Real estate

Back to Basics – Practical completion

Published on 28th Jun 2021

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General meaning

There is no universally accepted definition of practical completion, commonly referred to as "PC". It is often not defined in construction contracts, including the standard form building contracts such as the JCT and NEC.

Broadly speaking, practical completion is considered to be the point at which all of the work in respect of the construction of a particular building, phase or project is complete, save for minor defects that can be remedied without undue interference or disturbance to an occupier. Another way of describing it is the point at which the relevant building is "capable of beneficial occupation and use".

Circumventing the issue of a lack of a definition, PC can also simply mean the point at which the architect or independent tester etc certifies the building as practically complete, a question which is often left to the professional discretion of the certifier. Often, any minor defects are picked up at this point by the certifier issuing a "snagging list".

It is not uncommon for disputes to emerge as to whether or not practical completion should have been certified. This will usually require an examination of whether patent defects were present at the time of such certification and whether they could be considered minor or trivial.

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Judicial commentary

The courts have given some guidance on the meaning of practical completion.

In one of the more recent cases, Mears v Costplan Services (2019), the court adopted a widely used description from one of the leading construction texts, Keating on Construction Contracts, and stated the following:

  1. works can be practically complete notwithstanding that there are latent defects;
  2. there should not be patent defects. These include both outstanding works and defective works requiring remedy;
  3. all construction work should be finished; and
  4. the certifier has discretion to certify PC even if very minor works are left incomplete.

The court also placed weight on the "intent and purpose" of the building / project. For example, when answering the question of whether a particular work is "very minor", the purpose and intention of the project should be taken into account. The "quality" of the work done in certain respects is also relevant.

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The importance of practical completion

The date of PC has huge importance both commercially and legally. Not only is it the point at which the contractor hands over possession of the site (or relevant part of the site) to the employer and the point at which the operational period can start on projects, it also the initiates various legal and commercial consequences. For example:

  • the “defects liability period” commences;
  • the employer usually releases to the contractor a percentage of any retention monies;
  • the risk of loss or damage to (and responsibility for) the works transfers to the employer;
  • bonds may expire or time may start running as to their expiry; and
  • any right to liquidated damages in respect of a delay to the works ends.
  • Other contractual provisions may also take effect upon PC. For example, in a JCT contract, the “final account” provisions.

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