Penultimate certificate for construction contracts
The JCT minor works building contract (MW 16) includes provision for a ‘penultimate certicate’, which signifies that there is no more work to value and triggers the final progress payment. Once issued, only the final certificate remains.
The due date for payment is 7 days after practical completion and the penultimate certificate must be issued within 5 days of the due date. The final date for payment is 14 days from the due date.
The difference between the penultimate certificate and a normal certificate for a progress payment is that half the retention is now released. Retention is a percentage of the amount certified as due to the contractor that is retained by the client to ensure that the contractor properly completes the works. So for example if the total retention was 5%, then 97.5% of the amount owed will become payable once the penultimate certificate has been issued, rather than 95% under a normal progress payment.
There will be no further payments until any defects that become apparent have been rectified and the final certificate is issued. At this point the final payment will be made, including the release of the remaining retention.
The Housing Grants Construction and Regeneration Act (The Construction Act) sets out requirements for making payments under construction contracts, including a requirement to issue a pay less notice (previously a withholding notice) if the client intends to pay less than the amount set out in a payment notice, setting out the basis for its calculation. See The Construction Act for more information.
NB There is no provision for the penultimate certificate to be withheld once practical completion has been certified. This means that certifying practical completion is a crucial point in the progress of the works, when the penultimate payment is triggered, the contractor’s liability for liquidated damages ceases and the client takes possession of the site. See practical completion for more information.
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The due date for interim payment following practical completion is 7 days under MW11 not 14 days with certification required within 5 days then payment within 14 days.