Defects liability period DLP

1 What is the defects liability period?
2 What happens at the end of the defects liability period?
3 What happens if the contractor fails to make good defects?
4 What happens after the defects liability period?
5 What defects should be rectified during the defects liability period?
6 What is substantial completion?
7 Related articles on Designing Buildings

[edit] What is the defects liability period?

The defects liability period (now called the 'rectification period' in Joint Contracts Tribunal (JCT) contracts) is a period specified in construction contracts that begins on certification of practical completion and typically lasts six to twelve months. During this period, the client reports any defects that arise to the contract administrator who decides whether they are defects (i.e. works that are not in accordance with the contract), or whether they are maintenance issues. If the contract administrator considers they are defects, then they may issue instructions to the contractor to make them good within a reasonable time. Note, it is actually the contractor's responsibility to identify and rectify defects, not the client's, so if the client does bring defects to the contractor's notice, they should make clear that this is not a comprehensive list of all defects

Practical completion is the point at which construction work is certified as practically complete under the building contract. As well as signifying the beginning of the defects liability period, this has the effect of:

Releasing half of the retention (an amount retained from payments due to the contractor to ensure they complete the works).
Ending the contractor's liability for liquidated damages.
Allowing the client to occupy the site.

For more information see: Practical completion.

[edit] What happens at the end of the defects liability period?

At the end of the defects liability period, the contract administrator prepares a schedule of defects, listing those defects that have not yet been rectified, and agrees with the contractor the date by which they will be rectified. The contractor must in any event rectify them within a reasonable time.

When the contract administrator considers all the items on the schedule of defects have been rectified, they issue a certificate of making good defects. This has the effect of releasing the remainder of any retention and results in the final certificate being issued.

[edit] What happens if the contractor fails to make good defects?

If the contractor, having been given the opportunity to rectify defects, fails to do so within a reasonable time, they may be in breach of contract. In this situation others may be employed to rectify the defects, and the cost of such works deducted from the contractor's retention.

For more information see: Certificate of making good defects.

[edit] What happens after the defects liability period?

After the defects liability period, the building owner does not have a contractual right to insist that the contractor rectifies defects not notified during that period. The building owner must instead seek redress in an action for damages, for breach of contract, or for negligence. In the case of dwellings there is a statutory remedy provided by the Defective Premises Act 1972. These rights of action are not perpetual; actions for breach of contract are time barred after six years from the date of the breach (usually the completion of the building although with a failure of design the breach may have occurred earlier), or for a contract under seal, the period is 12 years

For more information see: Latent defects.

[edit] What defects should be rectified during the defects liability period?

It is important to note that the defects liability period is not a chance to correct problems apparent at practical completion, it is a period during which the contractor may be recalled to rectify defects which appear after practical completion. If there are defects apparent before practical completion, then these should be rectified before a certificate of practical completion is issued.

This can, however, put the contract administrator in a difficult position, as both the contractor and the client may be keen to certify practical completion (so that the building can be handed over) and yet defects (more than a de minimis) may still be apparent in the works. Issuing the certificate could render the contract administrator liable for problems that this causes for example in the calculation of liquidated damages.

In practice therefore, it is not unusual, particularly if it is in the client’s interests, for a certificate of practical completion to be issued with an attached list of minor omissions and defects to be rectified in the defects period. An example of this would be if the certificate of practical completion might trigger tenants fit out and subsequent payment of rent, when it is in nobody’s interest to delay the programme just for delivery of a piece of door furniture or a replacement light fitting.

If the contract administrator is pressured to certify practical completion even though the works are not complete, they might consider informing the client in writing of the potential problems of doing so, obtaining written consent from the client to certify practical completion and obtaining agreement from the contractor that they will complete the works and rectify any defects. If the contract administrator is not confident about the potential problems this may cause, they may advise the client to seek legal advice.

For a more detailed analysis of what constitutes practical completion and when it can be certified, see: Practical completion.

On construction management contracts, a separate certificate of practical completion must be issued for each trade contract. This means there may be a number of defects liability periods. The same is true on management contracts, where each works contract must be certified individually.

[edit] What is substantial completion?

Some forms of contract (for example in the USA) allow for an alternative position of 'substantial completion'. The American Institute of Architects (AIA) defines this as: '[The] state in the progress of Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so the Owner can occupy or utilize the Work for its intended use.'

[edit] Related articles on Designing Buildings

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Comments

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My understanding is that under JCT SBC the Contract Administrator is responsible for identifying defects (clause 2.38) rather than the Main Contractor.

This is a complex issue. The contract administrator does have the power to instruct the contractor to rectify defects. However, it is the contractor's responsibility to complete the works in accordance with the contract documents - that is, without defects. The end of the defects liability period does not mean the contractor is no longer liable for defects, only that they do not have the right to return to site to correct them.

This is why the article includes the suggestion that the contract administrator makes clear in any schedule of defects that it is not a comprehensive list of all defects. Otherwise the contract administrator would effectively be taking on a supervisory role.

However, the case of Pearce and High v Baxter suggests that the contractor may not be liable for the full cost of rectifying defects after the defects liability period if they have been prevented from rectifying them themselves during the defects liability period. This uncertainty means it is in the employer's interests to try to identify defects and have them rectified during the defects liability period.

what happens if the defect liability period is over and we have not received any formal defects list? Is the CA under contract to issue the defects list giving enough time for the contractor to complete the works before the defect liability period ends?

It depends what it says in the contract.