At Substantial Completion minor items, known as "punch list" items, may remain to be completed or corrected. Substantial Completion is a critical legal and contractual milestone that signifies the near conclusion of the construction phase and the commencement of the warranty period for addressing any defects.
Key aspects and implications of Substantial Completion include:
- Occupancy: Substantial Completion allows the owner to take possession and use the project or facility, even though all construction activities may not be entirely finished.
- Certificate of Substantial Completion: This is a document, often prepared by the architect or engineer, that certifies the date the project achieved Substantial Completion. It formally marks the transition from construction to occupancy and use.
- Punch List: A list of items that need to be completed or corrected by the contractor. The creation of a punch list is typically associated with reaching Substantial Completion. Completion of punch list items is required to fulfill the contract obligations fully.
- Warranty Period: The start of the warranty or defect liability period usually coincides with Substantial Completion. This period obligates the contractor to correct defects that may become apparent after occupancy.
- Release of Retainage: Substantial Completion often triggers the release of a portion of the funds retained by the owner as a financial assurance for the satisfactory completion of the project.
- Liability Shift: The responsibility for utilities, security, maintenance, and insurance often shifts from the contractor to the owner upon achieving Substantial Completion, depending on the contract terms.
- Final Payment and Settlement: While Substantial Completion may initiate the process for final payment to the contractor, full and final settlement typically occurs after all punch list items are addressed, and the project is fully complete.
The determination of Substantial Completion is subject to the contract terms and the professional judgment of the project's architect or engineer. It is an important concept in construction contracts because it delineates the shift of control and responsibility for the project from the contractor back to the owner, along with marking the commencement of statutory limitation periods for certain legal claims.
