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Substantial Completion vs. Occupancy for Liquidated Dam

7 replies [Last post]
Mon, 2005-10-03 09:52
Paul Yoon
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Could anyone explain to me what is difference between Substantial Completion and Beneficial Occupancy (or Temporary Certificate of Occupancy) from scheduling & legal point of view?

Roughly I understand the meaning of all of them, but I don’t understand exactly the difference from legal point of view, especially for calculating liquidated damages under delay claim situation.

Which one has the first priority to calculate liquidated damages if all of them is on a schedule as a milestone activity?

I really appreciate in advance.

Paul
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Replies

Thu, 2005-10-06 22:53
#1
Clive Randall
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As a complete side issue

It is well worth reviewing the building insurance requirements with regard to when the owner occupies the building and when substantiual completion takes place.

Generally even though occupation has taken place the insurance obligation of the Contractor may well continue until the date of practical completion.

Many buildings have suffered fires and the like when the Project nears completion, cover for the owners goods and chattels may also fall on the Contractor.

Kind regards
Clive
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Thu, 2005-10-06 08:35
#2
Paul Yoon
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Everyone, thank you for your advice and tips.
Regards,

Paul
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Thu, 2005-10-06 04:52
#3
Andrew Flowerdew
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Stuart,

Your’e probably right or there doesn’t seem much point in defining the two seperately. It may be a case of partial occupancy is required by the Employer and so it is being used as a form of sectional completion.

As we don’t know all the facts, one guess is as good as another!
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Thu, 2005-10-06 03:57
#4
Stuart Ness
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Andrew is right when he notes that the correct answer is dependant upon the specific wording of the Contract, which is the opening point in my answer below! ;-)

In my experience ‘Beneficial Occupancy’ takes place ahead of Substantial Completion. Substantial Completion is the point at which the Works are considered to be complete and from which LADs would commence, AND at which point the Employer would normally occupy the Works.

If the Employer occupies the Works at the point of Substantial Completion, (which is the normal case) it is difficult to see where the added benefit is. On this basis, I would suggest that Substantial Completion and Beneficial Occupancy cannot be the one and the same thing.

Cheers,

Stuart

www.rosmartin.com
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Wed, 2005-10-05 19:34
#5
Andrew Flowerdew
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Somewhere between Ronald’s and Stuart’s answer is the correct answer depending on the contract wording. Both are correct in what they say.

It may be the case that if the ocupancy is of the whole of the works and not just a section then the date of substantial completion and date of beneficial occupancy may be one and the same.

Substantial completion is often (but not always - read the contract) defined as the point at which the Employer starts or could have started to gain benefit from the object being built.
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Wed, 2005-10-05 12:11
#6
Ronald Winter
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“Substantial Completion” often refers to the point in a project where the Owner is able to use the facility for its intended purpose. This means different things depending upon what type of facility you have in mind and who its customers are.
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Wed, 2005-10-05 04:45
#7
Stuart Ness
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Hi Paul,

If the terms ‘Substantial Completion’ and ‘Beneficial Occupancy’ are cited in your Contract terms, they should also be defined in the Contract – as we have seen in other threads, the same terms used in different Contracts (and in different parts of the world) may have different meanings. Moreover, it is unlikely that you will unearth a ‘legal’ definition of these terms as they will (or should) be defined within the Contract, and not at law.

That said (GULP!!), ‘Substantial Completion’ is usually synonymous with ‘Practical Completion’, i.e., it represents the point at which the Contractor usually essentially completes the Works and it represents the start of the Contract’s Maintenance (or Guarantee) Period. Things such as the Contractor’s Construction All-Risk Insurance normally end at this point, and it usually is the date by which the end of the construction period is required.
Therefore, LADs etc will often be calculated from the Substantial Completion date if applicable.

‘Beneficial Occupancy’ is often used to represent the situation where the Employer can gain early access to, and occupy, his project prior to Substantial Completion, and in itself it may be a cause of delay and disruption to the completion of the Works by the Contractor.

As to the point from which LADs are calculated, this should be clear from your Contract (or it is really badly drafted!!), but I would hazard a guess that they are more likely to be calculated from ‘Substantial Completion’ than from any other milestone in your schedule.

Hope this helps,

Stuart

www.rosmartin.com
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