Last edited 21 Jul 2014

Beneficial occupation

Beneficial occupation’ or ‘beneficial occupancy’ is a term that can be used to describe a building that is capable of being used for its intended purpose, even though it may have some minor defects.

It can be used with reference to the certification of practical completion, which takes place when all the works described in a construction contract have been carried out. This is a very important process as it releases half of the retention (an amount retained from payments due to the contractor to ensure that they complete the works), ends the contractor's liability for liquidated damages and signifies the beginning of the defects liability period.

The defects liability period, which follows certification of practical completion, is not a chance to correct problems apparent at practical completion, it is the period during which the contractor may be recalled to rectify defects which appear. If there are defects apparent before practical completion, then these should be rectified before a certificate of practical completion is issued.

However, practical completion is often certified when there are very minor (de minimis) items 'not affecting beneficial occupancy' that remain incomplete and that can be put right without undue interference or disturbance to occupants, ie the client is able to take possession of the works and use them for their intended purpose. The legal basis for this is not clear however. Unless the contract states otherwise, if the works are not complete, the client is not obliged to take possession of them.

See practical completion for more information.

Beneficial occupation can also be used in relation to vacant domestic and non-domestic properties In assessing their liability to pay rates. A property that is capable of beneficial occupation (eg a property for which a tenant would pay rent) may be subject to rates. Again, that is not to say that the property is without defects, but that it is capable of beneficial occupation, or with minor alterations would be capable of beneficial occupation.

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