Practical completion is a term that is misunderstood by many home buyers. Generally it means the point where all building work is complete or all but completed, in accordance with the contract, and the house is reasonably fit for occupation.
A building contract usually defines practical completion being when all works are completed, except for any defects or omissions which do not prevent the home from being used for its intended purpose. In other words, if the unfinished items prevent the home from being “lived in” then practical completion could be deemed not to have occurred.
Usually there will be a practical completion inspection and the building supervisor and client will agree on a list of items that need to be attended to.
There is usually a short gap in time to the handover. I understand that this is commonly around 10-14 working days, although two weeks is the standard timeframe to key handover. This may be extended if there are a lot of practical completion items still to be addressed. Builders will not want to hand over a house that is not habitable.
Confusion over payments at this stage is common because it is at the point of practical completion that payment of the final progress claim is due. At Master Builders, we regularly receive calls from home buyers who state that some minor works have not been completed and that they wish to withhold some or all of the final payment until they have been completed. Such a practice is a contract breach because this is not what they have agreed to.
The builder has a contractual obligation to repair these minor defects, but this may not necessarily happen before handover, although most builders would attempt to do so. Many items are attended to in, or at the end of, the defects liability period (usually a period of four to six months after practical completion for many residential contracts, and sometimes called the maintenance period).
Practical completion is an important stage of the building process but buyers must understand that not every last detail will necessarily be completed at that time. In short, at practical completion, the builder is paid in full, there is a short gap of time, and the owner takes occupancy – then the defects liability period starts. The Building Commission or the courts will act if the builder does not meet the defects liability obligations.