Partial possession is not sectional completion

Both arrangements end with the employer using part of a building before the whole of it is finished. That is where the similarity stops.

Sectional completion is planned

The contract divides the works into sections from the outset. Each section has its own completion date in the contract particulars, its own rate of liquidated damages, and its own everything else that follows: practical completion, rectification period, retention release.

Because it is planned, the contractor priced it. Phased handover changes how a job is built, and a contractor that knew at tender will have allowed for it.

Partial possession is a remedy for not having planned

The contract did not divide the works, and now the employer wants part of the building anyway. JCT provides a mechanism: with the contractor’s consent, the employer takes possession of a part, and practical completion of that part is deemed to have occurred on that date.

The word deemed is doing the work. There is no certificate of practical completion for the part in the ordinary sense. There is a written statement identifying the part taken and the date, and the consequences follow from that.

Consent is real

The contractor can refuse. That is not obstruction: taking part of a building out of a live site changes access, sequencing, security and welfare, and can make the rest of the work materially harder.

In practice consent is usually given and priced, or given in exchange for something. What it should not be is assumed.

What follows for the money

Three things happen on the possession date, and all three are proportionate to the value of the part taken.

• Retention on that part is released as if it had reached practical completion, which is to say half of it.
• Liquidated damages reduce in the proportion the value of the part bears to the contract sum, from that date forward.
• The rectification period for that part starts running, ahead of the rest.

That second point is the one most often missed. Continuing to deduct damages at the full rate after the employer has taken half the building is a deduction that will not survive being challenged.

Insurance moves too

Risk in the part taken passes to the employer, and the contractor’s obligation to insure it ends. Both insurers need to be told, and a gap between one policy ending and the other starting is the sort of administrative detail that becomes very expensive very quickly.

The lesson for next time

If phased handover is foreseeable at tender, make it sectional completion in the contract. Retrofitting it through partial possession works, but it requires consent, it costs something, and every consequence has to be calculated by hand rather than being in the contract already.