What is Practical Completion?

Practical Completion in construction refers to the point at which a building or structure is deemed to be complete and ready for use, although there may still be some minor outstanding work or defects that need to be rectified.

This is an important milestone in the construction process as it marks the point at which the contractor’s responsibility for the work shifts from the construction phase to the defects liability period.

What’s triggered

Upon practical completion, several things are triggered:

  • The Penultimate Certificate is issued by the Contract Administrator and all parties know that the works are finished.
  • Start of the Rectification (Defects Liability) period, during which the contractor is responsible for rectifying any defects that may become apparent.
  • Start of the Maintenance period.
  • The payment of final account.
  • The client can take possession of the building or site and start using it for its intended purpose.
  • The contractor is no longer required to carry insurance for the works.
  • It is the end of the contractor’s liability for liquidated & ascertained damages, unless they have delayed completion of the works beyond the agreed date.
  • The contractor can apply for receiving half of the Retention money which was withheld during the interim valuations.

It’s important to note that the specific implications will depend on the terms of the contract and may vary from project to project. Some contracts may include provisions for the return of retention monies upon practical completion, while others may specify different conditions for the release of retention.

Summary

Here is a summary table of the implications of reaching practical completion for the client and the contractor:

Implications Client Contractor
Possession Can take possession and start using the building and/or site for its intended purpose No longer has responsibility for the building and/or site
Insurance Responsible for insuring the building and/or site after the contractor’s insurance policy expires No longer has responsibility for insuring the building and/or site
Maintenance Responsible for maintaining the building and for any damage that may occur after practical completion No longer has responsibility for maintaining the building and/or site
Operation and Maintenance manual Provided with an operation and maintenance manual Responsible for providing the client with an operation and maintenance manual
Warranties and guarantees Provided with any warranties or guarantees that apply to the building and its systems Responsible for providing the client with any warranties or guarantees
Defects liability period The defects liability period starts, during which the contractor is responsible for rectifying any defects that may become apparent Responsible for rectifying any defects that may become apparent during the defects liability period
Information Provided with as-built drawings, test results and other relevant documentation Responsible for providing the client with as-built drawings, test results and other relevant documentation
Final payment Can start to claim any liquidated damages that may be due if the contractor has delayed completion of the works beyond the agreed date Submits a final account for payment
Retention  Typically a payment of 50% of the Retention money  is made back to the contractor No longer applicable

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