Romania And The UK: When Are The Works Taken-Over?

Taking-Over, Completion Certificates and Building Permits

The issue of "taking-over" a construction project on completion in Romania always seems to raise the question of whether the works can be said to be taken-over when the contractor has complied with the contract (in terms of substantially completing the works), or whether the works need to have received the Building Permit from the local authority.

The circumstances in which this question arises are always the same. The contractor has, in its view, completed the works and requested taking-over. There is, no doubt, a defects or "snagging" list (assume for the moment that these items are de minimis). However, the employer's or engineer's refusal to take over is on the basis that the Building Permit has not yet been obtained. This is, apparently, required in order for the employer to know that the works are in fact complete (because they meet with the local authority's requirements) and therefore meet with the requirements under the building contract. Thus, until the local authority is satisfied, taking-over can apparently be refused and liquidated damages continue to be deducted.

It is surprising that this argument is encountered so frequently in Romania. Romania is apparently a special case and unlike other countries. This argument is of course a fallacy. While the detail of a country's legislation in relation to buildings that are fit to be used varies, the general scheme is much the same in all developed countries. The building contract between the employer and contractor is governed by its terms. The works are either ready to be taken-over in accordance with the terms of their contract (because as a fact they are substantially complete) or they are not. None of the standard form contracts anticipate that the employer, and in particular the contractor, will be in limbo until a third party local authority decides (using some different standard) that the works are complete in accordance with local legislation. However, can the employer deduct liquidated delay damages until the local authority issues a Building Permit, even in circumstances where the construction is substantially completed or the employer has taken beneficial possession?

Issues

A number of important issues arise. First, it is the terms of the building contract that primarily govern the relationship between the employer and the contractor. The basis of virtually all standard form contracts (and any purpose-written ones or amended standard forms) is that the works are to be completed by a certain date. If the works are not completed, then compensation for the delay, if caused by a contractor risk event, is due to the employer. An extension of time mechanism can relieve the contractor of any delays that are at the employer's risk. These delay damages are to compensate the employer for late completion arising as a result of a contractor's risk. The commercial purpose, of...