Last edited 18 Oct 2016

Partial possession of the site by the client

As construction nears completion, there can be considerable pressure to allow the client or tenants to take possession of part of a building or site, even if the works are ongoing or there are defects that have not been rectified. This can be programmed as part of the works 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:

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.

An alternative arrangement might be for the client to 'use or occupy' the works. This is different from possession in that the client does not have sole use of the works, and the contractor remains in possession, with responsibility for insurance and so on.

Partial possession requires particular consideration of:

  • Difficulties with logistics on site.
  • The protection of completed parts of the works.
  • The provision of appropriate insurance.
  • The adoption of appropriate health and safety measures to deal with risks resulting from occupation of areas adjacent to, or only accessible through ongoing construction works.

NB The New Engineering Contract (NEC) offers a different description of partial possession as 'taking over' the works.

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Comments

If partial possession occoured in a project,can the contractor handling the project apply for completion certificate and the format to use for such application?


As always - it depends on what the contract says. However, in general terms, practical completion should be certified for the part of the works that the client takes possession of. This would be the same process that would apply for certifying practical completion of the whole works at the end of the construction period - but making clear which parts of the works it applies to.


Q: If there is a performance bond in place, which would normally terminate on PC, does the Bond value also decrease in the same way Liquidated damages would decrease on a pro rata basis?

A: I have never heard of a bond diminishing in value as the project proceeds nor is it normal for the bonds to cease at PC. However bonds are usually set at 10% of contract value and the claimant will need to demonstrate that its costs as a result of the contractor’s default or insolvency are of the value of the bond or more. It is usual for bonds which in effect are a guarantee to terminate at the end of the defects liability period on the issue of a final certificate.

See: Bond and Performance bond for construction.