Difference between practical completion and partial possession
The extent to which building works have been completed and whether a client can occupy a building or not is an issue that often arises during a project. There can be pressure to occupy a building, even if the works are not complete, and this can lead to disputes if the differences in the options available are not properly understood.
The contract administrator certifies practical completion when all the works described in the contract have been carried out. This is when, leaving aside minor items and/or snagging, the works are considered to be complete.
Once the certificate of practical completion has been issued, the client takes possession of the works for occupation. At this point the contractor no longer has exclusive possession of the site, and their obligation to insure the works and their liability for liquidated damages for delay comes to an end. Depending on the type of contract, at this point the contractor usually becomes entitled to half of the retention.
Practical completion signifies the beginning of the defects liability period, during which the contractor must make good any defects that become apparent. It is important to note that the defects liability period 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 following practical completion. If there are defects apparent before practical completion, then these should be rectified before a certificate of practical completion is issued.
The client may wish to take possession of part of a building or site, even if works are ongoing. This can be programmed within the original contract documents it the need can be foreseen through a requirement for sectional completion, but in the absence of such a provision many contracts offer the more open-ended option of partial possession.
The effect of partial possession is that:
- Any part for which partial possession is given is deemed to have achieved practical completion.
- Half of the retention for that part must be released.
- The defects liability period begins for that part.
- Liquidated damages reduce proportionally.
- The client is responsible for that part and should insure it.
The contractor is not obliged to allow partial possession (although permission cannot be unreasonably withheld), and may not wish to, if for example access routes are difficult to achieve, it would disrupt the works, or it would incur additional costs. There could also be additional difficulties if the occupants of the part that has been possessed disrupt the contractor, which could result in a claim for extension of time and/or loss and expense.
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