Practical completion is the stage at which building works are finished apart from minor outstanding items, and the Client can use the building for its purpose. In JCT contracts it is certified by the contract administrator or employer's agent. The certificate matters for the money: it usually releases part of the Retention, ends Liquidated Damages for delay and starts the defects period.
Worked example
A fit-out Subcontract is worth £480,000 with 5% retention, so £24,000 has been held back across the interim valuations. Practical completion is certified on 12 March.
| Item | £ |
|---|---|
| Retention held | 24,000 |
| Released at practical completion (half) | 12,000 |
| Held until defects are made good | 12,000 |
The half and half split is typical of JCT. Always confirm it against the actual contract and subcontract terms. The UK government plans to ban cash retention, which would change this step: see Retention for where that stands.
What changes on the certificate
- Part of the retention is released.
- Liquidated damages for delay stop running from the certified date.
- The defects liability period, or rectification period in JCT terms, starts.
- Responsibility for the site, and often for insuring the works, moves to the client.
- The contractor normally issues a Final Account within the period the contract sets.
Practical completion in the cost report
On a CVR, practical completion is the moment cost forecasts should harden. Remaining spend is mostly defect work, Snagging and the last invoices, so the forecast final cost should converge on the final account.
Open items that tend to be missed are retention due to subcontractors, accruals for late invoices and any back-charges not yet settled.
Check each subcontract's own date too. A subcontract can reach its own practical completion before or after the main contract does, and its retention follows the subcontract terms.
NEC contracts use "Completion", a different defined term, with its own rules on defects.
Related terms
Substantial Completion, Retention, Defect Liability Period, Liquidated Damages, Final Account, Snagging.
Planyard's cost value reconciliation shows the forecast final cost and retention balance for each job, so you can see what is left to pay once practical completion is certified.
