What is practical completion?
Practical completion is vitally important in construction projects. It is a landmark in works which represents handing over of possession of a site and the transfer of insurance liability from the contractor to owner. Further, when practical completion is achieved, this often triggers the release of retention monies and any other related payments.
Interestingly, there is no defined term in law of what practical completion is or what constitutes practical completion. For a determination of practical completion to be made, it will be done so in respect of the contract, each being different and therefore turns on its own facts.
While there is no set definition of practical completion, it is generally considered to be the point at which a building is complete, save for minimal defects which are outstanding but can be rectified without undue influence to the owner or occupier. Consequently, disputes which usually arise in relation to practical completion, arise not from what the definition of practical completion is or ought to be, but as to how a certifier determines that it has been achieved and whether or not it has been achieved.
What does the case law say?
We can look to the English authority of Jarvis & Sons v Westminster Corporation & Another[1], in which Viscount Dilhorne said that that practical completion means “…the completion of all construction work that is to be done”.
However, subsequent case law (English), has established that practical completion can be achieved even where some defects remain, as long as such defects are minimal in nature and do not prevent the occupation and use of a building.
In Mears v Costplan[2], Mears entered a contract to lease a building which was built as student accommodation. It later transpired that the rooms were built smaller than the 3% tolerance in the contract. Mears claimed that a certificate of practical completion could not be issued and that they were entitled to terminate the agreement for lease.
The English Court of Appeal upheld the decision of the judge at first instance, rejecting the argument that “the failure to meet the 3% tolerance…automatically amounted to a material breach of contract”.
In elaborating on what constituted practical completion, Couslon J stated: “If there is a patent defect which is properly regarded as trifling then it cannot prevent the certification of practical completion, whether the defect is capable of economic remedy or not. If on the other hand the defect is properly considered to be more than trifling, then it will prevent practical completion, again regardless of whether or not it is capable of remedy”. Whether a matter is trifling is, according to Couslon J, “a matter of fact and degree”.
Practical completion was, he said, “…in the absence of any express contractual definition or control…at least in the first instance, a question for the certifier”.
Thus when a dispute arises as to whether practical completion can be certified, the defects which are the cause for the delay in issuing the certificate must be deemed to be more than trifling by the certifier, yet how they are to determine this remains unclear.
Practical Completion in practice:
Contracts will usually contain a date for practical completion and should this date be missed, financial penalties are often imposed and accumulate daily or weekly until practical completion is met.
Upon practical completion a certificate confirming same is provided by the certifier (usually the architect) and the contractor hands possession of the site back. The certifier also issues a list of defaults which remain even upon practical completion. A rectification or defects liability period remains in place following practical completion in which the contractor must rectify any defects which remain outstanding. Often, half of the retention monies is paid to the contractor upon practical completion with the other half held until the end of the defects liability period.
While Coulson J refers to matters which are trifling in Mears, determining whether matters were trifling was not before the Court in this case and consequently, determining what is deemed to be a trifling matter can be difficult. It would be prudent upon the party certifying practical completion to take a cautious approach and document what matters remain outstanding and to be completed post certification and why they are deemed to be trifling.
Some commentators have suggested that one way in dealing with the issue is to include an express contractual definition of practical completion setting out what matters must be completed in order for practical completion to be achieved, thus limiting the arguments as to whether a defect can be deemed to be trifling.
This note is for general information purposes and does not constitute legal advice. Legal advice must be obtained for all individual circumstances. Each case must be assessed on its own merits
[1] [1970] 1 WLR 637
[2] [2019] EWCA Civ 502]
About The Authors
David Curran
David holds an LLB Law Degree from the University of Wales, Cardiff and the Certificate in Professional Legal Studies from Queens University of Belfast. He was admitted to the roll of solicitors in Northern Ireland in 2003 and admitted in The Republic of Ireland in 2014.....
