{"id":895733,"date":"2019-04-12T08:55:36","date_gmt":"2019-04-12T14:55:36","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895733"},"modified":"2019-04-11T15:07:58","modified_gmt":"2019-04-11T21:07:58","slug":"when-do-defects-prevent-practical-completion","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/when-do-defects-prevent-practical-completion\/","title":{"rendered":"When Do Defects Prevent Practical Completion?"},"content":{"rendered":"\n

Julian Bailey, Emma Knight and Helena Payne | White & Case<\/a> | April 4, 2019 <\/p>\n\n\n\n

Practical completion represents the physical completion of works on construction projects. Despite its importance, it is not a legal term of art, and whether or not practical completion has been achieved requires determination on a case-by-case basis.<\/strong><\/p>\n\n\n\n

The recent judgment in\u00a0Mears Ltd v Costplan Services (S.E.) Ltd<\/em>\u00a0[2019] EWCA Civ 502 provides an important analysis of the interplay between patent\u00a0defects and\u00a0practical\u00a0completion. In this case, the Court of Appeal confirmed that a material defect does not necessarily\u00a0prevent\u00a0practical\u00a0completion from being achieved.<\/strong><\/p>\n\n\n\n

Key facts<\/h3>\n\n\n\n

In Mears v Costplan<\/em>, the Court of Appeal considered the meaning of ‘practical completion’ in the context of the construction of student accommodation and a related agreement for lease.<\/p>\n\n\n\n

PNSL, the employer, contracted with Pickstock, the contractor, for the design and build of student accommodation. Separately, Mears, the tenant, entered into an agreement for lease (“AFL<\/strong>“) with PNSL and Pickstock to take a long lease of the property following completion.<\/p>\n\n\n\n

The AFL contained a longstop provision that permitted the tenant to terminate the AFL if the practical completion certificate had not been issued by the longstop date.<\/p>\n\n\n\n

Further, the AFL prohibited variations to the works that materially affected the size of the accommodation rooms. It considered a reduction in size by more than 3% from the relevant drawings as material. In the event, of the intended 348 bedrooms plus kitchens and certain other rooms, 56 rooms were built more than 3% smaller than the relevant drawings. These breaches were irremediable: there was no prospect of the building being torn down and re-built.<\/p>\n\n\n\n

The tenant alleged that any breach of the 3% tolerance was a material and substantial breach of the AFL, meaning that (i) it was entitled to terminate the AFL and (ii) practical completion could not be certified. At first instance, the judge ruled in favour of the employer \/ landlord, noting that it would be ‘commercially absurd’ if the breach of the 3% tolerance made practical completion impossible and allowed the tenant to terminate the AFL and walk away.<\/p>\n\n\n\n

The tenant’s appeal was dismissed by the Court of Appeal, which held that:<\/p>\n\n\n\n