Practical completion certificates
1A practical completion certificate need not be in any particular form. A simple letter from the architect stating when practical completion of the works occurred is normally sufficient. For partial possession, the architect needs to identify which part of the structure the employer is taking possession of. Where the contract includes a provision for sectional completion, the section that is being certified as complete must be identified.
2 The certificate must not be issued until the person issuing it believes practical completion has occurred. It is not enough for the employer or contractor, both of whom may be seeking to put pressure on the certifier, to confirm this.
It is possible to define practical completion in a building contract, for example by identifying things that must be done before it can be certified.
Sometimes handing over a health and safety file or collateral warranties is a precondition to practical completion, but this can give rise to arguments because providing bits of paper may seem irrelevant to whether works are complete.
3 The certificate must not be issued in circumstances where works are outstanding or where there are patent defects – defects arising after completion should be dealt with in the defects liability period. However, a certificate of practical completion may be issued where outstanding works are de minimis, that is, when they are insignificant.
4 The certificate must not be issued conditionally or subject to items of work being completed. Often such certificates are issued subject to long lists of outstanding works, “snagging”. There is no mention of snagging in JCT contracts, which may come as a surprise to some. Contract administrators who engage in this practice are opening themselves up to claims for professional negligence.
5 A practical completion certificate cannot be rescinded. It is not open to the issuer to have a change of heart, rescind the certificate and issue a fresh one. If a certificate of practical completion is wrong, then it can only be challenged through a dispute resolution mechanism in the contract.
6 Issuing the certificate normally triggers the release of the first half of retention money to the contractor. After issue of the certificate the employer may withhold the second half. However, any other amounts being withheld must be covered by a valid withholding notice.
7 A practical completion certificate means the work is finished. There is no power for the contractor’s employment to be determined for failure to progress regularly and diligently with the works after the certificate has been issued. There is no requirement on the contractor to proceed regularly and diligently with remedying defects identified to him after practical completion. Under the JCT contract the contractor need only complete them within a reasonable time of an instruction so to do.
8 The certificate triggers the employer’s responsibilities with regards to insuring the works.
9 It represents the cut-off point in terms of the employer’s right to deduct liquidated damages and the contractor’s entitlement to claim loss and expense. It seems hard to believe, but contractors do sometimes make claims for loss and expense relating to periods after practical completion.
10 By and large, the certificate stands as the latest date when the limitation period for claims will start to run (12 years for contracts under seal; six for contracts under hand). Breaches of design liability often occur early on in a project so that the limitation period starts to run well before practical completion. However, designers are sometimes said to be under a continuing duty to advise in relation to design, which means that the limitation period for claims for breach of that duty does not start to run until practical completion.
It is worth noting that limitations on liability, such as one sometimes finds in collateral warranties (to the effect that claims may not be brought against the warrantor more than 12 years after practical completion of the works) do not have the effect of enabling the warrantee to sue until 12 years after practical completion of the works – this is just a long stop and claims may have become time-barred long before 12 years after practical completion.
Nick Lane is a construction lawyer at Olswang
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