Solicitor Michael Gerard of Michael Gerard Solicitors (www.mg-law.co.uk) explains why it is so important to be certain when issuing a practical completion certificate.
All standard forms of contract provide for the issuing of a notification when practical completion has been achieved. The JCT 2016 suite of contracts provide for the certification of practical completion of the works (or a section of the works), when in the opinion of the architect or contract administrator (CA) it has been achieved. But once issued under a contract, can the practical completion certificate (PCC) be withdrawn?
As a CA, you must be fully aware of your role and responsibilities when issuing a PCC at the end of a building project. However, complications can still arise after a PCC has been issued for a range of different reasons, for example, if the PCC has been issued prematurely or if the CA changes their mind about the works having actually been completed, creating a dispute between the parties involved. In this scenario, it can be difficult for a CA to know what to do – or what the legal guidelines are.
Adhering to terms and conditions
When a CA is engaged to administer the building contract, they must act within the terms and conditions of the contract. This means that if a contract does not include any provision to revoke the PCC once issued, the CA has no power to do so. The reasoning for this is because standard forms of contract will usually prescribe the level of completion that is required for a contract to be considered as practically or substantially complete. However, whilst the old ICE form of contract (now obsolete), caveated the notice of substantial completion with an undertaking to finish any outstanding works, the JCT is not so accommodating and is strict on the powers of the CA post certification of practical completion.
It is established authority that once the PCC has been issued, it remains final and binding on the employer and cannot be revoked. Keating on Building Contracts, 10th Edition, paragraph 5-040, poses the question as to whether, and if so to what extent, a certificate is binding and conclusive: “While it is a question of construction in each case to determine whether it was intended that a particular certificate should be conclusive upon the matter with which it purports to deal, very clear words are necessary for a certificate to have that effect.” The effect of a PCC issued under a JCT is to confer finality upon the certificate. So, it must follow that a certificate validly issued cannot, in the absence of clear terms to the contrary or a legal waiver by the parties, be withdrawn.
A chain reaction
Under the JCT, release and payment of half of the retention monies succeed the PCC. There is no contractual provision under the JCT that allows a CA to issue a PCC and then withdraw it: the certificate is either issued under the relevant clause in the contract or it is not – there is no ‘half-way house’. This is because there are contractual procedures that are essential to the issue of the certificate which cannot be reversed. At the point of issue, the following occurs:
- The contractor’s liability for liquidated damages ceases.
- The rectification period begins.
- The contractor’s licence to occupy the site ceases.
- The employer takes possession of the works.
- The employer takes over the insurances.
- The limitation period begins.
- The contractor’s obligations are terminated.
- The CA’s powers come to an end, except for matters relating to the rectification period.
What happens post PCC?
Therefore, under the standard JCT forms of contract, once the PCC has been issued, the CA’s duties under the contract are restricted. Furthermore, the PCC triggers completion of the works in respect of the licence to occupy the site. It enables the employer to take beneficial occupation of the site, stops liquidated damages being levied and defines the date when the rectification period ceases. It also brings to an end special insurance requirements.
Certainty is therefore required for such important circumstances as the PCC, which is merely an opinion of the CA at the moment of giving that certificate, cannot be rescinded. The reason for this is because the PCC alters the parties’ positions to an extent that cannot readily be contemplated for reversal merely on a change of mind or for some mistake.