Construction & Engineering
What's the difference between Sectional Completion and Partial Possession?
In short, sectional completion is an obligation to meet the date for completion for just part of the works. Whereas partial possession is an agreement to accept completion for just part of the works. It is usually agreed whilst the works are progressing.
Sectional Completion and the consequences are agreed up front and provided for in the contract. Once it is in the contract, the contractor has an obligation to achieve the sectional completion date. Liquidated damages are agreed up front should the section be delivered late.
Requires an agreement during the progress of the works. It can be more disruptive for the contractor if it is not planned well in advance.
The contractor must act reasonably and not delay in reaching his decision. He can refuse it if it will interrupt the progress of the works; make the balance of the works more expensive to complete; cause real insurance issues or pose a health and safety risk. The employer can pay these costs to obtain partial possession, but it will often be more expensive than agreeing sectional completion at the outset of a contract.
It is necessary to reach agreement on the liquidated damages to be paid by the contractor if the balance of the works are not completed on time.
What is the effect of Practical Completion?
Practical Completion means that:
- Under the standard building contracts, it commences the defects rectification period commences (usually 12 months, but it can be 6 months);
- It releases half of any retention monies kept back from all interim payments up to (but not including) practical completion;
- The contractor’s obligation to insure the work ceases and the employer has to insure the work (even if the contractor is still on site rectifying defects);
- It triggers the final account process;
- The contractor will then be liable for any damage to the work, site, materials etc (as it will not be covered by the insurance that covers the construction period).
When is Practical Completion achieved?
Practical Completion is a state of affairs in which the building has been completed free from any defects that can be seen ('patent defects') other than ones that can be ignored as 'trifling'. In other words, the defects (and the rectification of them) that can be seen do not interfere with the use and occupation of the premises.
Before issuing a certificate of practical completion, the person that issues it should think very carefully about whether the employer and/or occupier may suffer a financial loss resulting from interference with the use of the premises caused by defects being rectified at the same time as the building is occupied.