In the contract for any kind of construction, renovation or restoration work, you’ll likely see the term “substantial completion.” Often a contract will specify that payment is due upon substantial completion. In some cases, substantial completion is promised by a particular date.
Substantial completion is actually a legal term. It’s often defined as the stage of a project where an area is fit for occupancy or whatever its intended purpose is. There may still be some painting or finishing touches left to do, but the bulk of the work is done.
In a construction project, it’s generally the point where the owner is responsible for a property as opposed to the contractor. Sometimes a certificate of occupancy or other certificate is issued, but not necessarily.
How does it differ from final completion?
Final completion is typically the point where the work is completely finished and a final inspection has been made. This could be days, weeks or even months after the substantial completion and may involve other professionals. Typically, warranties don’t go into effect until final completion of a project.
Because substantial completion is such a crucial milestone in a project and since payment is often expected at that point, it may be wise to clearly define what it involves in more detail in a contract.
Whether you’re a business owner or other professional developing a contract that includes the substantial completion language or you’re the one being asked to sign the contract, it’s essential that both sides agree on what constitutes substantial completion. This can save you from conflict and potential litigation later on.