non-completion being issued by thecontract administrator; the employernotifying the contractor that it mayexercise its right to levy liquidateddamages; and the employer issuing avalid withholding notice.Liquidated damages provide anexclusive remedy in respect of thecontractor’s delay.
Even if the building contract does notcontain a provision for sectionalcompletion of that part of the workswhich is very near to completion, theemployer can, if he wishes and if thecontractor consents, take partialpossession of that part of the buildingwhich will, in the very near future, bepartially complete.However, taking possession of part,before the whole development iscomplete, does have its disadvantages.These include that, notwithstandingthere may still be some patent defects,practical completion of the part ofwhich early possession is taken will bedeemed to have occurred and all theconsequences of practical completionwill follow in respect of that part. Thiswill lead, for example, to there beingtwo defects liability periods (one forthe part of the development for whichearly possession is taken and the otherfor the remainder of the development).Equally, the employer will have toinsure that part of the development inrespect of which possession is taken.In addition, the amount of liquidateddamages to which the employer isentitled in respect of the non-completed part and in respect of whichpossession is not taken, will bereduced accordingly.However, with the agreement of thecontractor, it may be possible toovercome some of the problemsarising out of the employer takingpartial possession. If agreement ispossible, a supplemental agreement isrecommended, varying the terms ofthe original building contract.
Defects Liability Period (“DLP”)
At practical completion, there are notmeant to be any patent defects. TheDLP is about remedying defects which“appear” during that period. However,if a schedule of minor defects (asnagging list) is in fact attached to thecertificate of practical completion,those minor defects should beremedied at the start of the DLP withina reasonable time from practicalcompletion.During the DLP and if the employer soinstructs, the contractor has anobligation to remedy any (originallylatent) defects which may emerge, atits own cost. As noted already, it isgenerally a 12 month period.
The end of the Defects Liability Period
Very shortly before the expiry of theDLP, the contract administrator shouldinspect the works and draw up aschedule setting out, in some detail,any defects which are apparent.
What options are there as to thedefects identified?
The contract administrator caninstruct the contractor to make goodthe defects within a reasonable time,at no cost to the employer.Alternatively, the contractor can beinstructed not to remedy the defects.The employer would then make anappropriate deduction in respect of thecosts that it will incur in having thedefects remedied by others. Howeverthe employer may be restricted torecovering no more than the costs thatthe contractor would have itselfincurred, had it been asked to remedythe defects. This is in line with theduty to mitigate.The contract administrator does nothave to wait until the end of the DLP. Itcan issue instructions during the DLPto remedy any defects which emergeduring the DLP.
Once the defects have been madegood
Once the defects have been made goodand assuming that the contractor wasactually instructed to make good thedefects, the contract administratormust issue a notice to that effect, forexample, the certificate of makinggood.
Consequences of issuing theCertificate of Making Good.
The issuing of the certificate of makinggood will result in the release of thesecond and final part of the retention.The final certificate cannot be issuedprior to the issuing of the certificate ofmaking good.
Defects appearing after theCertificate of Making Good has beenissued
Strictly speaking, the contractadministrator cannot issue thecontractor with an instruction to makegood any defects which appear afterissue of the certificate of making good.However, if the final certificate has notyet been issued, an adjustment as tothe amount payable to the contractorcan be made.The employer should check the termsof the building contract to ascertainthe contractual effect of the finalcertificate and in particular whether itis conclusive and if so, as to what?As a last resort (and assuming that thefinal certificate does not act as a bar),the employer may have no alternativebut to issue proceedings in relation tothe losses which it will suffer, as aresult of the defects. The issuing ofproceedings is outside the scope ofthis guide.
So while practical completion and theDLP are the final hurdles, it isimportant that care is taken to ensurethat the project does not stumble atthis late stage when the finishing postis in sight.For further information, please contactJames LevyTel: 020 7074 8074Email: firstname.lastname@example.org