What practical completion actually triggers

Ask ten people on a site what practical completion means and most will describe a state of the works: the building is finished, the client can move in, only snagging is left. That description is roughly right and completely useless, because practical completion is not a state. It is a certificate, and until somebody issues it nothing has happened.

There is no statutory definition

Neither the JCT forms nor the Construction Act define practical completion. The courts have filled the gap, and the position that has emerged is that the works must be free from patent defects other than trifling ones, and the employer must be able to take possession and use the building for its intended purpose.

Two consequences follow from that. The first is that a handful of minor outstanding items does not prevent certification. The second is that anything preventing beneficial use does, no matter how small it looks on a list.

The five clocks

On the date certified, all of the following change:

• Retention halves. Half of what is held is released, and future deductions run at the reduced rate.
• The rectification period begins. Usually six or twelve months. The end of it triggers the second retention release.
• Liability for liquidated damages ends. Damages run to the date of practical completion and no further.
• Risk passes. The employer takes responsibility for the works, and the contractor's obligation to insure them ends.
• The final account period starts. Under JCT the contractor has a set period from practical completion to submit final account documents.

Move the date by a fortnight and you have moved a retention release, a damages calculation, an insurance transfer and a final account deadline. That is why the argument about the date is rarely really about the date.

Why the pressure comes from both sides

The contractor wants the earliest defensible date, because damages stop and half the retention comes back. The employer often wants the latest, for the mirror reasons. Both positions are legitimate and both are self-interested, which is precisely why the decision sits with the contract administrator rather than with either party.

What a certifier cannot do is issue it conditionally. A certificate that says practical completion is achieved subject to completion of the outstanding items is not a certificate of anything, because the contractual consequences cannot be made conditional. Either the works have reached the standard or they have not.

Partial possession is a different thing

Where the employer wants to take part of the building early and the contract does not divide the works into sections, JCT provides for partial possession. Practical completion is then deemed to have occurred for that part on the date of possession, retention on it is released as if it had reached practical completion, and liquidated damages reduce proportionately.

That last point is the one that gets missed. If the employer occupies half the building, damages cannot continue to run at the full rate, and a deduction that ignores the reduction is open to challenge.

What to record

A certificate that will still make sense in three years states the project, the parties, what it applies to, the date certified and the person certifying. If there are outstanding items, list them separately as a schedule rather than as a qualification to the certificate itself.

The distinction matters. A schedule of outstanding work sits alongside a valid certificate. A qualification written into the certificate calls the certificate into question, and with it every one of the five clocks.