Every construction project ends with a walk-through – at least it should. Too often, final inspection is the start of something else, such as a legal battle. The owner isn’t going to let the contractor skip out with work yet to finish. The contractor wants payment for work completed.
Here are a few good ways to get past confrontation when the job is nearly done.
Courts recognize an obligation to pay when any construction project is substantially complete. Even if a few items aren’t finished, the owner should pay what’s due less the cost of wrapping up defects. So, when is a job substantially complete?
Occupancy is the best evidence of substantial completion. If the job has passed final code inspection and the owner is moving in, the job is substantially complete. That’s the easy case. Some cases aren’t so clear cut.
Substantial completion doesn’t have to be an all or nothing affair. If the job includes distinct parts, one part could be substantially complete while the other isn’t. In exchange for payment, offer to note what’s accepted and what’s rejected. For example, suggest that the owner exclude some portion of the job (such as appliances or fixtures) from acknowledgement of completion.
Partial completion can be a problem when some equipment serves several parts of the project – some complete and some incomplete. HVAC and electrical systems are obvious examples. By convention, payment is due on any equipment that serves a part of the project that’s complete even if that equipment also serves an incomplete part of the job.
If the owner is eager to take up occupancy, offer to have incomplete work handled as warranty repair to be done later. That’s clearly the best choice when defective equipment is covered by a manufacturer’s warranty.
Your Punch List
Before starting the walk-through, hand
the owner a punch list of known issues. By implication, the job will be substantially
complete when an owner approves your list. Your punch list should show:
- Each defect. To make corrections easy to find, walk the project with a roll of blue painter’s tape. Stick a short piece of tape on each defect. Write a pencil number on the tape, the same defect number as on your punch list.
- What’s needed to complete the work.
- The subcontractor or trade responsible.
- Your estimate of when work will be finished for each item.
- The estimated cost to complete or correct each defect. Use these estimates to figure how much of the final payment can be withheld, usually 125% of your estimated cost.
If the owner approves your punch list, the next steps are easy.
- Final payment is due, less the estimates on your punch list.
- Later inspections will be limited to items on your list. Everything else is accepted.
- Roles change. The owner can enter and use the site at any time. The contractor loses the right to enter the property at will.
- Get punch list items worked off in a week or two. The longer work drags on, the more time an owner has to accumulate grievances.
A good contract can make project close-out almost automatic. Have a look at Construction Contract Writer. The trial version is free.
