California Legal Codes and Statutes

§ 8540

Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.
(a)Funds withheld pursuant to a stop payment notice shall be distributed in the following order of priority:
(1)First, to pay claims of persons that have given a bonded stop payment notice. If funds are insufficient to pay the claims of those persons in full, the funds shall be distributed pro rata among the claimants in the ratio that

the claim of each bears to the aggregate of all claims for which a bonded stop payment notice is given.

(2)Second, to pay claims of persons that have given an unbonded stop payment notice. If funds are insufficient to pay the claims of those persons in full, the funds shall be distributed among the claimants in the ratio that the claim of each bears to the aggregate of all claims for which an unbonded stop payment notice is given.
(b)Pro rata distribution under this section shall be made among the persons entitled to share in the distribution without regard to the order in which the person has given a stop payment notice or commenced an enforcement action.

Cite this section

Cal. Civ. Code § 8540 (2026)
https://ca.codecond.com/codes/civ/division-4-general-provisions/part-6-works-of-improvement/title-2-private-works-of-improvement/chapter-5-stop-payment-notice/article-4-priorities/section-8540

Other sections in Article 4 - Priorities

§ 8540§ 8542§ 8544

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