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Defining completion ofconstruction works

RICS Practice Standards, UK

1st edition, guidance note

Defining completion ofconstruction works1st edition, guidance note

This guidance note summarises the principal features of completionof construction works under a variety of construction contracts.

It is intended to be of use to surveyors who are certifying, or providingservices in consequence of or in relation to, completion ofconstruction works.

Guidance is given under the following headings which map to theAssessment of Professional Competence (APC):

• General Principles (Level 1: Knowing)• Practical Application (Level 2: Doing)• Practical Considerations (Level 3: Doing/Advising).

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GN 77/2011Part of the RICS QS & Construction Standards

Defining completion of construction worksRICS guidance note

1st edition (GN 77/2011)

Published by the Royal Institution of Chartered Surveyors (RICS)

Surveyor Court

Westwood Business Park

Coventry CV4 8JE

UK

www.ricsbooks.com

No responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this publication canbe accepted by the authors or RICS.

Produced by the QS & Construction Professional Group of the Royal Institution of Chartered Surveyors.

ISBN 978 1 84219 682 3

Royal institution of chartered surveyors

Typeset in Great Britain by Columns Design XML Limited, Reading, Berks

Printed in Great Britain by Annodata Print Services, Dunstable, Beds

Contents

RICS guidance notes 1

1 Introduction 21.1 What does completion mean in the context of commercial contracts generally? 21.2 Why is this different in the context of construction and engineering projects? 21.3 What minimum service level is a surveyor required to deliver at completion? 2

2 General principles: level 1 – knowing 42.1 When is a construction and engineering project complete? 42.2 Why does it matter 42.3 Practical completion under the JCT forms of contract 42.4 Completion under the NEC forms of contract 42.5 Completion under the FIDIC forms of contract 52.6 Completion of sub-contractors’ works 52.7 Sectional completion 52.8 Partial possession 5

3 Practical application: level 2 – doing 73.1 Clarifying the test of completion 73.2 Agreeing completion dates 73.3 Disputed completion dates 7

3.3.1 By contract administrator (CA) 73.3.2 By client 83.3.3 By contractor 83.3.4 By sub-contractor 83.3.5 By third parties 9

3.4 Works not in accordance with the contract and incomplete works 93.5 Latent defects 93.6 Client using works before completion 103.7 Conditions Precedent 10

4 Practical considerations: level 3 – doing/advising 114.1 Documentation 114.2 Risk, liability and insurance 114.3 Bonds, guarantees and payments 114.4 Third parties 124.5 General considerations 124.6 Definitions 12

DEFINING COMPLETION OF CONSTRUCTION WORKS | iii

AcknowledgmentsRICS would like to thank the following for theircontributions to this guidance note:

Lead author

Richard Mills (Mills & Co)

Working Group

Chair:

Andrew Smith (Laing O’Rourke)

Alpesh Patel (APC Coach Ltd)

Christopher Green (Capita Symonds Ltd)

David Cohen (Amicus Development Solutions)

Duncan Cartlidge (Duncan Cartlidge Associates)

Jim Molloy (Department of Health, Social Servicesand Public Safety NI)

John G Campbell (BAM Construction Limited)

Kevin Whitehead (McBains Cooper ConsultingLimited)

Michael T O’Connor (Carillion Construction Limited)

Michelle Murray (Turner & Townsend plc)

Roy Morledge (Nottingham Trent University)

Stuart Earl (Gleeds Cost Management Limited)

iv | DEFINING COMPLETION OF CONSTRUCTION WORKS

RICS guidance notes

This is a guidance note. It provides advice toRICS members on aspects of their work. Whereprocedures are recommended for specificprofessional tasks, these are intended torepresent ‘best practice’, i.e. procedures whichin the opinion of RICS meet a high standard ofprofessional competence.

Although members are not required to follow theadvice and recommendations contained in thenote, they should note the following points.

When an allegation of professional negligence ismade against a surveyor, a court or tribunal is likelyto take account of the contents of any relevantguidance notes published by RICS in decidingwhether or not the member had acted withreasonable competence.

In the opinion of RICS, a member conforming tothe practices recommended in this note shouldhave at least a partial defence to an allegation ofnegligence if they have followed those practices.However, members have the responsibility ofdeciding when it is inappropriate to follow theguidance.

Alternatively, it does not follow that members willbe found negligent if they have not followed thepractices recommended in this note. It is for eachsurveyor to decide on the appropriate procedure tofollow in any professional task. However, wheremembers do not comply with the practicerecommended in this note, they should do so onlyfor a good reason. In the event of a legal dispute, acourt or tribunal may require them to explain whythey decided not to adopt the recommendedpractice. Also, if members have not followed thisguidance, and their actions are questioned in anRICS disciplinary case, they will be asked toexplain the actions they did take and this may betaken into account by the Panel.

In addition, guidance notes are relevant toprofessional competence in that each membershould be up to date and should have knowledgeof guidance notes within a reasonable time of theircoming into effect.

DEFINING COMPLETION OF CONSTRUCTION WORKS | 1

1 Introduction

This guidance note is intended to summarise theprincipal features of completion of constructionworks under a variety of construction contracts. Itis intended to be of use to surveyors who arecertifying, or providing services in consequence ofor in relation to, completion of construction works.

This note may therefore be of use to any surveyorcarrying out any of the following activities:

+ Certifying completion of works

+ Certifying payment after completion of works

+ Analysing delay

+ Advising on the deduction of delay damages

+ Advising on insurance provisions

+ Advising clients of their occupancy options ifworks are delayed

+ Advising main contractors or specialistcontractors on issues such as release ofretention, rectification of defects, etc.

+ Advising purchasers, tenants, bondsmen andother third parties of their rights and obligations

+ Resolving or adjudicating disputes related toany of the above activities

+ Drafting or reviewing contract documents

Completion of projects as complex as constructionworks is rarely a scientific or purely logical processbut requires a degree of evaluation. It will rarely beappropriate to withhold a completion certificatebecause of very minor defects or where the cost ofremedial works is wholly disproportionate to thebenefit to be derived.

The question of completion can be furthercomplicated by pressures from the client.Sometimes the client applies pressure to takeoccupation even though the works are not finished.On other occasions circumstances may havechanged (e.g. the client may have lost a tenant) andthe client may not want to take occupation(preferring instead to deduct liquidated damages,for example) for as long as possible.

Many contracts for civil engineering projects (asopposed to building projects) adopt a softer

approach to construction and require the client totake possession once the works are fit to be useddespite the fact that there may still be ongoingworks such as planting, etc.

1.1 What does completion mean in thecontext of commercial contractsgenerally?

In commercial contracts generally (i.e. contracts forthe provision of goods and services), and subject toexpress provisions to the contrary, performanceunder the contract is not complete until all of theobligations imposed by the contract have beensatisfied. In other words the contract is notcomplete if there are still works to be done orrepairs to be made or documents to be provided.

Examples of express provisions to the contrarywould be clauses dealing with sectional completion(see section 2.7 below) or partial possession (seesection 2.8 below).

1.2 Why is this different in the contextof construction and engineeringprojects?

While the question of completion does not usuallycause too many problems in the provision of simplegoods or services the same cannot be said ofcomplex and expensive systems such as buildings.

Imposing overly onerous criteria for completion onconstruction projects can often result in perceivedunfairness. This can especially materialise whererelatively minor but time consuming remedial works,which need not prevent the occupation of thebuilding, can result in the builder being exposed tosignificant liabilities for liquidated damages.

1.3 What minimum service level is asurveyor required to deliver atcompletion?

The services that the surveyor provides, in thecontext of completion of the works, will dictate theminimum level of service that the surveyor is

2 | DEFINING COMPLETION OF CONSTRUCTION WORKS

required to provide. For example, if the surveyor isrequired to certify completion of the works he willbe expected to use reasonable means to satisfyhimself that the works are free from all but veryminor defects, to identify any defects that do exist,and to assess the scope and potential disruptionthat could be caused by remedial works if theworks are to be taken into possession before all ofthe defects are rectified. However, if the surveyor’stask is limited to valuing the works at completion itwill usually be sufficient for him to satisfy himselfthat the works have been done, withoutundertaking any further independent enquiry as towhether they have been done properly or not.


2 General principles: level 1 – knowing

Guidance given in this section relates to the keyprinciples involved in completion of the works.Surveyors involved in providing services inconsequence of completion will be expected topossess, as a minimum, this basic level ofknowledge.

2.1 When is a construction andengineering project complete?

Subject to any express provisions in the contract,construction and engineering projects are notcomplete until all of the services required by thecontract have been provided to a standardconsistent with the requirements of the contract.Such services may include the provision ofmanuals, demonstrations and training, which,unless the contract states otherwise, will berequired to be provided before the works can besaid to be complete.

The criteria relating to whether or not the service orworkmanship has been provided to the requiredstandard will include:

+ any relevant provisions of the contract

+ any relevant provision of the specification

+ the purpose for which the works are intended,and

+ any statements made by the contractor prior tohis or her appointment, such as specific skillsor experience.

2.2 Why does it matter?

Completion of a construction project often directlytriggers a number of consequent actions orobligations, or marks the end of any furtherliabilities. Some common examples, depending onthe contract involved, are:

+ The client takes possession and control of thebuilding

+ Cessation of any further liability for delaydamages, whether liquidated or unliquidated

+ Risk of loss or damage to the works passes tothe client, which therefore terminates anyfurther requirement on the contractor to insureand secure the works

+ Commencement of a defects liability,rectification or maintenance period

+ Milestone payment or release of retentionmonies

+ A requirement for an account of the works tobe prepared

+ Obligations under third party agreements suchas funding arrangements, bonds, guarantees,leases, sale agreements etc.

2.3 Practical completion under the JCTforms of contract

Under the JCT contracts, completion of the worksis generally referred to as ‘practical completion’.Some have tried to interpret the phrase as allowinga state of less than full completion. In this context,the phrase ‘beneficial occupation’ was often usedto describe the standard of completion that wasrequired by the phrase ‘practical completion’,meaning the client is physically able to takeoccupation of the works and use them for theirintended purpose. There is, however, no legal basisfor the use of such a test. Even if the works can bebeneficially occupied, unless the contract providesotherwise, if the works are not finished the client isnot obliged to take possession.

The test of completion is, however, subject to alimited test of reasonableness known as the deminimis principle. This means that certification ofcompletion of the works should not be refused ifthere are only very minor defects in the works.

2.4 Completion under the NEC forms ofcontract

Under the NEC form of contract, completion isdefined as when all the work required by the ‘worksinformation’ is completed by the specifiedcompletion date, and all notified defects that wouldprevent the client from using the works arecorrected.

This implies that completion is achieved even ifthere are notified defects still present within the


works, provided that those defects do not preventthe client from using the works.

2.5 Completion under the FIDIC formsof contract

Under the FIDIC forms of contract, which areprincipally used on international projects, the clienttakes possession of the works when the workshave reached a state of completion known as‘substantial completion’.

Substantial completion is primarily determined bywhether or not the works are sufficiently completeto be fit for their purpose from a functionalperspective. Other criteria might include the cost ofremedial works in proportion to the value of theoriginal works.

2.6 Completion of sub-contractors’works

It is important for the main contractor to link hissub-contractors into similar obligations regardingcompletion to the ones he is subject to under themain contract; otherwise completion may have tobe accepted from his or her sub-contractors whentheir works are not classified as complete under themain contract.

This could mean that the main contractor is liablefor liquidated damages because of his or her sub-contractors works and would be unable to passthat liability onto the sub-contractors.

The most obvious way for the main contractor todeal with this issue is to repeat in the sub-contractsthe obligation to which he is subject in the maincontract. However, if there is a dispute as towhether or not that obligation has been satisfiedthe main contractor could still be left in theunsatisfactory position of different adjudicatorsdeciding the issue in different ways.

In order to overcome this problem a commonapproach is for the sub-contract conditions to statethat the sub-contract works will not be consideredcomplete until the main contract works have beenaccepted by the client.

For many trades, such as mechanical and electricalservices, decorations, etc. such an obligation is notusually contentious as the completion of thosetrades is usually relatively close to completion of

the works as a whole. However, for some tradessuch as piling, drainage, etc. these provisions meanthat the sub-contractors’ works may not be classedas officially complete until many months after theactual completion of the sub-contractor’s works onsite. The sub-contractor therefore may beresponsible for loss or damage to the sub-contractworks long after the works are in fact complete andmay not be entitled to payment of the sum due oncompletion until all of the other works are alsocomplete.

2.7 Sectional completion

On many projects the client will wish to take one ormore sections of the works without waiting for thewhole of the works to be completed.

This could be the case where part of the worksrestricts the use of facilities on an existing site andif the scope of works for this section is relativelysmall it can be occupied earlier than completion ofthe whole works, thereby minimising the disruptionto the existing facility. Alternatively if the worksinclude, for example, shop units at ground floorwith flats above, the shop units might be taken atan early stage to allow the retail tenants to do theirfitting-out concurrently with completion of the flatsabove.

Sectional completion is usually anticipated by thecontract documents and pre-planned with separatecompletion dates, extension of time provisions andliquidated damages.

If delay to one section causes a delay to asubsequent section then the contract will need tomake adequate provision for an extension of timein those circumstances. For example, if thecontract is for the refurbishment of two blocks offlats and it anticipates section one being completedbefore transfer of the tenants to allow section twoto proceed, then any client delays in section onewill have a direct impact on the completion ofsection two. Unless the extension of timeprovisions in section two make provision for thisthe client will be deprived of its right to deductliquidated damages for other delays to section 2.

2.8 Partial possession

Sometimes the client will wish to take possessionof part of the works even though this is notspecifically anticipated by the contract documents.


If, for example, when constructing a block of flats,the client sells the penthouse suite to a purchaserwho requires a lot of changes to be made, whichmay delay completion of that suite, the client maywish to take possession of the other flats that havealready been completed in order to complete thesales of those flats as soon as possible.

In this case the client can take partial possession ofa defined scope of works (e.g. the completed flats)before the works as a whole are complete.

Partial possession can only be taken with theconsent of the contractor but that consent may notusually be unreasonably withheld. For example thecontractor would not be entitled to withhold hisconsent in order to improve his bargaining positionin a separate dispute over payment but would beable to do so if, for example, he could show thatoccupation of apparently completed areas wouldhinder his ability to complete the remaining areas.Examples of ways in which occupation couldhinder completion would be if occupation requiredthe contractor to limit the amount of noise or dustcreated, or if the contractor was restricted fromworking on mains services or if occupation requiredthe maintenance of fire escape routes through thecontractor’s working areas and such like.

Partial possession usually anticipates discrete areasof the works being taken into possession by theclient at an early stage. On some occasions theclient may try to use the partial possessioncontractual mechanism as a means of reserving itsrights over potentially defective elements of theworks. For example, the client might try to takepartial possession of everything except the roof.The partial possession mechanism is not designedwith this purpose in mind and is unlikely to besuccessful either in protecting the client’s rights todeduct liquidated damages or in extending thedefects liability period for the alleged defectiveelement.


3 Practical application: level 2 – doing

This section looks in more detail at the concept ofcompletion and begins to look at the practicalapplication of the general principles.

3.1 Clarifying the test of completion tobe applied

Although, as stated above, whilst most commercialcontracts require all of the works to be completebefore completion can be said to have beenachieved this approach comes as a surprise tomany of those involved in the construction industry.This surprise can perhaps be explained as follows:

+ the common use of liquidated damages inconstruction contracts for contract overrunswhich many contractors consider to be unfair incircumstances where the client is in a positionto occupy and use the property as intendedeven though there might remain a small amountof relatively insignificant works outstanding,

+ the historical and well established practice ofcontract administrators exercising discretion incertifying completion even though there are stillworks of a relatively minor nature outstanding,and

+ the inherent nature of one-off constructionprojects (in contrast to factory manufacturingprocesses) which involve or are at the mercy ofexternal influences such as weather patternsand which involve the integration of hugenumbers of separate processes, products,teams and individuals usually on a uniquebasis.

For all of the above reasons it is advisable for theparties, through their respective advisers, to clarify,before the contract is signed, the basis upon whichcompletion of the works will be certified and thediscretion to be exercised by the contractadministrator. Not only will this avoid surprises (andtherefore reduce the scope for dispute) but such anapproach is likely to lead to greater certainty in theagreement between the parties and a higher degreeof trust which in turn should encourage andfacilitate a more successful outcome for all of thoseinvolved.

3.2 Agreeing completion dates

Most contracts will provide a mechanism wherebythe completed works are offered up as complete bythe contractor and are then inspected by, or onbehalf of, the client before the client’srepresentative agrees whether or not the works arein fact complete. In the vast majority of cases thisprocess works to the mutual benefit of both parties.

The contractor will be keen to avoid any liability fordelay damages and to limit its exposure to risk,insurance and security. On the other hand, if thereare outstanding works to complete the contractorwill usually prefer to complete those works whilsthe has possession and control of the works ratherthan trying to complete works after the client hastaken possession and occupation. For example,trying to complete works after the client has takenpossession may involve working out of normalworking hours or may require additional access orsecurity provisions.

Equally the client may want to take possession ofthe works as soon as possible and to begin usingthe facility. However, the client will not want to takepossession of the facility too early if that meansthat he has to suffer the contractor’s continuedpresence in completing outstanding works.

Usually a happy medium can be struck.

3.3 Disputed completion dates

3.3.1 By contract administrator (CA)

Sometimes the works will be offered up ascomplete by the contractor but the contractadministrator will refuse to certify them as beingcomplete.

The contract administrator will usually haveauthority to decide whether or not to accept theworks as complete on behalf of the client,notwithstanding some small incomplete parts of theworks.

The contract administrator will make a decisionbased on his or her own perception of the facts


independently of any view expressed by thecontractor. In so doing the contract administratormay come to a different view as to whether or notthe works are complete.

In such cases the contractor may seek to persuadethe contract administrator to revise his decision, forexample, on the basis that the outstanding worksare minimal or that additional works are nowherenear as extensive or disruptive as the contractadministrator might imagine.

If the contractor still disagrees with the CA’sdecision then the contractor’s best recourse willusually be through adjudication.

3.3.2 By client

Occasionally the contract administrator will certifycompletion at a date prior to that on which theclient believes the works were in fact completed. Inthese circumstances the client might dispute thatthe works are complete despite the fact that theyhave been certified as such by the contractadministrator and accepted as such by thecontractor.

The client’s recourse in these situations is to referthe matter to an adjudicator who usually has powerto open up, review and revise the decision of thecontract administrator.

Once the contract administrator has certifiedcompletion of the works they cannot ‘uncertify’completion even if they genuinely believe that theymade a mistake.

3.3.3 By contractor

If the contract administrator refuses to exercisediscretion in certifying completion where there areperhaps a few outstanding tasks remaining,perhaps because the client tells him not to, thecontractor may well feel aggrieved, but there isusually not much that the contractor can do otherthan to complete the outstanding works as quicklyas possible.

The client usually has the power to revoke the CA’sdiscretion to certify completion notwithstanding thatthere may be some outstanding works even if thoseoutstanding works are not preventing occupation orenjoyment of the works. This may arise for exampleif the client does not have a tenant for the worksand prefers instead to claim delay damages from

the contractor. Unless the issues complained of areso trifling as to be an absurd basis for refusing tocertify completion of the works, the contractadministrator will have little choice but to follow theinstructions of his client.

In these circumstances the contractor’s onlyrecourse is to ask an adjudicator to open up,review and revise the decision of the contractadministrator and to certify that completion in factoccurred at a date prior to that certified by thecontract administrator. In order to demonstrate toan adjudicator that completion did in fact occurbefore the date certified by the contractadministrator the contractor will need to maintainvery detailed records.

3.3.4 By sub-contractor

Sub-contracts will usually provide for completioneither using similar criteria to those used in themain contract or directly linking completion of thesub-contract works to issue of the completioncertificate under the main contract.

In the former case the sub-contractor can raise itsown arguments as to completion of the worksindependently of any disputes over the maincontract. Ultimately the sub-contractor can refersuch arguments to adjudication and may obtain adecision that is inconsistent with any decisionunder the main contract but dealing with similarissues. Such a situation is obviously unsatisfactoryfor the main contractor.

In the latter case there is little that the sub-contractor can do if the condition of completionunder the sub-contract is linked to the issue of thecompletion certificate under the main contract.Some sub-contracts impose a specific obligationon the main contractor to actively pursue remediesfor the sub-contractor under the main contract.Such obligation may be sufficient to impose anobligation on the main contractor to refer disputedcompletion to an adjudicator. Even where there isno express provision there will be an impliedprovision on the main contractor to mitigate itsloss, either by challenging the contractadministrator’s assessment of completion under themain contract or by offering the sub-contractor anopportunity to do so in the main contractor’s name.Either way it is unlikely that the main contractor willbe allowed to pass significant delay damages down


to the sub-contractor if the main contractor has nottaken reasonably active measures to securecertification of completion under the main contract.

3.3.5 By third parties

Obligations under third party agreements such asleases, funding arrangements or sale agreements,for example, are often triggered by the certificationof completion of the works.

The CA will need to keep the interests of thesethird parties in mind when certifying completion,especially if the immediate client is calling for thecertification of completion before the completion ofthe works. The client may be doing so in order totake advantage of benefits arising under a thirdparty agreement, such as a lease. However, thethird party may be unhappy if the commencementof his or her obligations has been artificiallyadvanced simply because it happened to suit theclient.

In these circumstances the certifier may haveprovided or offered collateral warranties to the thirdparties. If the certifier fails to properly take thirdparty interests into account in fulfilling his or herduties, he or she may become subject to an actionunder the collateral warranty.

In fulfilling his or her role the certifier will often findthat interested parties have opposing requirementswhen it comes to the certification of completion.This highlights the need for the certifier to remainprofessional and objective at all times in exercisingthis function.

3.4 Works not in accordance with thecontract and incomplete works

Completion of the works may be certifiednotwithstanding the existence of patent defects oreven incomplete works. This would include worksnot in accordance with the contract.

Under the JCT contracts the contract administratorusually has discretion as to whether or not tocertify completion even though there are patentdefects or incomplete works. That discretion isusually (and legitimately) exercised afterconsultation with the client. The extent to which theclient will be prepared to take possessionnotwithstanding patent defects or incomplete workswill be directly proportionate to the client’s need for

possession. However the contractor will wish toavoid the client taking possession if there is toomuch work outstanding as once the client is inoccupation, completion of the outstanding workswill often be much more difficult.

If the client should wish to take possession whenthere are still considerable amounts of remedialworks / incomplete works to finish, and thecontractor is agreeable to the client takingpossession, it may be preferable for the client andcontractor to record their agreement in asupplemental contract. This could then also dealwith the additional restrictions within which thecontractor would be required to work, thetimescales within which the works are to becomplete and any damages payable in the eventthat those conditions are not achieved.

3.5 Latent defects

Latent defects are defects that are not apparent atthe time of completion but which subsequentlybecome apparent months or years later.

Latent defects may be, for example, failed piling,which only shows itself in an unacceptable degreeof settlement, or in the rotting of timber caused byinadequate treatment.

By their nature latent defects cannot preventcompletion of the works because they are notknown about at that time. Defects that are knownabout at the time of completion are known aspatent defects.

In the event that latent defects in the works arediscovered after completion of the works has beencertified then, subject to any limitation clauses inthe contract and subject to the limitation period nothaving expired, the contractor will be liable fordirect costs reasonably incurred by the client as aresult. This will include the cost of any appropriateremedial works and also any loss of profit or suchlike reasonably suffered by the client.

During the defects liability period the contractor hasa right to return to the works and undertake theremedial works himself. This is likely to be lessexpensive for the contractor than paying the clientthe costs associated with him bringing in a thirdparty contractor to carry out the remedial works.


3.6 Client using works beforecompletion

There may be circumstances where the client doesnot wish to take possession of the works beforecompletion but does wish to make some use ofthem. For example, if the construction works arefinished but the boilers are not commissioned theclient may nevertheless wish to move in furniture,shelving etc. In the absence of specific provisionsin the contract the client would only be able to doso with the express consent of the contractor.

3.7 Conditions Precedent

In some instances the contract might state thatcompletion of specific activities are conditionsprecedent to completion being achieved. Clausessuch as this limit the scope of the CA’s discretionto certify completion notwithstanding that someworks remain incomplete.

In this context conditions precedent are sometimesused to ensure that completion will not be certifieduntil after health and safety information has beenprovided or until after all operation andmaintenance manuals have been provided or untilafter the client’s staff have been trained in theproper use of the various building systems.Obviously if these conditions are too onerous theycan easily lead to perceived unfairness.


4 Practical considerations: level 3 –doing/advising

This section looks at the practical considerationsthat need to be taken into account in applying theprinciples and practical applications discussedpreviously. A chartered surveyor should considerthese aspects when advising on completionmatters.

4.1 Documentation

Completion of the works means completion of all ofthe works described in the contract. Theserequirements are not limited to completion of thephysical works but also include provision of alldocumentation required by the contract such ascertificates, operation and maintenance manuals,health and safety information, collateral warranties,etc. as well as any other information specificallyreferred to in the contract.

The relationship between completion of the worksand issue of a completion certificate by the buildingcontrol officer is frequently misunderstood. Unlessthe contract provides otherwise, there is in fact norelationship between the two, although refusal bythe building control officer to certify completion willoften be a good indicator to the CA to do likewise.

The fact that the two events are not linked can bedemonstrated by the following examples:

+ The building control officer’s refusal to certifycompletion may be caused by a design issueimposed by the client or his or her design team.If the builder has done all that was required, heor she is entitled to a completion certificate forthe works regardless of the refusal of thebuilding control officer to sign it off.

+ The building control officer will generally not beinterested in decorations or aesthetic defects orexternal works provided that the building andits components function as required. Howeverdefects in the finishing trades or in theaesthetic quality of other trades may well belegitimate cause for the CA to refuse to certifycompletion despite the fact that the buildingcontrol officer has signed the building off.

4.2 Risk, liability and insurance

On completion of the works the client takespossession of the works and at that point becomesresponsible for any damage to or loss of the works.It therefore becomes the client’s responsibility tosecure and insure the works to cover the risk ofsuch loss or damage.

If the loss or damage is caused by defectiveconstruction works, such as a flood caused by aloose pipe fitting, the client (or its insurers) will beable to recover any loss resulting from the defectiveconstruction works from the contractor.

4.3 Bonds, guarantees and payments

Completion of the works is often a significantmilestone for bonds, guarantees and payments.

Bonds and guarantees given to the clientguaranteeing performance of the contractor’sobligations often expire once the works havereached completion.

In this case the client will want to make sure thatthere has been a diligent search for defects beforecompletion is certified. If a significant defectmaterialises after bonds and guarantees haveexpired the client will still have a claim against thecontractor, but if the contractor is a relatively smallorganisation it may not have the financial resourcesto meet the client’s claim.

Completion is also often a milestone that triggers apayment to the contractor. At this stage thecontractor will have been paid virtually all of themoney to which it is entitled and even if the clientholds some money as retention, this may not besufficient to meet the costs of a significant latentdefect. For this reason, again, the client will want tomake sure that a diligent search for defects hasbeen undertaken before completion is certified.


4.4 Third parties

When certifying completion of the works before theworks are actually complete the CA needs to makesure that he or she has fully taken into account theinterests of all third parties. There are situations inwhich a client will want completion to be certifiedat an early stage in order to trigger obligationsunder a lease. However, the requirements of thetenant are likely to be very different, if not directlyopposed, to those of the client. In thesecircumstances the CA will need to consider verycarefully the existence and extent of the duties thathe or she owes to the various parties.

4.5 General considerations

+ What is the test of completion expressed orimplied by the contract and specification?

+ Does the contract / specification allow thecontract administrator to exercise somediscretion in determining whether the works arecomplete notwithstanding some relatively minoroutstanding works?

+ Has the client or contractor expressed anyinformed approvals or reservations about theuse of such a discretion?

+ What will be the impact of completion on thirdparties and have their interests been taken intoaccount by the contract administrator whenconsidering whether or not to exercise anydiscretion to certify completion of the worksnotwithstanding some relatively minoroutstanding works?

+ Has partial possession been taken? And if sohas consideration been given to the obligationsof insurances, different commencement datesfor rectification/defects liability periods,retention release and in some cases the client’sapplication of liquidated and ascertaineddamages?

+ Where there is sectional completion of theworks has consideration been given to theobligations of insurances, differentcommencement dates for rectification/defectsliability periods, retention release and in somecases the client’s application of liquidated andascertained damages?

4.6 Definitions

(a) Fault Free Completion

Various definitions are available from decided casesand the principal textbooks on construction law.Some definitions lean towards perfect, fault freecompletion:

“One would normally say that a task waspractically completed when it was almost, butnot entirely finished; but Practical Completionsuggests that is not the intended meaning andwhat is meant is the completion of all theconstruction work that has to be done.”

City of Westminster v J. Jarvis & Sons Ltd (1970)HL, 7 BLR 64 per Viscount Dilhorne at page 75.

And in the same case also, at page 75:

“… The defects liability period is provided inorder to enable objects not apparent at thedate of practical completion to be remedied. Ifthey had been apparent, no such certificatewould have been issued.”

(b) Completion for All Practical Purposes

The above quotations need to be compared withthe opinion expressed by Salmon LJ when thesame case had earlier been heard by the Court ofAppeal:

“The obligation on the contractors under clause21 to complete the works by the date fixed forcompletion must, in my view, be an obligationto complete the works in the sense in whichthe words ‘practically completed’ and ‘practicalcompletion’ are used in clause 15 and clause16 of the contract. I take these words to meancompletion for all practical purposes, i.e. forthe purpose of allowing the council to takepossession of the works and use them asintended. If completion in clause 21 meantcompletion down to the last detail, howevertrivial and unimportant, then clause 22 wouldbe a penalty clause and as suchunenforceable”. Ibid, CA [1969] 1 WLR 1448, atpage 1458

(c) The De Minimis Principle

Viscount Dilhorne’s definition is in any event subjectto the de minimis principle to the effect that


completion may have been achievednotwithstanding the existence of minor defects.

For example in H W Neville (Sunblest) Ltd v WilliamPress & Sons Ltd (1982) 20 BLR 78 at page 87 HisHonour Judge Newey QC stated:

“I think the word practically … gave thearchitect a discretion to certify that [thecontractor] had fulfilled its obligation underclause 21(1) (of JCT 63) where very minor deminimis work had not been carried out, but thatif there were any patent defects in what [thecontractor] had done the architect could nothave given a certificate of practicalcompletion.”.

(d) Impossibility of Perfection

The development of this argument has involvedcontrasting the construction industry with otherforms of manufacture. In Emson Eastern Ltd v EMEDevelopments Ltd (1991) 55 BLR 114 at page 121His Honour Judge Newey, having been takenthrough the authorities including his own previousjudgment in William Press stated:

“I think that probably the most importantbackground fact which I should keep in mind isthat building construction is not like themanufacture of goods in a factory. The size ofthe project, site conditions, use of manymaterials and employment of various types ofoperatives make it virtually impossible toachieve the same degree of perfection as can amanufacturer. It must be a rare new building inwhich every screw and every brush of paint isabsolutely correct.”

And in the same case at page 122 he states:

“In my opinion there is room for ‘completion’ asdistinct from ‘practical completion’. Because abuilding can seldom if ever be built precisely asrequired by drawings and specification, thecontract realistically refers to ‘practicalcompletion’, and not ‘completion’ but theymean the same. If, contrary to my view,

completion is something which occurs onlyafter all defects, shrinkages and other faultshave been remedied . . . and a certificate tothat effect has been given . . ., it would makethe liquidated damages provision . . .unworkable and in practice would require thedefects liability period to be added to the timeinitially negotiated by the parties for thecarrying out of the works. The constructionindustry recognizes a difference between thecarrying out of new works and ‘snagging’ thatis to say dealing with minor defects in them.

“The standard which the architect must apply indeciding when practical completion of theworks has been achieved was differently statedby Salmon LJ and by Lord Dilhorne in Jarvis’case; the latter being more stringent that theformer. In William Press I seem to have soughta position in between and I think that that isprobably right.”

(e) Remedying Defects

Another ingredient which it is suggested affectscompletion is the extent of disruption an employerwould incur in allowing access to a contractor toremedy defects or complete works outstandingafter the issue of a completion certificate.

In Big Island Contracting (HK) Ltd v Skink Ltd 52BLR 110 at 111 the editors of Building Law Reportsreferring back to Westminster City Council v JJarvis & Sons state:

“Furthermore, an employer must wish to reduceto the very minimum the disruption that iscaused by the presence of works goingthrough a snagging list and an architect shouldnot issue a certificate of practical completionuntil all such work has been completed –unless the employer waives the right to insistupon it being done, and the contractor iswilling to continue to work in an occupiedbuilding and suitable arrangements have beenmade for the insurance.”


Defining completion ofconstruction works

RICS Practice Standards, UK

1st edition, guidance note

Defining completion ofconstruction works1st edition, guidance note

This guidance note summarises the principal features of completionof construction works under a variety of construction contracts.

It is intended to be of use to surveyors who are certifying, or providingservices in consequence of or in relation to, completion ofconstruction works.

Guidance is given under the following headings which map to theAssessment of Professional Competence (APC):

• General Principles (Level 1: Knowing)• Practical Application (Level 2: Doing)• Practical Considerations (Level 3: Doing/Advising).

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