What substantial completion means for a homeowner

Substantial completion is a phrase in a contract. It is the point at which a payment, a warranty clock, or both may start, even though a list of fixes is still open. It is not a final inspection, and it is not a certificate of occupancy. If your contract uses the phrase, the definition in that contract is the one that controls the payment. If the contract does not define it, do not treat a text message as the definition.

One public definition, and what it is for

Washington's Department of Enterprise Services uses this sentence in its certificate for state projects: substantial completion is the stage when the construction is sufficiently complete, in accordance with the contract documents, that the owner can fully occupy the work for the use for which it was intended. The same form says the contractor will complete or correct the items on an attached list within a stated number of days, and that the warranty period begins when the certificate is issued (Washington DES, PDF).

That form is written for state work, not for your kitchen. The idea is the one many home contracts borrow: you can use the room, and a list of remaining items is still open. Your contract may use different words, or it may not use the phrase at all. Read the clause that names the payment before you pay it.

What it is not

• Not the punch list. The list is the work still open after that milestone. Walking it, and holding the last money until it is done, is in final payment and the punch list.
• Not the final inspection. The building department's inspection is their paper. A contract date does not pass it for you. What to confirm before and during the job is in remodel permits.
• Not a certificate of occupancy. Some projects need one before anyone occupies the space. Many interior remodels do not. Ask the building department which paper this job needs. Do not assume the contractor's "we're done" is that paper.
• Not a certificate of completion you sign because someone is waiting. The Texas Attorney General says not to sign a certificate of completion until all the work is completely finished, the site is cleaned up, and you are satisfied (Texas AG).

Why the date can matter after you move back in

Oregon's Construction Contractors Board uses substantial completion for complaint deadlines. For work on an existing structure, the board says a complaint must be received within one year from the date the work was substantially completed or the date work ceased (Oregon CCB). The board's rule, for those deadlines, says substantial completion occurs when a person in the owner's position would reasonably conclude that the contractor had fulfilled the contract and that final payment was due. If there is no evidence pointing another way, the board may use the first of these: the final inspection is done, a certificate of occupancy is issued, the space is habitable or usable, or most or all of the payment was made and the payment was not all advanced before the work was complete. Warranty work, or a repair of work already completed, does not extend that date, except that replacing completed work can reset it for a complaint about the replacement (Oregon rule on substantial completion).

That is Oregon's rule for complaints. It is not your payment clause, and it is not the rule in another state. It is a reason to write the date down: a clock can start while a punch list is still open. The written warranty on the work, if you have one, may start on a date the contract names. Get that in writing. See warranty in writing.

Before you pay the draw tied to that phrase

1. Read the definition in your contract. If the payment says "at substantial completion," the same contract should say what that means and what is still allowed to be unfinished.
2. Walk the room and write the open items. A list you both have is the attachment. Do not agree that the list is empty if it is not.
3. Keep the inspection separate. If the job needed a final inspection, the contract date does not replace it.
4. Do not sign a completion certificate for unfinished work. The Texas AG's line is above. A holdback that waits for the list is a contract term, covered in holdback and retainage.

RenoBinder keeps the punch list and the payment schedule with the project. One room is free.

This is general information, not legal advice. Rules vary by state; for a dispute, talk to a licensed attorney or your state contractor board.

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