§ 33-1058 — Withholding monies by construction lenders; payment bond

A. On receipt of a stop notice pursuant to section 33-1055, the construction lender may and on receipt of a bonded stop notice shall withhold from the borrower or other person to whom it or the owner may be obligated to make payments or advances out of the construction fund sufficient monies to answer the claim and any claim of lien that may be recorded. If a payment bond has previously been recorded in accordance with section 33-1003, the construction lender shall withhold monies pursuant to a bonded stop notice filed by the original contractor and, at its option, may withhold monies pursuant to a stop notice or bonded stop notice given by anyone other than the original contractor.

B. The construction lender may elect not to withhold pursuant to a bonded stop notice if a payment bond has been recorded in accordance with section 33-1003. When giving the construction lender the stop notice or bonded stop notice, if the claimant makes a written request for notice of the election, accompanied by a preaddressed, stamped envelope, the construction lender shall furnish to the claimant a copy of the bond within thirty days after making the election. A lender is not liable for a failure to furnish a copy of the bond if the failure was not intentional and resulted from a bona fide error, if the lender maintains reasonable procedures to avoid such an error and if the error was corrected no more than twenty days after the date on which the error was discovered.