A project’s Substantial Completion date is a critical construction milestone for contractors and owners. Depending on the contract, the date of Substantial Completion has project-specific contractual and statutory consequences.
Substantial Completion is an “event” – there is no universal definition of the term. It is generally understood to be (1) a point in time (2) when work performed by the contractor is sufficiently complete (3) where it can be used or occupied for the owner’s intended purpose. The date of Substantial Completion is generally established at the time of contract formation (either as a negotiated or a contract set date), and that date may be adjusted over the course of a project to account for excusable delays.
As a construction professional, your attorney should review and tailor any written agreement to your project-specific needs and risk tolerances prior to execution. Savvy construction professionals often start with standard form agreements promulgated by the American Institute of Architects (“AIA”), the Design-Build Institute of America (“DBIA”), or the Engineers Joint Contract Document Committee (“EJCDC”) as the basis for their construction contracts. The AIA, DBIA, and EJCDC standard forms each contains contract provisions relating to when and what happens once Substantial Completion has occurred, subject to any agreed-to, project-specific deviations.
As you might expect, the AIA’s, DBIA’s, and EJCDC’s definitions of Substantial Completion are remarkably similar:
- Section 9.8.1 of AIA Document A201 – 2007, General Conditions for the Contract for Construction, defines Substantial Completion as “the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use.”
- Section 1.2.18 of DBIA Document #535, Standard Form of General Conditions of Contract Between Owner and Design-Builder, defines Substantial Completion as “the date on which the Work, or an agreed portion of the work, is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy and use the Project or a portion thereof for its intended purposes.”
- Article 1, Subsection 1.01(A)(40) of EJCDC’s C-700, Standard General Conditions of the Construction Contract, defines Substantial Completion as “the time at which the Work (or a specified part thereof) has progressed to a point where, in the opinion of the Engineer, the Work (or a specified part thereof) is sufficiently complete, in accordance with the Contract Documents, so that the Work (or a specified part thereof) can be utilized for the purposes for which it was intended.”
Washington’s statutory language is understandably similar to the definitions of Substantial Completion in the AIA, DBIA, and EJCDC standard form agreements. Substantial Completion is defined by statute as “the state of completion reached when an improvement upon real property may be used or occupied for its intended use.” See RCW 4.16.310. The fact that additional contract work remains, including punch list work, does not affect the conclusion that a project is substantially complete if it is otherwise fit for occupancy. Dania, Inc. v. Skanska USA Bldg. Inc., 185 Wn. App. 359, 371, 340 P.3d 984, (2014).
The date of Substantial Completion of a construction project is significant for several reasons:
- First, in Washington, the construction statute of repose bars construction-related claims not filed within the six-year repose period. See RCW 4.16.310. The practical effect and intent of this statute is simply to limit the period of time construction professionals are potentially liable for construction-related claims.
- Second, the date of Substantial Completion is the date when many of the contractor’s responsibilities at the jobsite transfer to the owner. Some of these responsibilities may include the responsibility for security, heat, maintenance, cleaning, utilities, and damage to the work. Substantial Completion is also when the owner generally assumes responsibility for insuring the work previously covered by the contractor’s insurance policy or policies.
- Third, the date of Substantial Completion is typically the day from which warranty periods and other periods for correction of the work run.
- Fourth, contractors may submit an application for final payment following Substantial Completion, pending completion of any outstanding punch list work, and may be entitled to release of any retention.
- Fifth, in the event a contractor has not achieved Substantial Completion by the agreed-upon date, the owner may be entitled to liquidated or other damages.
In practice, whether a project is “deemed” substantially complete may simply be left up to the discretion of whomever the owner and contractor have agreed to make such a determination. In AIA’s Document A201 – 2017, General Conditions for the Contract for Construction, the architect makes that decision. Similarly, in EJCDC’s C-700 Standard General Conditions of the Construction Contract, the date of Substantial Completions is determined by the opinion of the engineer. In DBIA Document #535, Standard Form of General Conditions of Contract Between Owner and Design-Builder, Substantial Completion is determined after joint inspection by the owner and design builder.
The determination by the architect or the engineer is not necessarily the final say, however, as the point in time when the work is sufficiently complete for use or occupancy is, arguably, a legal question of fact. In an unreported case, Division One of the Washington Court of Appeals referred to a California Court of Appeals opinion in which the California court remarked, “[t]he date of substantial completion is an objective fact about the state of the construction of the improvement, to be determined by the trier of fact. It is a statutory standard, not a contractual one.” See Puget Sound Energy, Inc. v. Pilchuck Contractors, Inc., 15 Wn. App. 2d 1004 (2020), rev. denied, 196 Wn.2d 1046, 481 P.3d 1060 (2021) (citing Hensel Phelps Constr. Co. v. Super. Ct. of San Diego County, 44 Cal. App. 5th 595, 616, 257 Cal. Rptr. 3d 746 (2020)).
Comment/Good Practice: As is often the case, legal issues can be time-sensitive, and a one-day difference could result in liability for catastrophic losses or completely bar another’s claim. While determination of Substantial Completion may be an objective event in certain circumstances, executing a Certificate of Substantial – evidencing an agreement as to the date the work was sufficiently complete for the owner to use and occupy a project for its intended purpose – will help to eliminate disputes and costly legal action as to the project’s Substantial Completion date.