A punch list is essential for completing a construction project and getting paid. Let’s look at what a substantial completion punch list is, how it affects payment deadlines, and how it can cause issues with lien rights.
What Is a Substantial Completion Punch List?
A substantial completion punch list is a document that lists the final work items that must be completed before a construction project is considered finished. All work that does not meet the construction contract’s specifications should be included on the punch list. Before the release of final payment, minor corrections, alterations, or repairs are typically required.
When should a punch list be used?
The substantial completion punch list is typically the final step in the project to ensure that everything was completed according to the owner’s specifications. It is also referred to as a “punch-out list, “closeout checklist,” or “final checklist.” It’s known as a snag list in the United Kingdom.
A well-written punch list will detail all tasks that must be completed before the structure is ready for occupancy. The majority of punch work items are minor fixes. Most of the major issues are likely to have been resolved. Any incomplete/incorrect installations or incidental damage to existing finishes or structures could be addressed in this manner.
What Goes into a Construction Punch List?
While it is not required, it is a standard component of many construction processes and is still widely used. A construction substantial completion punch list is typically created before the project is completed. Companies will begin a punch list when the construction project has reached a significant level of completion.
A legal term used in the construction industry is “substantial completion.” It denotes the point at which the owner, rather than the contractor, is in charge of the project. According to the American Institute of Architects, substantial completion occurs when the owner can occupy the building, or the building can be used for its intended purpose.
The owner, contractor, and other stakeholders walk through the project and list the remaining work to create a construction punch list. Designers and architects attend to ensure that the building is by their plans, while subcontractors and contractors attend to determine whether any issues are reasonable or unreasonable.
This final part is crucial because every project will have flaws. As a result, reasonable deficiencies must be defined and explained. Minor flaws that meet all specifications, such as a small ding in the floor or paint splatter on a pipe, can be included. Unreasonable flaws are mistakes that must be corrected. This could be due to the walls being the wrong color or something more serious. A punch list is a list of tasks that must be completed to finish a project completely.
Who is responsible for punch list items?
Everyone on a construction project has a role to play in the execution of a substantial completion punch list.
The GC’s responsibility is to ensure that all of these line items are addressed before issuing a completion certificate on the project. In addition, the general contractor (GC) may assign punch work to subcontractors who are responsible for specific areas of work.
In most cases, the GC will carry out a walkthrough with the owner to identify any incomplete or non-conforming work and create the initial substantial completion punch list. Depending on the issues that still need to be resolved, certain subcontractors may be called back to the project. That is the extent of the punch list for many projects.
If the project has one, the architect is also responsible for reviewing the punch list and approving final payments. The general contractor will send their punch list to the architect, who will conduct their walkthrough to determine what has and hasn’t been completed to their design specifications.
The architect will then revise the punch list and send it back to the owner and general contractor. The GC then distributes the punch list to the subcontractors and ensures that all work is completed.
Subcontractors typically bear a heavy load in the punch list process. They are in charge of much of the punch work and gather all necessary change orders and documentation that the GC must pass on to the owner. Rather than waiting until the end of the project, the ideal approach is to start organizing these documents as soon as possible.
Punch Work: Last step before payment
The substantial completion punch list is tied to final payment, so everyone on a project should be involved or concerned about it. An owner will typically withhold retainage payments until the substantial completion punch list items are completed, putting the fate of the contractor and subs in the owner’s hands.
After all, retainage frequently exceeds the job’s profit margin. When the contractor believes he has completed the project substantially, he can request a “pre-final” inspection. Hopefully, the necessary punch work will be minor, and the final payment will not be too far away.
Most contracts require final payment only after all punch list items have been completed by the contract specifications. Once “punched,” the list is typically attached to the Certificate of Substantial Completion.
Keeping Punch List Items and Lien Rights in Balance
Another issue that contractors may face is the impact on lien rights. Every state has mechanics lien laws that specify when mechanics lien must be filed. These deadlines must be met if lien rights are to be secured.
Typically, lien deadlines begin ticking from the “date of the last furnishing of labor/materials” or the project’s substantial completion. The tricky part is that most states do not consider punch work when determining lien deadlines.
Many would consider their last day of providing labor or material to the project, or the project’s completion date, to include punch list work, but they would be incorrect in the context of a mechanic’s lien.
For whatever reason, states almost always exclude substantial completion punch lists, warranties, and other types of remedial work from these calculations.
The danger is apparent here. If you fail to follow this rule, your mechanic’s lien deadline may come much sooner than you expect.
How Contractors Use a Construction Punch List
A punch list can only be used in one way: to communicate any outstanding tasks or issues with a building before the owner takes full ownership. There are, however, a couple of approaches to creating a punch list. Some people may still use a combination of spreadsheets and actual hole punches, but this is becoming less common. There are now various apps and software options available to aid in the creation and completion of punch lists. The main goal is for each person to sign off on their assigned portion of a punch list to ensure that everyone saw exceptional work and knew when it was completed.
Zero Punch List
Many construction companies set an ambitious goal of having no construction punch list. The idea is that by the time the project has reached a significant completion point, there will be no punch lists at the end. As a result, projects are more profitable because they do not require as many punch list changes. There are numerous ways for businesses to increase their chances of achieving zero-punch.
Companies should achieve zero by improving quality control procedures, enforcing clear contract documents, documentation, and communication. The first step toward having a near-zero construction punch list is to have clear contract documents. Complete documents should cover all specifications to reduce the amount of rework required. Following that, contractors must enforce documentation and communication among all stakeholders.
This ensures that there is documentation to back up any changes and communication to demonstrate when changes were made. Finally, quality assurance must be prioritized. Before beginning a new phase of the project, each step should be checked for quality. This can help contractors meet their zero-punch goals by reducing end-of-project rework.
Each project presents its own set of challenges, but preparing a complete and accurate punch list will provide everyone with a clear understanding of what needs to be done to complete the project.
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