ᐅ Is a Completion Guarantee Necessary for Finishing Construction?

Hello,
we are starting construction next week. It is a small to medium-sized local contractor.

Now I am wondering if I should have some kind of completion guarantee? (Large home builders often advertise this.)

Or is that unnecessary?
I have full trust in the company, and payments will be made based on construction progress.

I am only familiar with this from my father’s house build. He built with an independent architect five years ago and received a guarantee from the trades ensuring the five-year warranty was definitely secured.

Thanks for your clarification.

What should such a guarantee look like?

A standard A4 sheet with a photo of the boss???

Anything that is not a bank guarantee from the developer regarding possible defects in monetary terms is worthless.

And you won’t get such a guarantee; rather, the company will demand it from you.

This type of guarantee already exists; as far as I know, it is offered by the Town & Country parent company. For small and medium-sized enterprises (SMEs), such guarantees are rather uncommon because there is no franchisee who might go bankrupt, prompting the parent company to step in.

In the mid-sized business sector, bankruptcy means bankruptcy. Therefore, legislators have tried to minimize the risk by enforcing a payment schedule and prohibiting advance payments.

In our notary contract, it was stated that if the building type does not have a bond account, we can withhold 5% from the first installment. We did exactly that. He then received it with the second to last installment because everything went smoothly.

Our neighbors did not do this, reasoning: small village, local mason, personally known, he works properly... which he does. But I don’t rely on that for such large amounts.

Before it is clarified whether a performance bond or warranty bond (starting from acceptance) is meant or desired, a precise answer is not possible.

If it is not a “first demand guarantee,” it will remain ineffective anyway, because without acknowledgment or a binding court decision regarding the existence of a (disputed) defect, the guarantor will not pay. After all, they want to retain the right to claim recourse against the contractor in the internal relationship...

Retention of funds is much more practical. Only in the event of insolvency is a guarantee truly valuable.

Okay
I’m not familiar with this.

Thanks in advance. So, it’s not common.
Is it acceptable to withhold 5% if everything hasn’t been done properly?
So, retain or reduce the final payment?