Understanding the key milestone of Practical Completion during home building works is essential for both homeowners and builders alike, marking the point at which a project is deemed finished and triggering important legal implications.
Practical Completion Defined:
Practical Completion is a term used to signal that a building project has reached a stage where it is fit for occupation and use for its intended purpose (usually this means fit for living in). Under the Home Building Act 1989 (NSW), Practical Completion occurs either:
When the work is complete within the meaning of the contract under which the work was done; or
If the contract does not provide for when work is complete (or there is no contract), when the work is completed ‘except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose’.
Determining Practical Completion:
The determination of Practical Completion is not always straightforward and may vary depending on the circumstances of each construction project. Generally, it involves a careful assessment of whether the works have been completed in accordance with the contract and whether any minor defects or omissions can be addressed without preventing the beneficial use of the property.
Legal Implications of Practical Completion:
Once Practical Completion is achieved, several legal implications come into play including:
Final Payments: Practical Completion often triggers the final payment to the builder under the construction contract (however, this may be subject to any defects that need rectification);
Commencement of Warranty Periods: The clock starts ticking on the statutory warranty periods for defects under the Home Building Act 1989 (NSW). These are 6 years for major defects and 2 years in any other case; and
Occupation and Handover: Homeowners gain the right to occupy and take possession of the property, usually on the issue of an Occupation Certificate by the building certifier. This is a significant milestone for those eagerly awaiting the completion of their home.
Warranty Periods and Defects
It is essential to understand when Practical Completion has occurred to mark the commencement of the statutory warranty periods and calculate the expiry of the 2 year ‘minor’ defects and 6 year ‘major’ defects periods respectively. Often a homeowner will lose the right to have defects rectified upon expiry of those periods so it is essential that there is no delay enforcing defects rectification.
Call or email us today to discuss practical completion or building defects.