Defects and practical completion

Question

18 months ago I engaged a contractor to carry out a major refurbishment of our property. Practical completion was granted three months ago, subject to a list of defects. The contractor seems to have lost interest in correcting any of the defects or completing the outstanding work and whenever I speak to them they are rude, evasive, and dismissive. I would like to have them out of my space as soon as possible. How can I achieve this? We signed up for a JCT Intermediate Building Contract with contractor’s design.

Answer

The first point to make is that it is not good practice for a Practical Completion Certificate to be issued subject to a list of known defects that remain to be rectified or outstanding items to be completed. The issue of the Practical Completion Certificate means that the works are considered by your contract administrator to be complete – and “complete” in this context means that all of the contract works have been carried out and any defects must be insignificant and not affect the proper use of the building. If this is not the case then arguably your contract administrator has acted negligently in issuing PC. Your bargaining power to resolve the outstanding issues is significantly reduced post-PC; the contractor will have obtained one half of its retention money, and you are not able to claim liquidated damages relating to delays in carrying out post-PC work.

Turning to the question of what, practically, you can do if the contractor’s obstructive attitude is preventing progress, the JCT contract provides a potential solution. Formal termination of the contractor’s employment does not appear to be an option in your situation. A contractor’s failure to proceed regularly and diligently with the works is an event which would allow the employer to terminate, but only before Practical Completion. Post-PC, the employer’s termination rights are limited to events of contractor insolvency or corruption.

Is there any other way to effectively remove the contractor from the project? Under clause 2.30 of the JCT contract, it is clear that defects rectification work is not automatically to be carried out by the contractor. If defects or other faults are notified to the contractor not later than 14 days after expiry of the Rectification Period then they must be made good by the contractor at no cost to the employer. But the contract administrator may instruct otherwise, with the employer’s consent – and remove the rectification work from the contractor, making an appropriate deduction from the contract sum in relation to any defects not made good.

Unfortunately, decided cases suggest that it is not open to an employer to use the clause 2.30 mechanism to take rectification work away from the contractor in order to give it to a different contractor. The clause 2.30 mechanism is available only for the employer to take rectification work away from the contractor if it decides it does not require this work to be done at all. The rectification of defects is the contractor’s obligation; but it is also the contractor’s right to be given the chance to carry out the work, if the employer wants the defects rectified at all.

A different mechanism, in clauses 3.8 and 3.9 of the JCT contract relating to contract administrator’s instructions, is your best option. Clause 3.8 empowers the contract administrator to issue instructions to the contractor. You should check with the contract administrator – were the defective and outstanding works subject to a specific instruction or instructions given to the contractor? If not, the contract administrator should now issue the appropriate instruction setting out which of the defective or incomplete items are required to be rectified/completed and giving a reasonable, but finite, deadline for completing them.

If the contractor fails to comply with the instruction to rectify defects and complete outstanding items of work within the required timescale, then the contract administrator is entitled under clause 3.9 to give notice to the contractor requiring compliance. If within seven days of such a notice the contractor still has not complied with the instruction, then you will be entitled to pay another contractor to rectify the defects and complete any outstanding items of work. The contractor will be liable for all additional costs you incur in connection with engaging a new contractor, and any appropriate deduction may be made from the contract sum.

This article was first seen in the Professional Housebuilder.