Practical Completion and Handover in Queensland

What it is

In Queensland practical completion is not a stage the builder announces. It is a day, defined by Schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld). Sections 13 and 14 require the contract to state that date or how it is determined, but the Act sets what has to be true on the day.

The definition has three limbs

Practical completion is the day when the subject work is completed:

• in compliance with the contract, including all plans and specifications for the work and all statutory requirements applying to the work; and
• without any defects or omissions, other than minor defects or minor omissions that will not unreasonably affect occupation; and
• if the building owner claims there are minor defects or minor omissions, the builder gives the owner a defects document for them.

The third limb is the one builders miss. The defects document is not paperwork that follows practical completion. Where the owner claims minor defects, handing it over is a condition of practical completion happening at all, and the practical completion claim is not payable until it does.

What a defects document has to contain

Schedule 1B section 1 defines it tightly. A defects document:

• lists the minor defects and minor omissions the builder and owner agree exist;
• states when the builder is to remedy those agreed items;
• lists the minor defects and minor omissions the owner claims exist and the builder does not agree exist; and
• is signed by the building contractor.

Two things follow. It must record the disagreement, not just the agreed list, so a builder cannot manufacture practical completion by leaving disputed items off the page. And it is signed by the builder, not the owner: under the QBCC contract the builder need only make all reasonable efforts to have the owner sign the Form 6.

The handover sequence

The QBCC New Home Construction Contract runs it in order:

1. At least 5 business days written notice of the anticipated practical completion date.
2. Written notice when the builder considers the works have reached the practical completion stage.
3. On that date, or within 2 business days after it, the owner inspects with the builder.
4. If the owner is satisfied and the builder produces satisfactory written evidence that the inspections and approvals required by the Planning Act 2016 and the Building Act 1975 are complete, the builder signs the Form 6 Defects Document, gives the owner a signed Form 7 Certificate of Practical Completion stating that date as the Date of Practical Completion and hands over the works in exchange for payment.

If the owner, acting reasonably, considers the works have not reached practical completion, it must give written notice of what is required. QBCC states the home must be suitable for occupation: it functions as a normal home, has power and water and is weatherproof.

The final claim and what holds it up

The practical completion progress claim must be accompanied by a completed and signed Form 6 and Form 7. QBCC states the contractor can ask for final payment once they reach practical completion, and condition 28.6 makes the owner pay immediately once the builder has satisfied everything in condition 28.3.

The owner's position is structural rather than a right to hold money back. The claim does not mature until the builder has run the inspection, produced the approvals, signed the defects document and issued the certificate. Condition 28.5 stops the certificate doing more work than it should: issuing it is not approval of any work and does not prejudice any claim by the owner.

Paying early costs the owner. QBCC warns that paying more than the contract amount, or paying before the due date, reduces the protection available under the Queensland Home Warranty Scheme.

Defects after handover

Two clocks start, and they are not the same clock.

The contractual defects liability period runs from the Date of Practical Completion. Under condition 29 the builder must make good defects or omissions that become apparent to the owner within 12 months of that date. The owner must give written notice as soon as practicable after becoming aware and allow reasonable access, and the builder must rectify within 20 business days of the notice unless it reasonably cannot. Agreed minor defects listed on the Form 6 are due by the time stated in that document, not at the end of the 12 months.

The statutory warranty period runs from completion of the work under Schedule 1B section 29, at 6 years for a breach resulting in a structural defect and 1 year in any other case, plus a further 6 months to sue where the breach becomes apparent in the last 6 months. Section 28 voids any clause cutting that down. A 12 month defects liability period ends the builder's contractual repair obligation, not its exposure. The warranties run on, and under section 27 they run with the building to the next owner.