Getting in, getting on and getting out is how contractors make their money and having a completed project to put to use is how employers make theirs. Getting to the point of handing over the works is, usually, high priority for everyone.
Handing over does not mean that the contractor is relieved of its duty to complete the outstanding works or remedy existing defects (provided they are noted at hand over) but it does mean it can dramatically reduce its presence on site and the associated costs of that.
Other typical benefits to the contractor of handing over are:
- The Defects Notification Period (also known as Defects Liability Period) commences on handing over and the sooner it starts the sooner it ends. This is the period in which the contractor is required to return to site and remedy any defects arising (typically a period of 12 months for buildings and 24 months for electro-mechanical and process plant). The end of the Defects Notification Period marks the release of the contractor from its obligation to remedy patent (apparent) defects (but not from his liability for latent (hidden) defects) as well as prompting the return of the performance security and triggering the process to arrive at a final payment.
If retention has been deducted usually 50% of the retention monies will be paid out to the contractor on handing over. If a retention bond has been provided the bond terms should allow for the bond to be reduced by 50% on handing over. Alternatively, it might be that the employer will release 100% of the retention to the contractor on handing over in return for the contractor providing a retention bond.
The contractor will be released from responsibility for care of the works, equipment and plant (save in respect of works which remain outstanding).
If the contractor was responsible for maintaining insurance, on handing the works the contractor's obligation to insure for the following will usually end: the works; contractor's equipment; injury to persons; and damage to property.
If the project is in delay due to the default of the contractor, handing over the works will stop the period running for the accrual of delay damages.
For the employer, once it has accepted handing over of the works from the contractor it can start using the building/structure or get on with fitting-out. The employer would be ill advised to start using the building or commencing fit-out prior to the handing over of the works without careful agreement and arrangement. The employer could otherwise find himself exposed to: having waived its rights against the contractor vis a vis the completion date; finding itself responsible for delays to the project; or arguments about damage and defects to the works.
The employer is also likely to have to accept hand over as a precondition to changes to funding, enable marketing of parts of the building or trigger completion of leases.