Bonded Stop Notice Claimants Must Serve Proper Office of Bank or Construction Lender

Update from Reid & Hellyer (Feb. 3, 2011): This blog post was mentioned in a Press-Enterprise column entitled “Advice for contractors who haven’t been paid.”

General and subcontractors must take particular care when serving a bonded stop notice on the project’s construction lender. Last month, I blogged about the necessity for the 20-day notice being personally served or by return receipt mail on the “manager or responsible officer or person” of the lender.

This month, I remind contractors of another requirement: the notice must be served on the particular branch of the construction lender actually “administering or holding” the loan funds, per California Civil Code section 3083.

This requirement that the stop notice be served on the particular branch of the lender actually administering or holding the funds is strictly construed. Service of the stop notice is not perfected if the receiving branch forwards the notice to the administering branch. This requirement is not waived or relaxed even if the contractor, subcontractors and suppliers all believe that the branch that they have exclusively dealt with throughout the project is the administering branch.

Potential stop notice claimants need to exercise due diligence in confirming with the construction lender the location of the administering office.  Relying on the owner’s  mistaken identification of the administering branch of the lender does not excuse the  claimants from strict compliance with the requirements of California’s Mechanic’s Lien Law.