The term substantial completion is a commonly utilized concept in construction law, not only in Florida but across various states. Substantial completion refers to a point in a construction project when the owner can make use of the building or property, even if certain minor work remains. This concept recognizes that, in some situations, strict compliance with every detail of a law or regulation may not be necessary in order for another party’s obligations under a contract to be triggered. Instead, if the party involved has substantially completed the work or met the essential requirements of a particular contract, it may have achieved “substantial completion.”

This principle of substantial completion serves to mitigate disputes, offering some flexibility for contractors and subcontractors in contractual disagreements with property owners and assisting them in securing payment. Substantial completion, however, typically does not absolve a contractor of responsibility for substandard workmanship, relieve a contractor of its warranty obligations, or remove contractual conditions precedent to “Final Payment” that might be required before a contractor can be entitled to any final payment for the project. 

In analyzing whether substantial completion has been achieved, Florida courts typically analyze whether the owner can utilize the property for its intended purpose. Essentially, the focus is not solely on the minutiae of the work or whether every detail conforms precisely to the contractual specifications. Instead, it centers on the practical aspect of whether the completed work is substantial enough to serve the intended purpose for which the property was designed and constructed. This pragmatic approach acknowledges that minor defects or imperfections might exist but does not necessarily render the work “incomplete.”

The first place a court will look when determining whether substantial completion was achieved is the contract.  Sophisticated construction contracts typically include provisions that clearly establish when and how substantial completion is determined.  In fact, contracts often designate a specific third-party representative or design professional with the power to make that determination.  On large construction projects in Florida, the architect of record is often tasked with making that determination, which is typically memorialized in a letter to the local building department that must be sent before a Certificate of Occupancy for a new construction project can be obtained.  

Understanding the date of substantial completion is crucial for both owners and builders, and if the applicable language in a construction contract is not clear, it often sparks disputes. Builders and contractors must be aware of the triggering events that establish substantial completion because they can have a range of effects on the parties’ rights and obligations, including when payments are due, and sometimes, when warranties and/or indemnification obligations go into effect.

Regardless of whether substantial completion is reached, construction contractors must adhere to their obligations, warranties and responsibilities under their contract, which typically last beyond the date of substantial completion.  Furthermore, a contractor’s substantial completion of a project does not relieve its obligation to perform all of its work in compliance with the approved construction documents and to comply with applicable building codes.  

It is crucial that both owners and builders consult with experienced construction attorneys to make sure that their construction contracts properly address these considerations, which can serve to mitigate the risks of subsequent litigation. 

For all your legal needs related to construction, real estate, and contractual matters, contact Haber Law today.