House manufacturer threatens to stop work

I can just agree with everyone. Unlike (I believe) many here, I work for a construction company. Therefore, I would like to present the page from the perspective of the construction company:

Our legal consequences for the unlawful refusal to provide services are very severe. However, the legal grounds are very limited. In fact, we are almost always forced to provide services. An exception arises if a notice of concern is not resolved and results in an obstruction that eventually leads to the work no longer being able to continue. This would mean the client is at fault for not advancing matters for clarification.

The next issue would be the unlawful refusal to pay - but only after several reminders and then basically only together with a termination - because a partial payment is only a liquidity advance that was agreed upon - the right to remuneration only arises after full performance of the service. Here the construction company would be on thin ice - but the client is advised to pay the partial payments, because until the day of acceptance you cannot "overpay" and have the corresponding right to reimbursement (with interest).

The topic of "discussion about defects" is certainly a reason why the contractor might not want to perform further but is likely to be difficult to legally defend. We discuss the presence of defects even years after acceptance - here I see no reason to refuse performance.

-- This is just intended as a brief overview and to explain why everyone here is actually right at the moment. However, the person most correct is with the statement to have this clarified by an expert in construction law.

Certainly, multiple issues occur simultaneously and most likely the construction company does not only have trumps in hand (as said, the legal basis is weak).

Since the whole topic already starts with the construction contract (which dates were agreed, what applies contractually), this cannot be explained here at all.

Regardless of the legal framework, my professional experience shows that a significant number of conflicts between contracting parties begin with a lack of or poor communication.
An absolute classic example of missing communication is when something is taken for "granted" and therefore not spoken aloud. Without any ill will, diverging expectations develop.
An absolute classic example of clumsy communication is an emotional statement that is perceived by the other party as an attack. Here, too, there is generally no ill will.
In the conflict situation with the construction partner, I would therefore calmly seek a conversation and pursue four goals in sequence:

[*]Restoration of a good relationship level -> if necessary, discussion of misunderstandings, expectations, and perceived attacks
[*]Factual clarification of the tasks/decisive points to be addressed
[*]Finding solutions for points to be clarified, if necessary, delineating a continuing dissent (which does not necessarily have to cause a construction stop)
[*]Continuation of construction work, if necessary, with a construction schedule modified in coordination

Conducting a conversation with clearly and purposefully separated points is a skill not everyone masters by any means. The TE should critically question themselves whether they are capable of this – and if not, seek assistance. A mediator is usually a person who can do this and has learned it during training; lawyers are mostly also able to do so. However, lawyers often tend to think in terms of "winning or losing," which can give a conflict a very "unique" direction. You just have to know and accept that.

The construction company would be on thin ice here – but the client is advised to pay the installments, because until the day of acceptance one cannot "overpay" and would have the corresponding right to a refund (with interest).

But that is a very "clever" piece of advice. To sue for one's money for years, only to then face a liquidated construction company?

But that is a very "wise" piece of advice. Fighting for your money for years only to end up facing a liquidated construction company?

Well, of course you shouldn't pay installments for things that haven't been built. But before independently reducing installments, you should at least wait until the final invoice or last payment.
I just wanted to make clear that you shouldn't be "too" harsh in deductions out of fear. I think you don't have to scrutinize everything to the last detail.

Furthermore, double security is not lawful – meaning if a retention or a guarantee (performance bond 10%) is contractually agreed upon, you may not withhold additionally. Always assuming that the invoicing also reflects the work performed on the construction site.

may not be withheld additionally

To preempt this – unless a reduction instead of subsequent performance has been agreed upon or it is an open procedure where an expert has made a reduction proposal which the contractor still disputes ;)
Everything is legal and when it is legal, everything is subject to interpretation :)

Conducting a conversation with clearly and purposefully separated points is a skill that not everyone masters by any means. The OP should critically question themselves whether they are capable of this – and if not, seek help. A mediator is usually a person who can do this and has learned it during their training; lawyers are mostly also capable of this. Lawyers often tend to think in terms of "win or lose," which can give a conflict a very "particular" direction. You just have to know and want that.

Yes, but it must be noted that usually the two parties who need to speak are emotionally involved in the matter and partly therefore immediately block good arguments from the other side internally. We therefore have good experiences in such cases with mediators who moderate the conversation as neutral partners. Otherwise, as you said, everyone always wants to win and always sees themselves as right. But getting legal advice on construction law does not mean immediately standing at the door with a complaint letter.