Practical completion marks the point at which a building project is considered complete enough for the owner to take possession, despite minor outstanding works or defects.
This term, however, lacks a precise legal definition and often varies depending on the specific contract and context.
This article aims to explain the concept of practical completion, its significance in construction contracts, the processes involved, and the legal implications.
Table of Contents
- What is practical completion and why is it important?
- Practical completion and the law
- What are the criteria for achieving practical completion?
- Who certifies practical completion?
- What happens after practical completion is certified?
- Practical completion vs substantial completion
- Can practical completion be certified with defects?
- Get expert help with construction contracts from Lawhive
What is practical completion and why is it important?
Practical completion is a term used in construction to indicate that a building is completed to a point where the client (or owner) can start using it.
This means that all the major work is done, and only minor defects or outstanding tasks remain that don't stop the building from being used safely and effectively.
Practical completion is an important stage as it:
Marks the end of the contractor's major obligations and releases them from liquidated damages;
Allows the owner to take over the building and start using it for its intended purpose.
Practical completion and the law
While on the face of it, the above explanation is quite clear, there is no universally accepted definition of practical completion in UK construction law.
Standard forms of construction contracts, such as those from the Joint Contracts Tribunal (JCT), do not provide a precise definition. Instead, practical completion is typically defined within the specific terms of individual contracts like:
completion of all major construction work;
Absence of significant defects, with only minor issues remaining;
Fulfillment of all conditions in third-party agreements related to the works.
Due to the lack of a standard definition, case law plays a crucial role in interpreting practical completion. Courts often have to decide whether practical completion has been achieved in disputes between contractors and clients. Key case law provides guidance on this concept.
One of the most significant cases related to practical completion is Mears Ltd v Costplan Services (2019).
Mears Ltd entered into an agreement for lease with Costplan Services for the construction of student accommodation. The agreement stipulated that practical completion had to be achieved by a specific date, failing which Mears could terminate the agreement. Disputes arose over whether practical completion could be certified given alleged defects, including some rooms being too small.
The court emphasized that practical completion is achieved when the works are sufficiently complete for the purpose intended by the contract, even if there are minor defects.
Major or substantial defects, however, would preclude practical completion.
What are the criteria for achieving practical completion?
Practical completion is typically achieved when:
The major construction work is complete;
Only minor defects remain that do not hinder the building's use;
The building is ready for occupation and use;
The contract administrator certifies that practical completion has been reached;
Any additional contractual requirements are fulfilled.
These criteria help ensure that the building is substantially complete and fit for its intended purpose while allowing for minor defects to be addressed during the defects liability period.
Who certifies practical completion?
Practical completion in construction projects is certified by a designated professional, often referred to as the contract administrator. This person is responsible for inspecting the works and deciding whether the project meets the criteria for practical completion.
The contract administrator is usually an architect, engineer, or project manager appointed under the construction contract to oversee the project’s progress and ensure it adheres to the agreed specifications and timelines.
What happens after practical completion is certified?
Once practical completion is certified in a construction project, several important events and processes are triggered:
The client (employer) takes possession of the building and can start using it for its intended purpose.
A portion of the retention money, typically half, is released to the contractor.
The contractor’s liability for liquidated damages, which are penalties for late completion, ends.
The defects liability period begins, during which the contractor is obligated to fix any defects identified during this time.
The responsibility for insuring the building typically transfers from the contractor to the client.
Practical completion vs substantial completion
Practical completion and substantial completion are terms often used interchangeably in construction contracts, but the exact requirements of each may vary based on the contract.
The term practical completion is more commonly used in UK construction contracts. Whereas, substantial completion is often used in American construction contracts.
Can practical completion be certified with defects?
Practical completion can be certified if the remaining defects are minor and do not significantly affect the usability or safety of the building. These minor issues, often referred to as "snags," are typically listed in a snagging list that the contractor is required to address during the defects liability period.
Get expert help with construction contracts from Lawhive
At Lawhive, we specialize in providing expert legal advice for all stages of construction projects.
Our experienced network of construction solicitors can help you draft clear contract terms, manage practical completion processes effectively, and resolve any disputes that arise.
Contact us today for a free case evaluation to ensure your construction project is completed smoothly and efficiently.