"File Not Found" error when applying retention label to a 'NEW' folder in SharePoint

Question

"File Not Found" error when applying retention label to a 'NEW' folder in SharePoint

Molly Brean 0

Hi all,

I'm hoping someone can help me understand an error I'm hitting in SharePoint (retention labels managed via Microsoft Purview).

What I'm trying to do: Apply a retention label to a folder in a SharePoint document library.

What happens: When I create a new folder and try to apply the label, I get: "Error: File Not Found".

User's image Has anyone seen this "File Not Found" error specifically when applying a retention label during folder creation? Is it expected that the label can't bind to a folder that hasn't been saved yet, and that the supported sequence is to create the folder first and then apply the label from the details pane?

Any pointers appreciated — happy to provide more detail.

Thanks!

Manoj Kumar Boyini 16,725 Reputation points Microsoft External Staff Moderator

2026-06-02T21:35:16.09+00:00

Hi @Molly Brean

Retention labels are supported for SharePoint folders. However, Microsoft documentation also notes that retention and retention label policies must be successfully published and free of policy distribution errors before labeling functionality can be relied upon.

For this scenario, I would recommend verifying that the associated retention label policy is healthy and fully distributed in Microsoft Purview by reviewing the policy status under Data Lifecycle Management > Label policies or Records Management > Label policies. Microsoft specifically recommends resolving any policy synchronization or distribution errors before testing retention label behavior.

From a SharePoint perspective, the behavior you're describing is typically observed when a retention label is selected as part of the folder creation process rather than being applied to an existing folder. Since retention labels are applied to SharePoint items, the supported approach is to first create the folder and then apply the retention label after the folder exists in the document library.

If the label applies successfully after the folder has been created, that would indicate the retention label itself is functioning correctly. If the error persists even for existing folders, then the next step would be to investigate the label policy status, site configuration, and any policy distribution errors reported in Microsoft Purview.

Check whether the same retention label can be applied successfully to an already existing folder in the same document library.

Please let us know if you have any questions or concerns.
Manoj Kumar Boyini 16,725 Reputation points Microsoft External Staff Moderator

2026-06-03T12:53:30.1733333+00:00

Hi @Molly Brean

I hope you had a chance to review the information shared earlier, and I hope this information has been helpful! If you still have questions, please let us know what is needed in the comments so the question can be answered.
Manoj Kumar Boyini 16,725 Reputation points Microsoft External Staff Moderator

2026-06-04T05:34:04.52+00:00

Hi @Molly Brean

Just checking in to see if the information provided earlier was helpful. Please let us know if you need any additional details or assistance, and we’ll gladly continue supporting you.

1 answer

Your answer

Manoj Kumar Boyini 16,725 Reputation points Microsoft External Staff Moderator

2026-06-02T21:35:16.09+00:00

Hi @Molly Brean

Retention labels are supported for SharePoint folders. However, Microsoft documentation also notes that retention and retention label policies must be successfully published and free of policy distribution errors before labeling functionality can be relied upon.

For this scenario, I would recommend verifying that the associated retention label policy is healthy and fully distributed in Microsoft Purview by reviewing the policy status under Data Lifecycle Management > Label policies or Records Management > Label policies. Microsoft specifically recommends resolving any policy synchronization or distribution errors before testing retention label behavior.

From a SharePoint perspective, the behavior you're describing is typically observed when a retention label is selected as part of the folder creation process rather than being applied to an existing folder. Since retention labels are applied to SharePoint items, the supported approach is to first create the folder and then apply the retention label after the folder exists in the document library.

If the label applies successfully after the folder has been created, that would indicate the retention label itself is functioning correctly. If the error persists even for existing folders, then the next step would be to investigate the label policy status, site configuration, and any policy distribution errors reported in Microsoft Purview.

Check whether the same retention label can be applied successfully to an already existing folder in the same document library.

Please let us know if you have any questions or concerns.
Manoj Kumar Boyini 16,725 Reputation points Microsoft External Staff Moderator

2026-06-03T12:53:30.1733333+00:00

Hi @Molly Brean

I hope you had a chance to review the information shared earlier, and I hope this information has been helpful! If you still have questions, please let us know what is needed in the comments so the question can be answered.
Manoj Kumar Boyini 16,725 Reputation points Microsoft External Staff Moderator

2026-06-04T05:34:04.52+00:00

Hi @Molly Brean

Just checking in to see if the information provided earlier was helpful. Please let us know if you need any additional details or assistance, and we’ll gladly continue supporting you.

Answer 1

The behavior described is consistent with how retention labels are applied and enforced and with known “File not found” patterns when the underlying location or container does not yet exist.

When a folder is being created in SharePoint, the item (the folder object) does not fully exist until the creation operation completes. Retention labels are enforced by policies that must be able to resolve a real location/container. If the label is applied as part of the same “new item” operation before the folder is actually committed, the system can effectively be trying to bind the label to a location that is not yet available, which results in a “File not found”–type error.

Supported and reliable sequence for applying a retention label to a folder in a SharePoint document library is:

Create and save the folder first (so the folder exists as an item in the library).
After the folder is created, select it and use the Details pane (or equivalent UI) to apply the retention label.

This aligns with how Microsoft Purview retention and retention label policies work: policies and labels are enforced only after the target location exists and has successfully synced and been processed. Errors in policy distribution or in resolving locations are a known class of issues; Microsoft Purview does not support policies that contain such errors and requires them to be resolved before enforcement works as intended.

If the error persists even when applying the label after the folder exists, the next step is to check for retention/label policy errors in Microsoft Purview and resolve any reported issues before retrying.

References:

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"File Not Found" error when applying retention label to a 'NEW' folder in SharePoint

1 answer

Your answer