Practical completion is the hinge of a building contract. A great deal changes on the day it is certified, and almost none of it changes on any other day, which is why the date is worth more attention than it usually gets.
It does not mean perfect. It means the building can be used for what it was built for, with only minor items outstanding that do not prevent that use.
What changes on the day
Possession passes to the employer. The site stops being the contractor's and becomes yours.
Risk and insurance shift. Responsibility for insuring the building generally moves from the contractor to the employer. This is the item most often forgotten, and forgetting it means an uninsured building.
Half the retention is released.
The defects liability period starts running. Its clock starts here, not at the final account.
Liquidated damages stop accruing. If the works were late, the meter stops at practical completion.
The argument about the date
Because so much turns on it, the date is the thing both sides have an interest in moving. A contractor running late wants practical completion certified early, because damages stop. An employer wants it certified only when the building genuinely works, because risk and insurance transfer.
The honest test is use. Can the building be occupied and used for its purpose? Not "is every item finished", because the whole concept exists to accommodate outstanding minor items. But also not "can somebody physically get in", because a house with no working water is not a house that can be used.
Three things that are usually held to prevent practical completion, whatever the state of the finishes:
- No functioning water or drainage.
- No safe, tested electrical supply.
- Statutory approvals or connections outstanding that the building legally needs.
The snag list
Practical completion is normally certified alongside a schedule of outstanding minor items, usually called a snag list or a punch list. It is written at a joint inspection, and the discipline that makes it useful is boring:
- Room by room, in a fixed order, so nothing is missed.
- Each item described specifically enough to be actioned by somebody who was not at the inspection. "Door sticks" is not an item. "Bedroom 2 door binds on the frame at the top hinge" is.
- Photographed.
- With a date against it.
A snag list that runs to three hundred items is usually a sign that practical completion has been certified too early.
What goes wrong
The date is never formally certified. On small builds the contractor simply stops coming and the owner moves in. Nothing is certified, so nothing is triggered: retention is not released, the defects period never formally starts, and when a defect appears eighteen months later neither side can say whether it is within any period at all.
Insurance is not moved. The commonest expensive oversight. Confirm the date, then confirm the cover on the same day.
Snags become the defects period. The snag list is items outstanding at handover. The defects liability period is for faults appearing afterwards. Rolling the two together means the snags never get closed out, because they are always covered by something else.