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Management contract: occupation and defects liability period

Project plan management contract.jpgThe occupation and defects liability period is the stage after the client has taken possession of the development for occupation when any defects are rectified and the final certificate is issued signifying that the construction works have been fully completed. As the development is now occupied, close co-operation is required between the management contractor and the client so as so not to disturb occupants, whose activities will take priority over works contractors rectifying defects.

There are two different forms of contract operating during the defects liability period:

NB The actual defects liability period for individual works contracts bay be different depending on when that particular contract reached practical completion.


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A. Starting the work stage.

  1. The management contractor arranges a start-up meeting to plan the work stage. NB On management contracts, the defects liability periods may be at different times for each works contract.

B. Rectifying defects.

  1. If the contract allows, the management contractor may review all relevant events that might be considered to have affected the completion date for each works contract and may adjust their completion dates accordingly.
  2. The client reports any defects in the works to the management contractor. On large projects the management contractor may set up a hot desk for responding to complaints or to provide assistance required by the incoming occupants.
  3. The management contractor takes advice on the action necessary to rectify the defects from the consultant team.
  4. The management contractor and client agree a programme for rectifying defects in a way that minimises disruption to the client.
  5. The management contractor instructs the works contractors to rectify the defects.
  6. If rectification works are significant, it may be necessary for the client to re-appoint the CDM co-ordinator (whose appointment may have terminated on certification of practical completion) and it may be necessary to amend the health and safety file.
  7. The management contractor and client establish a programme for rectifying defects in a way that minimises disruption to the client.
  8. The works contractors rectify defects as instructed.
  9. The client's cost consultant prepares regular valuation statements relating to payments to the management contractor.The client's contract administrator issues interim certificates (payment notices) to the management contractor. If the client intends to pay a different amount from that shown on an interim certificate, they must issue a pay less notice giving the basis for the calculation of the amount that will be paid. NB Works contractors are entitled to be informed of the amount relating to their works that appears on the interim certificate.
  10. The client makes payments to the management contractor by the final date for payment.
  11. At the end of the defects liability period for each works contract, the management contractor arranges inspections of the works and prepares a schedule of defects which is issued to the works contractor.
  12. The management contractor agrees the programme for rectification of items on the schedule of defects with the client's contract administrator and works contractors, which should in any event be rectified within a reasonable time.
  13. The works contractor rectifies items listed on the schedules of defects and informs the management contractor.
  14. The works contractor provides the management contractor with information for the calculation of the final works contract sum.
  15. The management contractor arranges final inspections of the works contractors works and if satisfied issues a final certificate (payment notice) for that works contract. If the management contractor intends to pay a different amount from that shown on the certificate, then they must issue a pay less notice giving the basis for the calculation of the amount they intend to pay.
  16. The management contractor makes payments to the works contractors by the final dates for payment. This may include the release of any remaining retention if applicable
  17. The management contractor completes the building owner's manual.
  18. If a Site Waste Management Plan has been prepared, the management contractor may reconcile the planned handling of waste (as described in the site waste management plan) against what actually happened and provide an explanation of any differences.

C. Issuing the final certificate.

  1. Once the management contractor has received information from all works contractors enabling them to calculate the final works contract sum for each works contract, the management contractor provides the client's contract administrator (or cost consultant) with information allowing them to calculate the prime cost (the cost of the works contracts).
  2. The management contractor co-ordinates preparation of the final report.
  3. The client's contract administrator issues the final certificate (payment notice) under the management contractor's contract. If the client intends to pay a different amount from that shown on the certificate, then they must issue a pay less notice giving the basis for the calculation of the amount they intend to pay.
  4. The client makes payment to the management contractor by the final date for payment (this will include the release of any remaining retention).
  5. The client's contract administrator co-ordinates preparation of a final report and issues this to the client.

NB issuing the final certificate will normally signify the end of the management contractor's and consultant team's appointments. If post-occupancy evaluation services are required, these may involve a new appointment.


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