Completion & Handover
It is normal practice to have a start date and a completion date in a building contract.
When the work is nearly finished and the new building is ready for occupation, the contractor will usually inform the client or the architect or project manager, if there is one. The work will then be inspected and if everything is ready for handover, the completion date will be confirmed. Inspection will usually involve not just a visit and look around the site but also testing of equipment to see that it all works OK. Small ‘snagging’ items will not usually delay completion, and instead they will be listed for the builder to complete within a short period after completion. If, on the other hand, there are still outstanding matters of any substance, the contractor should finish them before completion is confirmed.
When the work includes equipment or materials that have a manufacturer’s warranty, the contract can usefully provide for the benefit of these warranties to be given to the client on completion so that he can claim directly against the manufacturer if a problem occurs. But this should not relieve the contractor from having to ensure that everything is working OK before he leaves the site.
It is usual for a contract to specify a defects period of six or twelve months during which any problem that arises has to be put right by the contractor, assuming the problem is down to him and not caused by normal wear and tear or some fault of the client, e.g. by failing to operate the boiler properly.
The potential liability of the contractor will not stop at the end of the defects period unless the contract says so. Under the general law, a contractor is liable for any latent defect that appears for up to six years from completion or twelve years if the contract is executed as a deed. The same applies to the liability of an architect or other professional consultant.
Most large building projects contain provision for the contractor to pay liquidated damages (LDs) if he fails to finish the work by the completion date. Liquidated damages are a pre-agreed amount – e.g. £200 a day or £500 a week – and should represent a genuine estimate of the likely cost of delay to the client. If, for example, you are renting a property until you can move into the new home, the cost of renting that other property could be used as the basis for calculating the liquidated damages. LDs are not often used in small projects but they could be appropriate for a main contractor building a £300,000 house and they do act as an incentive to a contractor to finish on time, as well as a negotiating tool when settling the final account.
If the builder is late in completing the contract and there is no reference to liquidated damages in the contract, he will still be liable to you if he is late. But instead of claiming a pre-agreed amount, you would have to show the actual loss that you suffered as a result of the delay.
Also, bear in mind that if completion of the work is delayed for reasons beyond the builder’s control, he may be entitled to an extension of time and a new completion date will then be fixed. And if you, the client, are responsible for the delay –e.g. because of some change that you requested, you definitely need to give him an extension of time, otherwise the completion date in the contract becomes redundant and instead of having to finish the work by a specified date, he only has to complete within a reasonable time.
Giles Dixon is a solicitor with his own practice specialising in commercial and construction contract drafting. www.gilesdixon.com
Giles is also the founding director of ContractStore, www.contractstore.com, a website selling a wide range of downloadable legal document templates, including contracts for self-builders and contractors.