No matter the size of a development project, you’ll need to manage tight schedules and thin margins as you attempt to complete the project by the owner’s preferred deadline. Even if the contractors and subcontractors are performing all of their work properly and without delay, there are a range of issues that could create delays to your project timeline, the primary of which is a stop work order.
The smallest of building code violations can result in a stop work order being issued, which means that everyone working on the project would need to leave the construction site until the issue has been resolved. When this order is issued, you might need to contend with high penalties, ample customer frustrations, and extensions to the preset timelines. This article focuses on stop work orders and how you can effectively avoid them.
What Is a Stop Work Order in Construction?
A stop work order is a type of instruction provided to a contractor that asks them to temporarily suspend all work for a development project. If this order is told to you by someone else, it isn’t automatically legally binding.
For a stop work order to be enforceable, it must be written down and given to the developer or generator contractor. While stop work orders can be used in practically any industry that involves written contracts, they’re most common throughout the construction industry.
What Are Common Reasons for a Stop Work Order?
There are many reasons why a contractor can receive a stop work order, the most likely of which is that the project isn’t complying with an aspect of the local building code. In this scenario, the local authorities could issue a stop work order. Keep in mind that these orders may also be used to resolve payment disputes and lower the amount of damage that occurs following a breach of contract. Some additional reasons why you might receive a stop work order include:
- Not adhering to the Occupational Health and Safety Act
- Not complying with the regulations surrounding workers’ compensation laws
- Being in violation of environmental protection laws
- Using hazardous materials at a construction site
- Hiring unlicensed contractors
- All other activities that are deemed to be illegal
Who Can Issue a Stop Work Order?
It’s possible for any local authority or individual who’s part of your development contract to ask for a stoppage. If you don’t comply with local regulations, government agencies typically recommend that a work stoppage occurs until the matter can be resolved.
It’s common for this type of order to be requested when project requirements shift during a later stage of development, which means that government approval would be needed for the changes. If one of the involved parties wants to alter the terms of the contract in a manner that significantly changes the final result, a stop work order can be beneficial.
What’s Included in a Stop Work Order?
Stop work orders usually detail all types of work that must be suspended. You should also be given a description of what needs to be done to fix the problem before work can resume. The pieces of information that should be listed in this document include:
- Lengthy descriptions of the activities that should be suspended, which may be some aspect of the project or the entirety of it
- In-depth instruction on the necessary corrections, which could involve the contractor obtaining a building permit
- Penalties that might occur if you don’t comply, which can be anything from civil fines and prosecution to terminating the contract
The stop work order must include steps on how to resume work if the contractor makes the necessary corrections.
If it doesn’t appear like the problems can be resolved, the stop work order should detail the steps that can be taken for work termination. This result might occur if the contractor and project owner have irreconcilable differences.
What Types of Stop Work Orders Exist?
There are two basic types of stop work orders can be applied to your project. The type of order you receive determines how much work can continue being done while waiting for the issue to be resolved.
Partial stop work orders will shut down part of the construction site, which means that some of the work will be able to continue. This option is oftentimes used when there are problems with one aspect of the design or issues with one of the subcontractors that must be tended to.
Full stop work orders will shut down the whole construction site, which means that everyone there will need to go home until the order is lifted. A full SWO can be issued for several reasons, which include evidence of financial, design, or engineering issues. The same is true if severe safety violations are discovered.
What Should You Do When You Receive One?
In the event that you receive a stop work order, keep in mind that not complying with the order can result in lengthier delays as well as the possibility of jail time. Taking the time to fight against the order only serves to lower your funds and waste some of your time. Once you receive an order to stop operations, make sure that you:
- Cease all work immediately.
- Get in touch with the issuing authority if you need more clarification.
- Review the problems to determine if the violations exist. If you feel like the order is unfair, speak with a lawyer.
- Estimate the costs and amount of work associated with the corrections. If the costs are too high, the project may need to be terminated altogether.
- Develop a work plan to fix the problems.
- Obtain an inspection once the work has been completed.
- Pay any fines to resume the project.
What Are the Penalties for Not Following a Stop Work Order?
If you don’t adhere to a stop work order, you may be assessed high fines and stiff penalties from local authorities. The majority of states allow for civil penalties to begin building up after the first day of the stop work order, which can lead to a high sum of money that needs to be repaid. Criminal charges could also be brought against you.
Document the Process
Regardless of the scope of the stop work order, it’s essential that you follow it. This situation must be resolved before you can continue working on your project. If you don’t believe that the order is correct, there are several options at your disposal to lift it.
When work is suspended on a construction site, every contractor and subcontractor on the job will be affected by payment and project delays, which is why you should lift the order as quickly as possible.
Your first option is to fix the violations that were listed in the stop work order. In the event that you caused the problem, it should be fixed immediately. If one of your subcontractors caused the problem, this individual should make the fixes, which means that they will be held accountable if they don’t perform the tasks assigned to them.
If the SWO was given to you because of an issue with code non-compliance, you should spend the money needed to redo any work that’s not up to code. The second option you can pursue involves asking for an additional inspection from the agency that issued the stop work order. The inspecting agency that’s hired for the job will be responsible for determining if you’ve resolved all of the issues detailed in the order.
The third option is to pay any fees that you owe. If the inspector examines the structure and ends up certifying the corrections that you made, you’ll still need to pay some fines. If you want the stop work order process to go smoothly, it’s essential that you document any work you perform as well as all correspondence.
Creating a paper trail for this order allows you to record all of the steps you took to comply with it while also allowing you to write down any costs you must pay. Your documents might be able to prove that the subcontractor you hired was aware of the issue, which may put the liability on them instead of you. The documentation you keep should also be helpful once the time comes to seek reimbursement.
Work stop orders are very common on construction sites but can cause extensive delays to any project. If you want to minimize delays and reduce the amount of money you lose, you should know what to do when you receive this order and how to have it lifted.
Jason Somers, President & Founder of Crest Real Estate
With over 15 years of professional experience in the Los Angeles luxury real estate market, Jason Somers has the background, judgement and track record to provide an unparalleled level of real estate services. His widespread knowledge helps clients identify and acquire income producing properties and value-ad development opportunities.