, Building
The client walks the new office floor with a pack of coloured dot stickers. Ninety minutes later there are 140 dots: a scuffed architrave, a socket plate 4mm proud, a door that catches on the carpet, three light switches that were meant to be brushed steel and are white plastic. Your site manager says the job is finished. The client says it obviously is not. Somewhere between those two positions sits a certificate worth around £21,000 to you in released retention.
Practical completion is a legal event, not a quality judgement
Under the JCT forms, practical completion is certified by the contract administrator or employer's agent. The term is deliberately not defined in most standard forms, which has kept the courts busy, but the working test that has emerged is whether the works are complete for all practical purposes and the employer can take possession and use them for their intended purpose. Trifling defects do not prevent it. What counts as trifling is a judgement, and it is the certifier's judgement rather than yours.
The moment it is certified, several things move at once:
- Liquidated damages stop running. This is usually the largest number in the room.
- The risk in the works and the insurance obligation pass to the employer.
- Half the retention is released, typically taking a 5% holding down to 2.5% or a 3% holding down to 1.5%.
- The rectification period, which most people still call the defects liability period, begins.
- The limitation clock for claims starts, six years from the date for a contract executed under hand, twelve years for one executed as a deed.
Because the consequences are that significant, arguments about practical completion are rarely really about architraves. They are about whether liquidated damages keep accruing while the argument runs.
Snagging and defects are not the same list
Snagging is the pre-completion sweep: things that are visibly not right on the day, mostly finishes, mostly cosmetic, mostly the result of following trades damaging each other's work. A snag list is a work list. It is not a legal instrument and it does not extend your obligations.
Defects are failures that appear during the rectification period after handover. A boiler that short-cycles in November. A flat roof that ponds. A floor screed that cracks along a line. These are different in kind, and they are usually more expensive, because the building is occupied and you are working around people.
The practical mistake is treating the snag list as the defects list. A client who is allowed to add items to a snag list for four months after handover has effectively given themselves an open-ended maintenance contract at your expense. Close the snag list at a stated date, in writing, and handle everything after it as a defect under the contract mechanism.
The rectification period is twelve months because of the seasons
The period is stated in the contract particulars. JCT's default is six months, and in practice twelve months is what gets written in on anything other than a small fit-out. The reason is a physical one rather than a legal one: a building needs to go through a full heating season and a full cooling season before you know whether the plant was commissioned correctly, whether the thermal envelope behaves, and whether movement joints were sized for the actual range of temperatures.
At the end of the period the contract administrator issues a schedule of defects, you put them right within a reasonable time, and then a certificate of making good is issued. That certificate releases the remaining retention. If you never chase the certificate, nobody will chase it for you, and firms routinely lose the balance of retention on jobs simply because nobody wrote the email fourteen months later.
You are entitled to return and fix the defects yourself. That right matters. If a client engages another contractor without giving you the opportunity to rectify, they will struggle to recover the full cost from you, because they have not mitigated. Equally, if you refuse to attend, they can appoint someone else and deduct the cost, and that cost will not be the price you would have done it for.
Retention is your money sitting in someone else's account
Retention is a percentage withheld from every interim payment as security for performance. It is typically 3% or 5% of the contract sum, released half at practical completion and half at making good. On a £700,000 contract at 5%, that is £35,000 held, £17,500 of it sitting there for a year or more after you have left the site.
Two things make this worse than it sounds. First, retention travels down the chain: a main contractor holds retention from you and the employer holds retention from them, so your money can be waiting on a certificate two contracts away. Second, if the party holding it becomes insolvent, retention is usually not held in trust and you are an unsecured creditor for it.
The Housing Grants, Construction and Regeneration Act 1996, as amended in 2009, banned pay-when-paid but did not ban retention, and it did not require it to be ringfenced. Reform has been debated repeatedly without landing. What you can do is negotiate: a lower percentage, a cap in money terms, a retention bond in place of cash, or release triggered by a date rather than a certificate that may never be issued.
New housing brings a separate warranty regime on top
If you are building homes, the contract's rectification period is not the whole picture. An NHBC Buildmark policy, or an equivalent from another provider, gives the buyer a builder liability period of two years followed by eight further years of structural cover, ten in total. The builder is responsible during the first two years, and the warranty provider is the backstop after that.
Since 2022 the New Homes Quality Code and the New Homes Ombudsman Service have added a further layer for registered developers, covering the sales process and post-completion service as well as the building itself. A developer can be compliant with Building Regulations, hold a valid completion certificate from building control, and still be found to have handled a customer badly under the code.
Where this shows up in the game
Construction arrives in Business Baron with the Property & Construction Track, an add-on to the full game. The game handles staged payments on building work, and the gap between finishing a job and being paid for all of it sits on your cash flow like any other. Money you have earned and not received is not money you can spend.