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Last edited 24 Sep 2015
Management contract: occupation and defects liability period
The 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.
- The contract between the client and the management contractor. The client may have appointed a contract administrator to administer this contract.
- The contracts between the management contractor and each works contractor. These contracts are administered by the management contractor.
On management contracts, a separate certificate of practical completion is issued for each works contract. This means that defects liability periods may be at different times for each works contract and as a consequence, the management contractor may continue to hold construction progress meetings and issue construction progress reports for continuing works contracts and may have to protect completed work from continuing work.
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.
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. The management contractor takes advice on the action necessary to rectify the defects from the consultant team and the management contractor and client agree a programme for rectifying defects in a way that minimises disruption to the client.
If rectification works are significant, it may be necessary for the client to re-appoint the principal designer (whose appointment may have terminated on certification of practical completion) and it may be necessary to amend the health and safety file.
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. 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.
The works contractor rectifies items listed on the schedules of defects, informs the management contractor and provides the management contractor with information for the calculation of the final works contract sum.
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. 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
 Issuing the final certificate.
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).
The client's contract administrator issues the final certificate (payment notice) under the management contractor's contract. The client makes payment to the management contractor by the final date for payment (this will include the release of any remaining retention).
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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