So, what exactly is the difference between a sectional completion and partial possession and why does it matter?
On a construction project where the employer wants to start fitting out one part of the works before the balance of the project is finished, he will need to consider whether to take partial possession of that part of the works once they are complete or whether to provide for sectional completion of the works at the outset.
Completion of the works will usually either refer to sectional completion or partial possession but not both.
Partial possession requires the contractor’s agreement to allow the employer to use part of the works for their intended purpose before practical completion of the whole of the works.
If the contractor consents and the employer takes partial possession of part of the works (the relevant part), that constitutes deemed practical completion of the relevant part from the deemed date of practical completion of the relevant part.
The rectification period commences for the relevant part, the liquidated damages payable for delay in completion of the works reduces down proportionately, risk of loss of damage to the relevant parts transfers from the contractor to the employer with consequence changes to the insurance requirements and the employer releases half of the retention sum relating to the relevant part, to the contractor.
Sectional completion is a term used to describe either practical completion of a section or the completion of the whole of the works under the building contract in sections. It differs from partial possession in that it is pre-determined and addressed in the contract documents.
Sectional completion allows the employer to require two or more sections to be delivered at different times. Separate completion dates and rates of liquidated damages apply to each of the sections of works.
The JCT contracts deal with sectional completion throughout their terms. The parties set out the sections in the JCT contract particulars and references are made throughout the contract to section completion.
Sectional completion of section is not just ‘deemed’ practical completion of that section, it is in fact practical completion of that section. The effect of sectional completion is similar to partial possession in so far as the rectification period for that section commences, risk of loss or damage to the completed section transfers from the contract to the employer with consequent changes to the insurance regime and the employer is obliged to pay half of the retention sum for that section to the contractor.
So which do I use?
Distinctions can be drawn between sectional completion and partial possession in so far as the effects of sectional completion are more certain because the parties have already agreed a distinct rate of liquidated damages for each section so there can be no argument about the appropriate proportionate reduction in damages payable, there can be no argument about the release of retention in respect of those works and there is no need for the contractor to consent to sectional completion. The architect or contract administrator will certify when he considers a section has been completed.
In addition, if the works are delayed, the architect or contract administrator can assess whether any individual section has been delayed and, if so, by how much.
Sectional completion leaves less to chance because the parties have agreed over the practical consequences of that completion in advance. If something does go wrong, it is easier for the employer and architect or contract administrator to deal with delays, changes or even acceleration with sections in place.
Equally, if a project is already in delay and the employer takes partial possession of part of the works, it is likely to be difficult for the parties to agree exactly what the reduced rate of liquidated damages should be for the balance of the works.
Care should be taken in drafting provisions dealing with sectional completion or partial possession with regard to:
- Logistics on site
- Protection of completed parts of the works
- Provision of appropriate insurance – client to insure those parts either complete or where partial possession has been taken
- The adoption of appropriate health and safety measures to deal with risks arising from occupation of areas within the vicinity of the ongoing construction works.
- The operation of extension of time provisions and whether for example, delays to one section will have a knock on effect on remaining sections of the works.
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