Retention money (construction contracts)

A private employer takes over a warehouse on March 3 with four snagging items, among them an out-of-level floor slab. On every interim payment to the structural works contractor, it has withheld 5%. This is the French retention of law no. 71-584 of July 16, 1971: a sum withheld from payments, capped at 5% of the contract amount, that secures the completion of work needed to clear the reservations recorded at acceptance. The law is mandatory, and it gives the contractor an option the employer cannot refuse. No retention is made if the contractor provides, for the same amount, a joint and several personal guarantee from an authorized financial institution, the substitute bond. The contractor is then paid in full; the risk moves from the employer, who was holding the money, to the guarantor, who pays only if the reservations remain outstanding. Without a bond, the sums withheld are deposited with a stakeholder accepted by both parties. One year after acceptance, with or without reservations, the bond is released and deposited sums go back to the contractor, even without a formal discharge, unless the employer has served by registered letter an objection grounded in the contractor's failure to perform. The one-year period overlaps with the French one-year defects warranty without being the same thing. Public contracts follow a similar mechanism under the Public Procurement Code (articles R. 2191-32 onward): a retention of no more than 5%, replaceable by an on-demand guarantee or by a joint and several personal guarantee on the terms the Code sets, and released at the end of the warranty period. For the guarantor the risk is short and small, and it is read in the contractor's balance sheet more than on site.