What is the difference between practical completion and final completion?

Practical completion is the point at which the works are finished apart from minor items and the building can be handed over. Final completion comes later, when the defects period closes and the builder has fixed what appeared in that time. The first usually releases part of the retention and stops delay damages; the second usually releases the rest and brings the contract to a close. Contracts differ in their names for these stages and in what each one triggers.

Who certifies practical completion?

The person the building contract names. That may be a contract administrator, a superintendent, an architect or an independent certifier, according to the contract form and the market. The certifier is expected to act fairly between the parties even when paid by the owner. A development lender is not usually the certifier, but its quantity surveyor commonly inspects the works and reports to the bank on whether the certificate can be relied on.

Can you occupy a building at practical completion?

Not on the strength of that certificate alone. Practical completion is a contractual event; whether a building may be used is a matter of building law, which differs by market and by type of building. New Zealand buildings open to the public need a code compliance certificate or a certificate for public use. Australian states use occupation certificates, occupancy permits or certificates of occupancy, and England has its own building control sign-off.

Does practical completion trigger settlement of an off-the-plan apartment?

Usually not by itself. In New Zealand and Australia, off-the-plan contracts commonly set settlement a number of working days after the later of the building approval and the issue of title, so practical completion starts the sequence without ending it. In England, contracts commonly run from the developer's notice that the home is finished. The buyer's contract states the actual trigger and any sunset or long-stop date. For the lender, this means the loan has to run for the whole of that sequence, with interest still accruing.

// WORKED EXAMPLEWHAT THE CERTIFICATE SETS OFF

Practical Completion: What It Changes for a Lender

The building is finished. The loan has not started to fall.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-09 · 7 MIN READ

// THE SHORT ANSWER

For a development lender, practical completion is the date the risk in the file changes shape, not the date the money comes back. Before it, the question is whether the building will be finished for the budget. After it, the question is whether buyers will settle before their contracts run out. The certificate ends the builder's delay damages and frees part of the money held back from it, yet the debt is at or near its highest and interest is still accruing. A lender therefore reads the date against the titles timetable, the sunset dates and whatever remains of the interest reserve.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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PART OF Property Development Finance

// 01 — THE TEST, AND WHO APPLIES IT

Practical completion is a term of the building contract. It belongs to the builder and the party that hired it, and the bank meets it only because so much in the loan hangs on it. The certificate is given by whoever the contract names: a contract administrator, a superintendent, an architect or an independent certifier. It says the works are finished for practical purposes, and that what is left is minor enough to be dealt with after handover.

How minor depends on the contract and the facts. Standard forms in New Zealand and Australia commonly carry a definition. English contracts often leave the phrase undefined and the courts have filled the gap: the Court of Appeal in 2019 described it as easier to recognise than to define, held that a building is not practically complete while it has visible defects that are more than trifling, and held that hidden defects do not stop the certificate. Being usable was not enough on its own. A lender does well to read the definition in the contract in front of it rather than assume one.

// 02 — WHAT THE CERTIFICATE SETS OFF

Delay damages stop running at the certified date

Defects period starts; the builder returns to fix what appears

Retentions commonly part released, the rest at the period's end

Bonds those tied to construction often lapse or reduce

Care of the works under many contracts passes to the owner

Presale contracts the settlement timetable comes into view

Delay damages were the project's compensation for lateness, and they end. Where the retention was withheld without being drawn, the part released is a cost the loan still has to fund, so the facility rises at the moment the building is done. In New Zealand, retention money under a commercial construction contract is held on trust by statute, in a dedicated account unless a complying instrument such as a bond or insurance stands in, so a lender there asks which applies and whether the money has been drawn. A performance bond that expires leaves defects backed only by the builder's covenant and the retention still held. And where the works pass into the owner's care, the insurance has to change with them, with the lender's interest still noted.

Then comes a chain the building contract does not control. The building authority or a certifier has to sign off: a code compliance certificate in New Zealand, an occupation certificate, occupancy permit or certificate of occupancy in Australia depending on the state, a building control completion certificate in England. In New Zealand and Australia titles also have to issue, through a unit or strata plan where the building is divided, and only then do most off-the-plan contracts require buyers to pay. In England, where flats are usually sold on new long leases, the contract commonly runs from the developer's notice that the flat is finished.

// 03 — THE EXAMPLE

A developer in New Zealand, constructed for this page like every figure in it, is building 34 downsizer apartments under a US$15.0m fixed-price contract. Twenty-four are presold. The builder finishes 20 days after the contract date, and delay damages at US$5,000 a day come to US$100,000, deducted from what the builder is paid. The retention held is US$0.60m, covered by a complying bond so that it has not been drawn, and half of it is released on the certificate. The loan's rate is 8.4%, and that rate, the retention and the damages are the example's.

US$m

Drawn before the certificate 18.70

Half of the retention released 0.30

Drawn at practical completion 19.00

Day 0 20 March practical completion certified

Day 25 14 April code compliance certificate

Day 53 12 May titles issue

Day 67 26 May presales settle

Interest during the wait 19.00 × 8.4% × 67 ÷ 365 = 0.29

Interest reserve remaining = 0.20

Shortfall = 0.09

The certificate brought in no money and added US$0.30m of debt. Another US$0.29m of interest accrues before the first buyer pays, and by 26 May the loan stands at US$19.29m. The reserve was built to the end of the programme and falls US$0.09m short. Here the delay damages cover it, which is what they are for, but they stopped growing on 20 March and the interest did not.

The settlement of the 24 presales, at an average of US$0.72m less 3% selling costs, brings in US$16.76m and leaves about US$2.53m secured on ten unsold apartments. The contracts' sunset date is 15 June, measured to the issue of titles. Titles on 12 May leave 34 days. Had the compliance certificate met a request for further information and slipped five weeks, the buyers could have been free to leave.

// 04 — WHAT IT IS NOT

Practical completion is easily mistaken for three other events. It is not regulatory sign-off: a certificate under the contract says nothing about whether the authority has accepted the building, and either can come first. It is not final completion, which follows the defects period, when the last of the retention is paid and the contract closes. And it brings in no money. The loan reaches its peak around this time and starts to fall only when sales settle.

Large or staged projects add a variation. A contract can provide for sections to be completed and handed over separately, each with its own date, its own damages and its own part of the retention. A lender funding a staged project reads each section as its own event, with presales that may settle in batches.

DEFINED IN ONE PARAGRAPH → · THE BUILD, MONTH BY MONTH → · RETENTION →

// 05 — WHERE IT DECIDES A FILE

The loan term is the first place. A facility that expires at the end of the building programme is too short, and the months after the certificate have to be in it. The second is the certificate itself. A builder wants it early, to stop the damages and collect the retention; a developer with presales waiting may want it early too. The lender's quantity surveyor reads it independently, because a certificate given over more than minor defects can bring disputes with buyers at the moment their settlement is needed.

The third is the handover of protection. Before the first drawdown the file should show which bonds lapse at the certificate, how much retention stays behind them, and who insures the building the day after. A lender that discovers those answers at completion has lost the leverage of the next drawdown, since by then nearly all the money is out.

DEVELOPMENT LOAN, THE PRODUCT → · BANK GUARANTEE →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Court of Appeal of England and Wales, [2019] EWCA Civ 502 — paragraph 74 — States that practical completion is easier to recognise than to define, that latent defects do not prevent it, and that patent defects do unless trifling — section 01.

// QUESTIONS PEOPLE ASK

What is the difference between practical completion and final completion?: Practical completion is the point at which the works are finished apart from minor items and the building can be handed over. Final completion comes later, when the defects period closes and the builder has fixed what appeared in that time. The first usually releases part of the retention and stops delay damages; the second usually releases the rest and brings the contract to a close. Contracts differ in their names for these stages and in what each one triggers.
Who certifies practical completion?: The person the building contract names. That may be a contract administrator, a superintendent, an architect or an independent certifier, according to the contract form and the market. The certifier is expected to act fairly between the parties even when paid by the owner. A development lender is not usually the certifier, but its quantity surveyor commonly inspects the works and reports to the bank on whether the certificate can be relied on.
Can you occupy a building at practical completion?: Not on the strength of that certificate alone. Practical completion is a contractual event; whether a building may be used is a matter of building law, which differs by market and by type of building. New Zealand buildings open to the public need a code compliance certificate or a certificate for public use. Australian states use occupation certificates, occupancy permits or certificates of occupancy, and England has its own building control sign-off.
Does practical completion trigger settlement of an off-the-plan apartment?: Usually not by itself. In New Zealand and Australia, off-the-plan contracts commonly set settlement a number of working days after the later of the building approval and the issue of title, so practical completion starts the sequence without ending it. In England, contracts commonly run from the developer's notice that the home is finished. The buyer's contract states the actual trigger and any sunset or long-stop date. For the lender, this means the loan has to run for the whole of that sequence, with interest still accruing.

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THE READING ROOMIN ONE PARAGRAPHPractical completion What is practical completion in a construction project?