Difference in construction between substantial completion and final completion.
Substantial Completion is the term used in construction contracts to describe the stage in which the work is sufficiently complete so that the owner can occupy or utilize the building for its intended use, in spite of some things that might need to be completed or corrected.
Final completion is the stage in which a contractor is entitled to the final payment given that all work has been fulfilled.
According to the AIA A-201 -General Conditions of the contract for construction- when the contractor considers that the work is substantially complete, he prepares a comprehensive list of items that need to be completed or corrected before final payment and submits them to the architect attached to the application for Substantial Completion Certificate. This list is commonly referred as Punch List. It constitutes an acknowledgement that work remains to be done after substantial completion.
Once the architect accepts that the building is complete enough, he will certify the application for Substantial Completion, and the contractor will be relieved of several responsabilities such as paying for utilities, security, insurance, maintenance and damage to the property. These are promptly passed on to the owner.
The owner at the same time, will release all or most monies withheld to the contractor during construction as part of the retainage on each application for payment.
Establishing the proper date of Substantial Completion is important because warranties of the materials and equipment installed begin running and so does the 1 year correction period in which any portion of the work not found according to the contract documents shall be corrected by the contractor.
Once the contractor completes the punch list -and any other item that arises after substantial completion- he will send the architect a notice that the work is ready for a final inspection.
If the architect finds the work to be complete according to the contract documents, he will instruct the contractor to submit a final application for payment by which he will certify all remaining balance of the work.
Before doing so, the contractor will need to submit an affidavit that payrolls and bills of material suppliers have been paid in full and that any insurance to protect the owner will be renewable.
While final completion is a milestone, it does not terminate certain important rights of the owner such as claims against the contractor for work failing to comply with the owner’s requirements, and that is only discovered after final payment is concluded.