TL;DR
Practical Completion (PC) is the contractual milestone where the building is reasonably ready for use, even if minor defects or finishing items remain. It triggers handover, the start of the defects liability period, the final progress claim, and the running of statutory warranty timeframes. Practical Completion is NOT the same as 100% defect-free completion — that’s a different (and rarer) standard called Final Completion. Most AU residential contracts use a 90-day defects liability period after PC.
Key Stats
- 90 days — typical defects liability period after Practical Completion in AU residential contracts.
- Handover triggers — statutory warranty clock, final progress claim, transfer of insurance/possession.
- “Reasonably suitable for occupation” — the legal threshold for PC, NOT “100% defect-free”.
- 6+ years — statutory warranty for major defects in most AU states, runs from PC date.
- 2 years — statutory warranty for minor / non-major defects, runs from PC date.
Practical completion is the point at which a construction project is sufficiently complete for the owner to occupy or use it for its intended purpose, even though minor defects or incomplete work may remain.
It is one of the most important milestones in a building contract because it triggers several legal and financial consequences.
What Happens at Practical Completion?
- The defect liability period begins — typically 12-13 weeks for residential, longer for commercial
- Retention money starts being released — usually 50% at PC, remainder after defects liability
- Risk transfers to the owner — the builder is no longer responsible for site security or insurance
- Final payment claim can be submitted — less any retention and incomplete work allowances
- Liquidated damages stop accruing — if the project was running late
Practical Completion vs Final Completion
| Milestone | What It Means |
|---|---|
| Practical Completion | Building is usable. Minor defects may exist. Defect liability period starts. |
| Final Completion | All defects rectified. All retention released. All contractual obligations fulfilled. |
Frequently Asked Questions
Who decides when practical completion is reached?
Typically the superintendent, building surveyor, or architect named in the contract issues a certificate of practical completion after inspecting the works. In residential contracts, it may be agreed between builder and owner.
Can an owner refuse practical completion?
An owner can dispute practical completion if there are significant defects that prevent the building from being used for its intended purpose. Minor cosmetic defects should not prevent practical completion.
What is a defect liability period?
The defect liability period (DLP) is a set time after practical completion during which the builder must return to fix any defects that appear. In Australia, this is typically 13 weeks for residential and 12 months for commercial. Structural defects may have longer warranty periods (6-10 years depending on the state).
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