period moot, and releases the public entity. A suit on the release bond is against the contractor and surety, and is subject to a three-year statute of limitations.
Payment Bonds
While a payment bond is required for all public work contracts over $25,000, a claimant can file an action on the payment bond against the surety without filing a stop notice or suing the public entity. This notice must be served on the principal and surety by certified mail or personal service.
The claimant must either serve the original contractor and the public entity with a preliminary 20-day notice or must give written notice to the principal and surety with 15 days of recordation of a notice of completion or 75 days after actual completion. California Civil Code Section 3252. Suit must be filed within 6 months from the time in which a stop notice action must be commenced. Civil Code Section 3249 says that suit must be filed prior to the expiration of six months after the period in which stop notices must be filed pursuant to Civil Code 3184. Civil Code Section 3184 says the stop notice must be served within 30 days after recording of a notice of completion or 90 days after completion or cessation. A suit is premature before the claimant has provided the last of his labor or materials. (six months plus 90 days)
