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Practical completion in Tasmania
Practical completion determines when you get the final payment and when the defects liability period starts.
What is practical completion?
‘Practical completion’ means that building works have been completed in accordance with the contract, except for minor omissions and defects, and, where applicable, that the builder has done all that they are required to do under the contract to enable a certificate of occupancy to be obtained.
If you are unsure whether any omissions and defects are ‘minor’ or may prevent works from being used for their usual purpose, you should contact your HIA workplace advisor for guidance.
What happens once you reach practical completion?
On the day the builder believes the building works have reached practical completion, the owner must be provided written notice of practical completion and the claim for final payment.
Within 5 working days of giving the Notice of Practical Completion, the owner and builder must meet on-site to carry out a final inspect the works.
The final inspection is an opportunity for the builder and owner to inspect the building works. There are three possible outcomes of the final inspection:
1. The owner does not attend the final inspection.
In this case, the builder is not required to complete the defects document and the owner is deemed to have agreed that practical completion has been reached. The builder may issue the Notice of Practical Completion.
2. The owner attends the final inspection and does not claim that there are any minor defects or omissions.
In this case, the owner is deemed to agree that practical completion has been reached and the builder can issue the Notice of Practical Completion.
3. The owner attends the final inspection and claims that the building works have not reached practical completion.
Within 5 working days of the inspection, the owner must give the builder a written defects list of the works required to be undertaken in order for practical completion to be reached.
The builder is required to carry out the works as specified by the owner (provided that the defects are not minor and prevent the building works from being reasonably capable of being used for their usual purpose).
Once the works are completed, the builder must issue a further Notice of Practical Completion within 10 working days and a further site inspection is required.
What does a defects document include?
The defects document needs to include the following:
- a list of all minor defects and minor omissions that the builder and owner agree exist;
- a statement about when the builder will remedy the minor defects and omissions – which may be after the client has made the final payment and taken possession of the property;
- a list of minor defects and minor omissions that the owner claims exist but the builder does not agree exist.
This defects document must be signed by the builder.
Can the builder disagree with the defects document?
If your client gives you a defects document, you can either:
- complete/rectify those items that the owner has identified as needing to be done and issue another Notice of Practical Completion; or
- give the owner a written notice rejecting the owner’s defect list and refer the matter to dispute resolution.
When is the client required to make the Final Payment?
Once the final inspection has occurred, and the owner has agreed (or has been deemed to agree) that practical completion has been reached, the builder must within 10 working days give the owner:
- a completed and signed Notice of Practical Completion stating the Date of Practical Completion; and
- the completed defects document (unless not required due to the owner failing to attend or otherwise does not claim there are any defects).
If your client pays the final progress claim, the date of practical completion is that stated in your Notice of Practical Completion.
Defects liability period
The contract provides an additional 3-month period for the owner to provide the builder a written list of defects.
Within 20 working days of receiving a written defects list, the builder must fix the defects, at no cost to the owner.
Handing over possession
Once the owner makes the final payment, you should give them possession together with all keys, certificates, and warranties.
If the owner takes possession without your consent or before final payment is made, the owner is in substantial breach of the contract.
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