Project Close-out and Occupancy

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At project closeout, the contractor notifies you, the owner, that the building is sufficiently completed, according to the certificate of substantial completion, and is ready for occupancy. At this stage, the following nine steps are taken:

  1. When the project is near completion, the architect conducts a walk-through with the contractor, creating the punch list. Unfinished tasks — which should be minimal at this point in the project — are listed as conditions to be completed by the contractor prior to final payment. It is a good idea to have both the project manager and a representative from the charter school attend this session. Several people should look over the completed construction. Check details such as door hardware, light switches and missing light bulbs, function of plumbing fixtures, availability of hot water, finishes, paint touch-ups, and correct installation of hardware for built-in furnishings.
  2. The owner or project manager works from a final punch list of outstanding items and undertakes a detailed inspection to make sure the work fully conforms to the contract documents.
  3. The GC and his or her subcontractors, along with the owner and the owner’s facilities or maintenance staff, conduct a walk-through of the project to demonstrate how all building systems operate. Take pictures or video of these demonstrations for future reference.
  4. The owner and contractor determine the final contract amount to be withheld (retainage) until final completion. If the construction is financed, the lender will probably not release retainage (up to 10% of contract amount) until the certificate of substantial completion and certificate of occupancy are received. (Note: Depending on scope and length of project, there may be subcontractors who performed and completed work during the early phases of the project. On a case-by-case basis, a lender may release their retainage.)
  5. Once the facility is complete, the architect issues a certificate of substantial completion, which is then signed off by the GC and the owner.
  6. The owner and contractor perform a walk-through and inspection, and agree that the building is ready for a final inspection by all building inspection departments of the government agencies that have jurisdiction.
  7. Third parties inspect and sign off on the project, resulting in the issuance of a certificate of occupancy.
  8. The GC then provides all warranties, affidavits, receipts, releases, and waivers of liens of bonds to the owner, indemnifying the owner against liens. Usually, if a bank finances the project, the owner will also have to provide these items to the bank.
  9. The GC issues final application for payment and, either simultaneously or after receipt of payment, issues a final release of liens.

Many development professionals recommend producing an operations and maintenance manual prior to moving into the new facility. The purpose of the manual is to maintain all key information related to the project in a single location, so once your development team is disbanded, you and your staff are armed with the information necessary to manage the building. Ideally, the design team and your contractor should produce the manual together with the following key elements:

  • Identify major design elements, systems, and materials that are crucial to the long-term quality and performance of the building (e.g., exterior wall and roof materials, windows, exterior doors, landscaping, all major operating systems and related components such as HVAC, plumbing, electrical, mechanical)
  • Collect all vendor-supplied operations and maintenance information and manuals, and all warranties, guarantees, and certifications that are contractually owed to you
  • Assemble all previously produced design materials (e.g., as-built drawings, final finish schedules, and plans)
  • Set up a maintenance schedule (weekly, monthly, quarterly, and annually) for all major system components

The general contractor typically warrants the overall project for one year following completion. During this time, the GC is obligated to return to the site to correct any deficiencies. Send your requests to your GC in writing and organize them so similar items (e.g., plumbing issues on one request, roof leaks on another, etc.) can be addressed at one time. Phone calls regarding each independent item are usually not well received. Keep a written log of when the deficiency was first noted, when the contractor was notified, when the problem was corrected, and if the problem recurred. Emergencies should, of course, be treated with immediate attention.

Related link in Essential Resources: Managing Construction Risks

Legal Disclaimer:

Nothing in this material should be construed as investment, financial, brokerage, or legal advice. Moreover, the facts and circumstances relating to your particular project may result in material changes in the processes, outcomes, and expenses described herein. Consult with your own professional advisors, including your financial advisors, accountants, and attorneys, before attempting to consummate any transaction described in this material.