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When Does a Building Reach Practical Completion?

Why? The liability for Liquidated Damages ceases; the Employer is obliged to insure; retention release is due and the defects period begins. Given the Employer's obligation it is not surprising that disputes frequently arise at this point in time. Unfortunately, in the Standard Forms of Contract, there is no precise definition of what Practical Completion is legally.

In J. Jarvis & Sons v Westminster Corporation (1978) the House of Lords ruled that Practical Completion for practical purposes was reached by "allowing the employer to take possession of the works and use them as intended". The Court went on to say that a Clause that requires completion down to the last detail, however trivial and unimportant amounts to a Penalty Clause and, as such, is unenforceable. However, within the same judgement it was also held that Practical Completion should be all the work complete not nearly all of it.

Following this case in Emson Eastern Ltd v EME Developments Ltd (1991) it was held that, given the complexity of resource employment on a building project, it was virtually impossible to achieve the same degree of perfection as can be achieved by say manufacture of goo ds in a factory. The Court stated that it would be rare for a new building to have every screw in place and every brush of paint correct. Furthermore, the Court held that a building is seldom built precisely to the drawings and specifications. Judge John Newy held that Practical Completion is between the two judgements in Jarvis. This is generally held to be the most sensible legal interpretation.

Each case is different and should be taken on its merits, however if minor works have not been completed but the product has been supplied for its intended use (e.g. occupation) this is likely to be Practical Completion. This position is further reinforced by Skanska Corporation v Anglo- Amsterdam Corporation (2002) which also applies the rule to phased partial possession contracts. It would make the situation clearer if a clause is drafted into the Contract stating that if the Employer takes part or total possession of the works that Practical Completion has taken place. Confusion should not be allowed to arise between "employer access" and "employer possession", mere access will not be deemed Practical Completion, whereas possession phases are. A word of caution, it is thus important to obtain clear evidence as to what is happening with, say, written exchanges, dated photographs, meetings, witnesses etc.

The moral of the story is if the Employer is refusing to take possession of the building and he or the Architect or appropriate refuse to issue the Practical Completion Certificate and pay the retention money due, ensure that evidence is carefully prepared.

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