Practical Completion v Handover

coljacqld · Mar 07, 2008 2:04 pm

Hi Everyone

Have a little question for those in the know; does the total number of days on your contract (ie 160 day build time in ours) apply to practical completion or hand over.

I am told today by our construction manager it is to practical completion but what happens if they drag their feet between there and handover.

Thanks in advance
Anne

stevec · Mar 07, 2008 2:09 pm

It is to handover. Dont listen to them. Look at the HIA contract. It is to the day the finish all things in the contract to the required level.

If you delay handover for any other reason besides building works not being completed to the rquired level then they can argue it.

I subtracted three weeks in late payments from my cheque when I built three years ago as they were running behind.

blackmax · Mar 07, 2008 2:12 pm

My HIA contract lists the days to practical completion, not handover.
But I've been told by the builders that they only have a certain number of days between practical completion to handover, so they can't drag their feet. I think it was like 4 or 5 days ???

sammy · Mar 07, 2008 2:38 pm

I thought practical completion is handover? In our contract, we pay the last payment at practical completion. So does that mean that the builder gets his money before he hands over the keys?
Sam

www.buildingmyfirsthome.blogspot.com

blackmax · Mar 07, 2008 3:12 pm

sammy,

I doubt you will be asked for your final payment simply when the builder informs you of practical completion.

I think the whole idea is that you both do an inspection of the house prior to making your final payment, and you both agree on what items need to be fixed prior to handover.

Maybe I'm mistaken, but I can tell you now there is no way in the world I'll be authorising payment without doing a thorough inspection & making sure work is to my expectations - Imagine the alternative - you make final payment and your builder tells you "yep, we'll be back in a few weeks to fix up the defects" - then you'll have a nightmare getting them to even come back.

If you don't believe me, look through the recent threads about people waiting 10 months after handover to get work fixed.

It doesn't worry me waiting another week before handover if the builder needs is to fix an issues. Better that then being fobbed off and told they'll come back later.

Casa2 · Mar 07, 2008 3:56 pm

To me it's a matter of exchanging final payment for keys. No keys, no final payment.

blackmax · Mar 07, 2008 4:31 pm

Casa,

In an ideal world you would all meet on site, if all is OK you would hand over the final payment cheque & receive the keys in return.

How does this work for those of us that have to send our invoices to the bank, and the bank then takes up to 10 days to do their valuation and issue the payment to the builder?

Does the builder then withhold the house keys until the funds are cleared, or do the banks make special arrangements for your final payment so that you get the keys straight away & it's left to the builder / bank to arrange funds tranfer?

Would love to hear from someone who's gone through the process where payment has all been done electronically & not via cheque.

First_Timer_Ray · Mar 07, 2008 5:04 pm

blackmax

How does this work for those of us that have to send our invoices to the bank, and the bank then takes up to 10 days to do their valuation and issue the payment to the builder?

Does the builder then withhold the house keys until the funds are cleared, or do the banks make special arrangements for your final payment so that you get the keys straight away & it's left to the builder / bank to arrange funds tranfer?

I too would love to know. We have had all of our progress payments done via EFT and are wondering what happens with handover... do we have to process it when we do our inspection and hope that everything is fixed for handover? Does the bank give us a bank cheque to take for the settlement - and would this mean that they would do an inspection prior to issuing a bank cheque for final payment?

Ray.

stevec · Mar 07, 2008 5:52 pm

My Advice from going through this before is NEVER do final payment by EFT. Get a bank cheque take it with you and if not happy do not hand it over. Walk away and tell them to fix it. They will pressure you into taking the keys and it is emotional because you want them but once all the aces are with the builder you will be in for a bad time.

I tok possesion of a house with work still outstanding once before and the time lost from work and frustration was to much.

When they know you wont take possesion until everything is 100% they will move quickly to finsih especiialy if they are in payment default.

I cannot stress enough to walk away get them to fix everything 100% and then do another inspection.

If ten inspections are needed so be it.

PhoenixStar · Mar 07, 2008 6:05 pm

stevec

My Advice from going through this before is NEVER do final payment by EFT. Get a bank cheque take it with you and if not happy do not hand it over. Walk away and tell them to fix it. They will pressure you into taking the keys and it is emotional because you want them but once all the aces are with the builder you will be in for a bad time.

I tok possesion of a house with work still outstanding once before and the time lost from work and frustration was to much.

When they know you wont take possesion until everything is 100% they will move quickly to finsih especiialy if they are in payment default.

I cannot stress enough to walk away get them to fix everything 100% and then do another inspection.

If ten inspections are needed so be it.

Agree with you 100% Steve.... We'll definitely be doing the same.

blackmax · Mar 07, 2008 7:22 pm

Steve,

I'm going to try and do what you say. That is, see if the bank will give me a cheque to take to final inspection. My builder is really starting to p*#s me off (not my building supervisor, rather the communication coming from their customer support team) as they won't give me a straight answer as to when practical completion will be, despite being only a matter of a few days from the contract date.

I was hoping to do my moving over easter, but I've convinced myself this isn't going to happen. Because I'll likely to miss this opportunity to move over easter, it won't worry me if it takes a couple more weeks for them to fix the items they need to.

Funny how I've asked many times if the house will be completed in time, only to be told everytime 'yeah, it won't be a problem'... But now we are within reach of the finish line, they're starting to give me the cold shoulder.

I'll wait and see how things pan out from now on. But when it's all finished and they start playing games, I'll post a short thread here outlining some of the issues I've encountered along the way - hopefully will act as a warning bell to others.

Watch this space in coming weeks....

sammy · Mar 07, 2008 8:22 pm

I'd like to ask what happens if there is a problem you encountered after you have the keys? I mean, it is easy to see some problems before handover but what about those problems you can't see until you have moved in? What then? There would be no monetary leverage as you would already paid them?

sammy
www.buildingmyfirsthome.blogspot.com

coljacqld · Mar 07, 2008 9:25 pm

Thanks everyone for their input.

By the looks there are a number of us with similar concerns. Would love tio hear from those who have already been through the process.

Have now had a chat to hubby since site visit this morning. He believes that practical completion and handover are one in the same because if they try to tell you they have reached practical completion and there are issues then in effect practical completion hs not been reached, it has only been reached once all issues resolved. I'm not sure I agree.

I think a % should be held onto by say an indepenadnt 3rd party like a bond until six months after handover and is only released when all issues are resolved.

Anne

ahuang · Mar 07, 2008 10:00 pm

Based on my experience, you don't have to worry about counting the days. First there's raining days, then Xmas holiday, then in case you are late in payment they are entitled to extend it again...

So, focus on the quality, inspection and communication with the builder/supervisor!

joaninhac · Mar 19, 2008 11:45 am

blackmax

Steve,

I'm going to try and do what you say. That is, see if the bank will give me a cheque to take to final inspection. My builder is really starting to p*#s me off (not my building supervisor, rather the communication coming from their customer support team) as they won't give me a straight answer as to when practical completion will be, despite being only a matter of a few days from the contract date.

I was hoping to do my moving over easter, but I've convinced myself this isn't going to happen. Because I'll likely to miss this opportunity to move over easter, it won't worry me if it takes a couple more weeks for them to fix the items they need to.

Funny how I've asked many times if the house will be completed in time, only to be told everytime 'yeah, it won't be a problem'... But now we are within reach of the finish line, they're starting to give me the cold shoulder.

I'll wait and see how things pan out from now on. But when it's all finished and they start playing games, I'll post a short thread here outlining some of the issues I've encountered along the way - hopefully will act as a warning bell to others.

Watch this space in coming weeks....

Blackmax,
we are currently experiencing the same problem, we too wanted to move in over the easter break, mind you our contract is now 3 weeks over and still no completion date in sight!

dymonite69 · Mar 23, 2009 10:53 pm

We are currently at the point of 'practical completion'.

Our HIA contract indicated that completion was estimated to occur 40 weeks after slab being poured. Unfortunately it makes no mention of liquidated damages if they go over time. It then states that when the builder deems the building is practically completed they will issue an invoice whereupon we have 7 days to inspect the house and make an official list of outstanding items according to the schedule. The builder promises they are to be fixed within a 'reasonable time'. The contract then states that we are to settle the final invoice and the builder then hands over the keys. It does not clearly state how many days they have to make good any problems. There is also a 3 months inspection for other construction related issues that have developed in that time. Again there is a general statement about addressing these concerns but no actual time frame given.

Overall the language is very loose - practical completion is not exactly defined nor what constitutes a reasonable time to fix.

In retrospect I have realised that the HIA contract is not worth the paper it is written on. It seems to favour the builder more than the client. Next time (if there will be ever a next time) I will get a solicitor to draw up a real contract that ensures the builder does things properly and on time (or fixes it up in an expedient manner).

Not up to scratch = no payment.

The interesting addendum to this is the builder cheekily asked for a part payment of the practical completion installment even though the water and sewerage system are not even connnected or operational.

I spoke to my bank manager who found this preposterous. We were instructed that no final payments were to made until the bank has personally inspected the property itself for completion. I also provided our bank with a long list of things we felt needed to be done prior to moving in. After all it's not my money and the bank is perfectly in its right to protect its investment if the house isn't up to scratch. I bet our builder is spitting chips. Watch this space.......

My personal position is to hold off any payments and let the builder sweat it out for a while. There are only three options left in this scenario. 1) the builder takes legal proceedings against you to get their final payments 2) you default on your mortgage and let the bank takes over the property who will try to sell it off to recover their money 3) You cave into the builder because you are trying to indefinitely support a mortgage of a house you aren't allowed to occupy.

The most probably scenario the bank presses the builder to complete the job. This gives you the house that you intended, the builder his money, and the bank an indebted customer for the next 30 years.

lisanne · Mar 24, 2009 8:30 am

I got told the main difference between hand over and practical completion is that the certificate of occupancy can be done at practical completion and they wont install the appliances until after this time to reduce the chance of them being stolen