Clear contractual arrangements can save arguments over when practical completion has occurred. But be careful – an overly stingent definition can backfire
The conflicting interests of developer, contractor and tenant at practical completion are a notorious source of difficulty for the architect as completion looms. Essentially, everyone wants completion to take place as soon as possible, but the same date will not suit everyone. The developer wants a timely completion so that rent can start rolling in, but not so early that it becomes embroiled in disputes with the tenant under the agreement for lease. The contractor also prefers an earlier completion so that it is off the hook for liquidated damages and can complete niggly finishing work at a leisurely pace. The tenant may need the building urgently because it has fit-out contractors lined up to start on a certain date. On the other hand, it will not want to take a building that is nowhere near finished …

These competing interests usually get played out in conflicting representations to the architect about whether or not practical completion has occurred. The architect normally has to steer a path between them. But matters are sometimes, inadvertently or otherwise, taken out of the hands of the architect altogether. A recent decision by His Honour Judge Thornton on an appeal against an arbitrator's decision in Skanska Construction (Regions) vs Anglo-Amsterdam Corp demonstrates how this can happen.

Skanska was employed to build an office block for a developer, Anglo-Amsterdam Corp, which had apparently pre-let it to an end user who was to carry out extensive fitting-out work. The JCT form had been amended to provide a stringent test for "practical" completion. The contractual completion date was 12 February 1996 and Skanska had not, according to the arbitrator, achieved practical completion on that date. Nevertheless, the tenant began its fit-out on 12 February and, after that date, Skanska was allowed back on site when permitted by the tenant but on the express condition, imposed by the employer, that Skanska made adequate security arrangements for its return visits.

The arbitrator apparently concluded that, even though the tenant was in occupation of the entire building and Skanska was only allowed back with the tenant's consent, practical completion was not "deemed to have occurred" under the partial possession provisions in the JCT forms. This was because these provisions could only apply to parts of the job and Skanska was working on the whole building. Accordingly, Skanska continued to be liable for liquidated damages.

But what a horrific mess ensues if the employer does not realise or does not accept what has happened …

Plainly that decision was wrong and the court found that practical completion was "deemed to have occurred" on 12 February. Skanska was relieved of liability for damages after that date, retention was released, possession of the site reverted to the employer and risk of loss or damage to the works also passed back to the employer.

All of these consequences follow from the fact that the contractor no longer controls the site. But what a horrific mess ensues if the employer does not realise or does not accept that that is what has happened.

We can only speculate what would have happened if the works had been destroyed by fire on 13 February or if a health and safety incident had occurred.

Postscript

Ann Minogue is a partner in solicitor Linklaters.