The Defects Liability Period: What Builders and Clients Need to Know

For most clients, practical completion feels like the finish line. The building is handed over, occupation begins, and the project moves out of active management. But the contract doesn't end at practical completion — and the obligations it creates for both parties continue through the defects liability period (DLP).

Understanding the DLP, and managing it properly, can be the difference between a clean close-out and a protracted dispute.

What practical completion means

Practical completion is typically defined as the stage at which the works are complete in accordance with the contract, except for minor defects that don't prevent the building from being used for its intended purpose. It's a practical definition, not a perfection standard.

At practical completion, the contractor is entitled to:

Release of the first portion of the retention sum (typically 50%)
Transfer of risk back to the client (depending on the contract)
Commencement of the DLP clock

What the defects liability period is

The DLP is the period after practical completion during which the contractor remains obligated to return to the site and rectify defects in their work. Standard DLP periods are typically 12 months, though some contracts (particularly for commercial or infrastructure projects) extend this to 24 months or more.

During the DLP, the client or superintendent has the right to issue a defects notice — a written instruction to the contractor to return and rectify specific defects within an agreed timeframe.

What counts as a defect

A defect is work that doesn't comply with the contract documents — drawings, specification, and any agreed variations. This includes:

Workmanship defects (poor finish, incorrect installation)
Material defects (specified product not supplied, or product failing prematurely)
Design defects (where the contractor holds design responsibility under the contract)

It does not include fair wear and tear, damage caused by the occupant, or work the client added after practical completion.

Common DLP management failures

Not inspecting before the DLP expires: Many clients never walk the building with the contractor before the DLP expires. This is the last opportunity to require the contractor to rectify defects at no cost.

Issuing defects notices too late: Most contracts require defect notices to be issued while the DLP is current. A defect identified after the DLP expires has no contractual remedy — only a tortious or statutory claim.

Not retaining the final retention: The second portion of retention (the DLP retention) should not be released until a final inspection has been completed and all defects notices have been closed out. Releasing it early removes your leverage.

Confusing maintenance with defects: Maintenance items (filters, cleaning, routine servicing) are the client's responsibility from practical completion. Defects are the contractor's. Understanding the difference matters when the contractor disputes a defects notice.

The final certificate

The DLP ends when the superintendent issues the Final Certificate, which confirms that all defects have been rectified and the retention is released. Read the contract terms around the Final Certificate carefully — in some contracts, issuing the Final Certificate waives certain rights.

If there are unresolved defects at the end of the DLP, they need to be formally recorded and a position taken before the Final Certificate is issued.

Managing the close-out and DLP phase is part of our Full PM Partnership service. Contact us to discuss how we handle close-out.