Delivery guarantee for individual home construction (France)
A guarantee compulsory since 1990 in individual home construction contracts, assuring the private owner that the house will be completed at the agreed price and on time if the builder defaults.
A private individual building a house often entrusts the whole project to a single builder, under an individual home construction contract regulated by the law of 19 December 1990. The main risk is not a construction defect, covered by ten-year liability and building damage insurance, but the builder's bankruptcy mid-project: an unfinished house, deposits paid, a loan being repaid, rent to pay in the meantime. The law therefore requires a delivery guarantee, issued by a credit institution or an approved insurer. If the builder defaults, the guarantor pays the cost overruns beyond the agreed price needed for completion, appointing another firm to finish the works if necessary, as well as late-delivery penalties beyond a grace period. It guarantees not the refund of sums paid, but the completion of the house. The guarantor requires counter-guarantees from the builder, monitors its financial health, and may refuse to guarantee it, which amounts to barring it from signing new contracts. Waves of builder failures, when the market turns and material costs rise, put guarantors under severe strain, as several resounding bankruptcies in the sector showed in the mid-2020s.
Textbook case: a builder goes bankrupt when a couple's house is weathertight but unfitted. The delivery guarantor appoints another firm, which finishes the works for 40,000 euros above the original price; the guarantor pays this overrun and six months of late-delivery penalties.
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