Practical Completion – What does it mean and why is it important?

Unfortunately, there is no standard definition of practical completion ("PC").

However, it could be described as the point at which a building is complete, except for minor defects that can be rectified with minimal interference or disturbance to the occupier.

Alternatively, PC can refer to the point at which an architect or contract administrator (“A/CA”) confirms that the contractor has achieved PC under the contract.?Usually this is via the A/CA issuing a certificate to this effect.?However, most standard form contracts do not actually define PC, instead leaving this to the professional judgment of the A/CA.

Practical Completion, why is it important?

Practical completion usually signifies a turning point in a project, in that it should (1) trigger the return of any retention monies and (2) the final account stage.?PC is also usually the end point for the calculation of any liquid ascertained damages (“LADs”) which may be due from the contractor to the employer.?It is for these reasons, amongst others, that contractors are generally keen for PC to be agreed as having been achieved and for this to happen sooner rather than later.

Conversely, employers are reluctant to take possession of a building which they consider containing defects.?They may resist PC, to put pressure on a contractor by withholding sums that would otherwise be due.

The effects of PC, coupled with the lack of an agreed definition within standard form contracts, means that the question of whether or not PC has been achieved is a common cause of disputes.?It is also an issue which, somewhat surprisingly, does not come before the higher courts very often.?With the current authoritative cases being spread out between 1969 and the present day.

Mears Ltd v Costplan Services South East & Ors – [2019]

However, in 2019, the issue of practical completion did come before the Court of Appeal for the first time in 50 years via Mears Ltd v Costplan Services South East & Ors [2019] EWCA Civ 502.?In its judgment, the court set out guidance regarding PC whereby Lord Justice Coulson reviewed the existing case law and authorities with regards to practical completion and summarised the current position to be as follows:

1. PC is easier to recognise than define. There are no hard and fast rules.
2. The existence of latent defects cannot prevent PC. If the defect is latent, nobody knows about it, and it cannot therefore prevent the certifier from concluding that practical completion has been achieved.
3. In relation to patent defects, there is no difference between an item of work which must be completed (i.e., an outstanding item) and an item of defective work which requires to be remedied. Snagging lists can, and usually will, identify both types of items without distinction.
4. A practical approach has been adopted by the courts such that practical completion can be summarised as a state of affairs in which the works have been completed, free from patent defects, other than ones to be ignored as trifling.
5. Whether or not a defect is trifling is a matter of fact and degree, to be measured against the “purpose of allowing the employers to take possession of the works and to use them as intended”.?However, this does not mean that if a house can be inhibited, or a hotel opened for business, that regardless of the nature or extent of any incomplete works, or defects, that the works must be regarded as having achieved PC.
6. The fact that a defect may be irremediable, does not itself preclude the achievement of PC.

When has practical completion been achieved?

As with many areas of the law, disputes concerning practical completion are likely to remain common.

However, the court’s judgment in?Mears at least offers a starting point for any parties to a dispute concerning the issue of whether or not PC has been achieved.

If you need further advice on practical completion, please get in touch with the Construction Law experts here.