Financial guarantee

Often neglected by building contractors, the GPE is nevertheless an important financial guarantee for the development of a property development operation. It is part of the market guarantees and financial guarantee put in place to guarantee an operation. The GPE is perceived as an insurance to guarantee the payment of companies and subcontractors participating in the act of construction. Still called guarantee in case of pay default, it promotes the establishment of good commercial relations between the various stakeholders. But what are its obligations and how does it work? This article gives you some details.

What is a business payment guarantee?

What is the Business Payment Guarantee?

GPE is a public security bond provided by the contracting authority under a works contract. It is used to guarantee the remuneration of contractors selected for a contract (or contract of hire ) in case of financial failure of the promoter of the operation. It is established through a bank or an insurance company which will forward it to the company receiving the guarantee.

This deposit also allows the client to ensure the smooth running of the work on his site. Implemented for more than two decades, it applies mainly to all specific works contracts. Several private actors are required to respect this guarantee. These are commercial enterprises, private real estate companies, banks, insurance companies, traders, lawyers, etc. We also find individuals asking for a loan to finance their work.

However, it does not apply to the promoter financing the work with a loan, which the company collects directly from the financial institution. Also, are not concerned by the said law the SEM (semi-public companies) realizing housing for social purpose and the companies of HLM and other social housing.


What are the obligations of this guarantee?

What are the obligations of this guarantee?

The Business Payment Guarantee is mandatory, but often set aside by companies. However, if entrepreneurs are paid directly, it is no longer necessary. It is provided to architects before they start work. If after starting the work, they have not received this payment, they can stop everything. But before, they must have sent a letter of formal notice to the building owner, 15 days in advance. If after 6 months there has been no action on the part of the promoter, the company may terminate the contract. The termination will be done to the damages of the owner. The company has the opportunity to make a request to the court to order the promoter to give the guarantee under duress.


What is its regulatory context?

GPE is a legal obligation. It was created by article 1799-1 of the civil code and the law no 94-475 of June 10th, 1994. The device 1799-1 of the Civil Code requires that the promoter guarantee the payment of the sums due to the entrepreneur and this , when the price of the works exceeds a sum fixed at 12.000 euros HT (decree no99-658 of July 30, 1999). More than 90 court decisions relating to this guarantee are favorable to entrepreneurs.

The case law attests the public order nature of this guarantee. A decision of principle of the Court of Cassation of December 1, 2004 gave more weight to this imposition. Thus, companies and the client are required to comply with Article 1799-1 of the Civil Code.

The guarantee being of public order, the two parties can not break this law by private agreements. The promoter must automatically pay the guarantee, even if it is not stipulated anywhere in the contract. The contractor also has the right to claim it during the completion of the contract. He will not need to send a letter of formal notice until he respects it.


How does this warranty work?

How does this warranty work?

It works in various forms:

  • If it is a specific credit for the financing of the works, it is paid directly to the entrepreneur via a bank.
  • It takes the form of a bond, if the promoter has not resorted to a loan. It may be a mortgage or consignment. It is the same if the loan is partial.

The bond is not considered as a guarantee, but a deposit. Its cost is borne by the client as well as the GFA .

The Company Payment Guarantee is advantageous for both the site developer and the works contractors. It allows the sponsor to enter secure markets more easily. It is a preventive tool for architects to avoid late payments and is mandatory, even if not all companies use it.


How to set up a business payment guarantee?

How to set up a business payment guarantee?

This guarantee is put in place in conjunction with a GFA and in addition. It is usually in the security risk carrier for the GFA, which will establish the guarantee as part of an operation in off-plan .


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