Practical Completion marks the transition of the project from the construction phase to the occupancy phase and triggers several contractual and legal processes, including the start of the defects liability period, the release of retained funds, and, in some cases, the transfer of insurance responsibilities.
Key aspects and implications of Practical Completion include:
- Substantial Completion: The term emphasizes that the work has substantially been done as per the contract documents, allowing the owner to take possession of the site for its intended use. It does not mean that every aspect of the work is 100% completed.
- Certification: Practical Completion is typically certified by the project's architect or engineer, who issues a certificate of Practical Completion. This certificate is an important document that confirms the date on which the project reached this stage.
- Defects Liability Period: The commencement of the defects liability period (or warranty period) usually starts from the date of Practical Completion. During this period, the contractor is responsible for rectifying any defects that emerge.
- Release of Retention Money: In many contracts, Practical Completion triggers the release of part of the retention money held back by the owner as a financial safeguard against defects or incomplete work.
- Occupancy and Use: Upon Practical Completion, the owner can begin using the facility for its intended purpose, even as the contractor completes minor outstanding items or corrects minor defects.
- Final Account Settlement: Practical Completion allows for the preparation of the final account, including adjustments for any variations, claims, or additional costs incurred during the construction phase.
The criteria for determining Practical Completion can vary depending on the contract and jurisdiction but generally include considerations such as completion of all major construction work, compliance with building codes and regulations, operational utilities, and the ability to use the building safely for its intended purpose
