Partial possession - an incomplete article

The story in this article is on partial possession. I do not mean the stuff of demons and the occult but the more benign contractual creature I shall share with you.

Ten long months’ hard slog have come and gone and seven lever arch files so far in testament to this fact on my shelves. The finishing post in sight. A best estimate of the completion date agreed, removers booked to repatriate the contents of our rented house and the stored items back to what will once again be home. That was two months ago. However, nothing is straightforward and a month ago a sweet neighbour threatened us with an injunction, not the first time, but this time they did not like noisy working during half term and nearly succeeded in stopping the job, but more about that another day. It explains why despite all efforts, the job is not now ready for occupation.

Three weeks ago I realised completion for Easter may not arise but hoped that we could take partial possession of all floors except for the basement. This weekend was crunch point, the lease on our rented house was nearly up. It was when I was to learn whether wife and children could move in to take partial possession. Under the JCT this concept provides for the employer with the consent of the contractor to take possession of part or parts of the works before they are completed, and for the application to each part possessed of practical completion, a mini defects liability period, insurance and liquidated damages analogous to those which would apply to the whole. Everyone wants completion or something analogous to it as soon as possible, the contractor so he may be liberated from the risk of liquidated damages and the burden of project insurances and gain the benefit of his retention money, the employer so he may move into the new surroundings he has yearned for, and the neighbours so they may no longer hear the din created by the builders.

Yet there are circumstances when it may be distinctly unwise to press for consent of the contractor to partial possession. Such consent is usually freely given for the benefits I referred but the dangers for the contractor are he ends up with his client in occupation. Despite best intentions there will nearly always be an impact on the remaining works, more protection will be required to the employers’ property and limits placed on space and time, the two most valuable resources of the contractor. No contractor should underestimate the likely impact. Typically it is surprising how often in these compromised circumstances the contractor will suffer loss and not seek remedy.

By the same token while necessity may force an employer to ‘have’ to take partial possession, it is not without danger. For a start the part possessed may be far from practically complete. Secondly, once in and deemed practically complete arguments over what is a snag or betterment tend to proliferate, and the stick of liquidated damages for culpable delay of the contractor is largely gone for practical purposes.

There is surprisingly little case law on partial possession and what there is hardly covers all the bases. So let us start with the misleading view that when one occupies or gains beneficial use of a building or facility, this amount to practical completion of the works or deemed practical completion of those areas occupied. This myth was blown under JCT contracts in 1987 in BFI Group v. DCB Integration Systems⁽¹⁾ and in 1994 in Herbert Construction (UK) Ltd v Atlantic Estates plc⁽²⁾. Simply taking possession is not enough the contract administrator must operate the partial possession machinery of the contract. This point was vividly illustrated in Impresa Castelli -v- Cola Holdings⁽³⁾ where LAD ’s were deducted for late completion of a hotel and the judge was satisfied the employers occupation was the lesser creature set by clause 23.3.2 of JCT WCD, which provides that the employer is entitled to use and occupy part or all of the works with the consent of the contractor. Clause 23.3.2 provides a lesser form of physical presence on or within the works by the employer. This presence by the employer has no effect on the contractor's exclusive possession of the works, nor on the contractor's obligations and entitlements with regard to liquidated damages, retention, defects, liability and insurance. The employer becomes in effect a sub-licensee to the contractor, who otherwise retains its exclusive possession of the works. Too often I have seen architects bullied into certifying partial possession in such cases.

The balance has got to be right though for if the employer has effectively ousted the contractor so he has a informal license to work around his employer and the employer has de facto possession then a court may as in Skanska Construction (Regions) Limited -v- Anglo-Amsterdam Corporation Limited⁽⁴⁾ deem partial possession!

The subtlety is important. The repercussions for both parties are crucial but of course this does not really cater particularly well for employers who are more or less “forced” to take ‘full’ possession due to circumstances and it is those facts that I considered carefully this weekend. Although our works were not in a partitioned sense truly ‘practically complete’, I was in a position where I really had to take possession or make alternative arrangements. Late on Sunday I decided to take the latter.

Now in all this I make no criticism against the contractor for there are reasons why he was late but by the same token I saw the danger of compromising the contractor by taking possession when he was not in fairness offering up those parts that I could have taken partial possession of as practically complete.

Traditionally architects in such circumstances issue a partial possession certificate with a shopping list as long as your arm. That is strictly not provided for by the contract and the better advice to clients is not to take partial possession at all if the works are not approaching a standard whereby the architect might reach the opinion on an elemental basis that the works are practically complete.

So the moral of my story is that employers and agents should take great care to ensure that when allowing occupation prior to practical completion, the contractor retains possession of the site and furthermore that if formal partial possession is taken, this should not be done in circumstances where the works are not practically complete insofar as the partial parts the employer seeks to occupy.

Never forget the circumstances which might allow the contractor to quite rightly complain that it has been hindered or delayed in the completion of the works not take into partial possession and that if work is still to be done in the relevant parts by the contractor then after practical completion the contractor’s obligation in respect of those parts is as under the defects liability machinery.

So what of us? We remain in our rented house a little longer. The end result will surely be worth it and all demons exorcised!