What Is Practical Completion and Why It Matters

Introduction

Practical completion is the moment a construction project crosses from “still under construction” to “usable in the real world.” It triggers major shifts in risk, possession, insurance, payments, and defects obligations. Whether you are an employer, contractor, or contract administrator, understanding this milestone can save time, money, and disputes.

Definition and purpose

Practical Completion is a contractual milestone that recognises when the works are complete enough to be used for their intended purpose, even if minor outstanding items remain. It is not about perfection; it is about functionality, usability, and contractual readiness.

Under the JBCC, Practical Completion is defined as:

“the stage of completion where the Works are substantially complete in accordance with the Contract and can effectively and conveniently be used for the intended purposes…”

In practice, this definition serves both legal and commercial purposes. Legally, it marks the point at which responsibility for the works begins to shift from contractor to employer. Commercially, it unlocks several downstream consequences that affect cash flow, insurance cover, and project close-out.

Once practical completion is achieved, the employer is usually entitled to take possession of the works, even though minor defects or incomplete items (often called snags) may still exist. At the same time, the contractor’s exposure to certain risks – such as damage to the works – reduces significantly.

This milestone also typically signals:

• The end of delay damages (unless delay continues beyond completion).
• The start of the defects liability period.
• Partial or staged release of retention money.
• A change in insurance responsibility.

Because so many rights and obligations hinge on this single event, disagreements often arise over whether practical completion has genuinely been achieved. That is why the concept deserves careful attention, not just at the end of a project, but throughout construction planning and administration.

How JBCC treats Practical Completion

Under the JBCC Standard Construction Works Contract (2020 edition), practical completion is carefully structured and procedural. It is not automatic; it must be formally assessed and certified.

Step-by-step process under JBCC

1. Contractor’s notice
   When the contractor believes the works have reached practical completion, they issue a formal notice to the architect or principal agent.
2. Inspection by the contract administrator
   The contract administrator inspects the works to determine whether they meet the contractual threshold for practical completion.
3. Certificate or list for completion
   If satisfied, the contract administrator issues a Certificate of Practical Completion.
   If not satisfied, the contract administrator issues a list of items to be completed or corrected before certification.
4. Employer takeover
   Upon certification (or in certain cases, early takeover), the employer may take possession of the works.
5. Defects liability period begins
   The Defects Liability Period (DLP) starts from the date of practical completion.
6. List for final completion
   During the DLP, defects and outstanding items are identified and recorded for rectification.
7. Making-good defects certificate
   Once defects are rectified, a Certificate of Making Good Defects is issued.
8. Final completion and retention release
   Final completion follows, usually triggering the release of remaining retention.

Key consequences under JBCC

• Risk transfer: The risk of loss or damage to the works generally shifts to the employer.
• Insurance: Construction insurance obligations may reduce or end.
• Retention: A portion of retention is typically released at practical completion.
• Delay damages: These usually stop accruing from the certified date.

JBCC’s structured approach helps reduce ambiguity – but only if notices, inspections, and certificates are handled properly and on time.

How FIDIC treats Completion and Taking Over

Unlike JBCC, FIDIC does not use the term “Practical Completion”. Instead, it relies on the concepts of Completion and Taking-Over.

Under FIDIC, the contractor applies for a Taking-Over Certificate once the works are complete in accordance with the contract, except for minor outstanding work that does not substantially affect use. Once issued, the employer is deemed to have taken over the works.

In practical terms, this is functionally equivalent to practical completion, even though the terminology differs.

Key points under FIDIC:

• The Engineer (rather than the Contract Administrator) issues the Taking-Over Certificate.
• Risk and responsibility for the works generally transfer to the employer upon taking over.
• The Defects Notification Period begins, similar to JBCC’s DLP.
• Minor outstanding work is permitted, provided it does not prevent intended use.

One notable difference is FIDIC’s stronger emphasis on formal taking-over, even where the employer starts using the works. Employer’s early or partial taking-over is a related topic and worth separate discussion.

Practical implications and common disputes

Despite clear definitions, practical completion remains one of the most disputed milestones in construction contracts.

Common traps and how to manage them

• Premature takeover
  Employers may start using the building before certification.
  Tip: Always document early use and confirm whether it constitutes contractual takeover.
• Incomplete snag lists
  Rushed inspections can miss defects.
  Tip: Conduct joint inspections and keep photographic records.
• Retention disputes
  Confusion over when retention is due for release.
  Tip: Tie retention release strictly to certificates, not assumptions.
• Insurance gaps
  Unclear handover dates can leave works uninsured.
  Tip: Align insurance policies with the certified completion date.
• Latent defects confusion
  Employers sometimes assume all defects are covered after completion.
  Tip: Understand the difference between patent defects, latent defects, and contractual remedies.

A Simple Example

A contractor finishes an apartment block, and tenants move in before the architect issues a certificate. Months later, water ingress appears. The employer claims it is a defects issue; the contractor argues risk transferred earlier. The dispute turns not on workmanship alone, but on whether practical completion had legally occurred.

Checklist for achieving Practical Completion

Before issuing or accepting practical completion, confirm the following:

1. Works are usable for their intended purpose
2. Statutory approvals (where required) are in place
3. Major services (water, power, drainage) are operational
4. Health and safety items are complete
5. Snag list prepared and agreed
6. Formal notice issued by the contractor
7. Inspection conducted by the contract administrator
8. Certificate issued and properly dated

This checklist helps align expectations and reduce disputes later.

Conclusion

Practical completion is not just an administrative step - it is the hinge on which possession, risk, insurance, cash flow, and defects obligations swing. Getting it right protects relationships and keeps projects moving toward clean close-out.

As the year winds down, you might even ask whether the year itself is “practically complete” – a tempting thought, but unlike a building, the calendar never issues a certificate.

For quick, cited access to contract clauses, standards, and guidance when preparing notices, certificates, or snag lists, check out our intelligent construction reference tool – Builder’s  Counsel.

References

1. Joint Building and Construction Council (JBCC). JBCC Standard Construction Works Contract & Agreement, June 2020 Edition.
2. International Federation of Consulting Engineers (FIDIC). Conditions of Contract for Construction (Second Edition, 2017). ISBN 978-2-88432-084-9.