Construction Financial Glossary

Substantial Completion Definition

Substantial completion marks the stage in a construction project where the work is complete enough for the owner to use the facility, even if minor tasks remain. At this point, the owner assumes responsibility for the property, and the contractor’s liability begins to shift.

Why Substantial Completion Matters

It signifies the transition from construction to occupancy, triggering key contract provisions such as warranty periods, retainage release, and final payments.

Determining Substantial Completion

    1. The contractor must complete all critical project elements required for safe and functional use
    2. A final inspection is conducted, and a certificate of substantial completion may be issued
    3. Any remaining work is documented on a punch list for final resolution


Related Terms: Certificate of Occupancy, Punch List, Final Completion, Warranty Period

FAQs

How is substantial completion different from final completion?

A: Substantial completion means the project is usable, while final completion means all contract requirements, including punch list items, are fully met.

Does substantial completion affect insurance or warranties?

A: Yes, many warranties and insurance policies start at the point of substantial completion.

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