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What is practical completion?

Practical completion can be a confusing concept for both the owner and builder, especially when the procedures outlined in the contract are not followed correctly. It is important for both parties to understand what practical completion represents, and to ensure they abide by the terms of the contract.

Under the HIA SA New Homes Contract, Alteration & Additions Contract, Cost Plus Contract, and Kit & Transportable Homes Contract, ‘Practical Completion’ means ‘when the work is substantially complete and reasonably fit for use’.

Practical completion does not require completion without any defects.  Minor defects and incomplete work, such as incomplete skirting, uneven paint finishes or a missing robe rail, will usually not prevent the home from being used.  

Whereas incomplete work such as a missing oven or sink, untiled showers, or electrical supply and water services are likely to make the works unfit for use.  If this is the case, practical completion has not been reached.

What happens at practical completion?

When the work has reached practical completion, the builder will give the owner a final account.

Within 7 days of receiving the final account, the owner must:

  • inspect the works with the builder
  • write down anything that is defective or incomplete in a Certificate of Practical Completion, sign it and give it to the builder and
  • pay the final account in full by cash or bank cheque, with no deduction or set off.

The hand-over process

The builder is not required to hand over the home until the practical completion process has been followed, including payment of the final account in full and provision of the Certificate of Practical Completion.  This means the builder retains possession of the site and is responsible for insuring the work until the handover date.  The owner is responsible for insuring the work following handover.

The builder is also not required to fix every defect or item of incomplete work prior to hand-over.  This allows the owner to move into the house sooner.  The builder will still be required to fix the items listed in the Certificate of Practical Completion within a reasonable time after hand-over and the owner must provide the builder with reasonable access to the home for this purpose.

Fixing defects

Typically, the owner should provide the builder with a written notice listing any defects or remaining incomplete work at around 3 months after practical completion.  However, the owner must immediately notify the builder of any urgent issues that may cause further damage to the home if not addressed.

The builder will then be required to address the matters raised by the owner within a reasonable timeframe depending on the circumstances.

Are you required to fix all issues the owner raises?

No. A builder is not responsible for defects arising from:

  • abuse or misuse
  • normal wear and tear
  • improper maintenance
  • work that was carried out by others

If you are notified of a defect that may be related to your work, it is recommended that you first attend site to assess the cause.  Then, if you reasonably believe the defect is not your fault or is not related to the building works completed by you, you may refuse to fix it.  You may also choose to assist the homeowner further, for example, by offering to quote the repair works, provided that the defect is not your fault.

To find out more, contact HIA's Contracts and Compliance team

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