Most project managers understand liens and payment bonds. But few have heard of the bonded stop notice—a quiet but powerful tool that keeps payment protection alive on public projects without halting work [1][2].
It’s not a new invention. Lawmakers wrote it into statutes decades ago in states such as California, Washington, Arizona, and Alaska. Yet most construction professionals have never seen one filed—or realized it even existed.
The Problem It Solves
Public projects prohibit liens. You can’t encumber public property with a mechanic lien, so when payments stall, subcontractors and suppliers lose their traditional safety net.
A regular stop notice lets them instruct the public agency or lender to withhold funds owed to the general contractor until payment issues resolve [3].
That protection comes at a cost: if the owner withholds money, the project’s cash flow can slow or stall. Owners and agencies want a solution that protects their interests without delaying progress—and the bonded stop notice provides it.
What It Actually Is
A bonded stop notice is a stop notice backed by a surety bond—typically 125% of the claim amount [4].
It carries the same power as a regular stop notice but adds a financial guarantee that shields owners and lenders from loss if the claim later proves invalid or overstated.
The arrangement keeps both sides secure:
- Subcontractors preserve leverage to enforce payment.
- Owners maintain confidence that public funds remain protected.
Unlike a lien, a bonded stop notice targets project funds, not property, and keeps progress uninterrupted.
Understanding the 125% Requirement
That 125% figure often startles project managers. It sounds like the subcontractor must pay one-and-a-quarter times the claim. That’s not true.
A bonded stop notice requires posting a surety bond, not paying 125% in cash.
The subcontractor pays only a small premium—usually 1–3% of the bonded value—to a surety company [5].
Example:
If a subcontractor files a $200,000 bonded stop notice, the bond totals $250,000 (125%).
The subcontractor might pay $2,000–$6,000 in premium, usually from project contingency.
The extra 25% acts as a safety buffer for the owner or lender. If an agency later finds the claim invalid, the surety reimburses any interest, legal fees, or administrative costs caused by withholding the funds [6].
In practice, the bond says: “We’re confident in our claim—confident enough to back it with a surety.”
That assurance allows agencies to honor the notice without freezing progress.
For subcontractors, it transforms a legal right into a credible, low-risk instrument of leverage.
When It’s Used
Bonded stop notices appear most often on public works projects, where mechanic’s liens don’t apply. Some private projects also use them when construction lenders require a bond before holding funds [4].
Typical triggers include:
- Disputed or delayed pay applications
- Unreleased retainage
- Pending change orders
Once the agency or lender receives a valid bonded stop notice, it must withhold funds equal to the claim amount until the dispute resolves [1]. The project keeps moving, and both sides stay protected.
How It Works in Practice
- File a Preliminary Notice – The subcontractor preserves the right to issue a stop notice later.
- Submit the Bonded Stop Notice – File a written claim with the surety bond (125% of claim value).
- Owner or Lender Withholds Funds – The agency holds the amount claimed from the GC’s next draw.
- Resolve or Release – The dispute resolves, and funds flow to the rightful party—or the surety covers losses if the claim fails [6].
California’s Civil Code (§9350–§9510) outlines this process precisely, ensuring quick administrative response instead of prolonged litigation [4].
Why It’s a Smart Move
For subcontractors, the bonded stop notice signals professionalism, not confrontation.
It shows they understand procedure, documentation, and accountability.
For project managers, it’s a controlled escalation that protects cash flow and relationships while avoiding legal gridlock.
Owners appreciate it because the bond guarantees that public funds remain safe, even during disputes.
Behavioral Insight
A bonded stop notice isn’t an act of aggression—it’s an act of confidence and competence. It demonstrates that a contractor knows how to assert rights responsibly.
That tone often shortens dispute cycles and improves communication. In contrast, silence or delay can quietly erode negotiating leverage until recovery becomes nearly impossible.
Example from the Field
An electrical subcontractor on a California wastewater project secured $180,000 in overdue retainage by filing a bonded stop notice with a $225,000 surety bond.
The public agency verified the claim within ten days, withheld funds from the GC’s next payment, and the GC settled immediately. No project delay. No lawsuit. That’s leverage working as intended [4][5].
Closing Thought
The bonded stop notice remains one of the few tools that protect payment rights on public projects without derailing progress. It costs little, acts fast, and projects credibility.
In a climate where liens don’t apply and payment delays strain the industry, understanding this mechanism gives PMs and subcontractors the leverage they need to stay solvent—and stay professional.
When you can’t lien the job, bond the claim.
References
[1] CNS Lien. What Is a Stop Payment Notice? July 19, 2021.
[2] Stoel Rives LLP. Construction Lien Law in Washington – Chapter Seven: The Stop Notice. 2022.
[3] Levelset. Stop Notice Overview – States Where It’s Allowed. 2023.
[4] Stimmel Law. Bonding Around a Stop Notice – Critical Tool for Contractors on Government Jobs. 2021.
[5] Levelset. A Stop Notice Freezes Project Funds Mid-Stream. 2023.
[6] Flex.one. Stop Notice in Construction – What It Is and How It Works. 2023.