Substantial completion and closeout

Eighteen months after the first piles went in, the Rail Yard Commons looks finished from the street. The larch is weathering to silver on the park side, the roof teeth catch the north light over the makerspace and the city has posted an opening date for the start of the school year. Inside, the reality is less tidy: painters are touching up the stair, the commissioning agent is running the third set of tests on the heat pumps, the elevator inspector has not yet signed off the second car, and there are 412 items on the deficiency list. Fairweather has asked the consultant to certify the building as substantially performed. Thibodeau tells Ingrid, who will lead the review, that this is the most consequential certificate she will sign on the job. 'It moves money, starts warranties and shifts risk from the contractor to the owner,' he says. 'Get the date right and get the reasons on paper.'

What substantial completion means

In Manitoba, substantial performance has two meanings that must be kept apart. The first comes from The Builders' Liens Act. A contract is substantially performed when the structure, or a substantial part of it, is ready for use or is being used for the purpose intended, and the work remaining to be done can be completed or corrected at a cost of not more than 3% of the first 250,000 dollars of the contract price, 2% of the next 250,000 dollars and 1% of the balance. The consultant certifies the date in the form the Act prescribes and gives the certificate to the owner and the contractor, and the date starts the period during which liens may be registered and the holdback must be kept. The second meaning comes from CCDC 2 2020, which separates the lien concept from the moment the owner takes over the building. Ready-for-Takeover is reached when substantial performance has been certified and a list of further conditions is met, including evidence of compliance with the requirements for occupancy or an occupancy permit, the operation and maintenance materials and training the contract requires, and other items the parties have listed. The one-year warranty under CCDC 2 2020 runs from Ready-for-Takeover.

The test is about use, not perfection. A building with 412 open items may well be substantially performed if the items are small and the building can be used for its purpose; a building with ten open items may not be, if one of them is the fire alarm. Ingrid's review therefore separates the items that prevent use, such as life safety systems, the building official's sign-off, the second elevator and the systems needed for heating and ventilation, from those that do not, such as paint touch-ups, a scratched door, missing signage and the larch boards to be replaced on one wall. Only the first group can hold up the certificate.

# Test substantial performance under The Builders' Liens Act (Manitoba):
# remaining work must cost no more than 3% of the first 250,000 dollars,
# 2% of the next 250,000 and 1% of the balance of the contract price.
contract_price = 16_030_000 + 412_000          # original price plus approved changes
def limit(p):
    first, second = min(p, 250_000), min(max(p - 250_000, 0), 250_000)
    rest = max(p - 500_000, 0)
    return 0.03 * first + 0.02 * second + 0.01 * rest
remaining = {  # cost to complete or correct, from the deficiency list priced by the consultant
    "paint and finishes touch-up": 18_500, "larch boards on the south wall": 26_000,
    "signage": 14_200, "landscape planting (seasonal)": 61_000, "door hardware adjustments": 6_300,
    "second elevator final adjustment": 9_800, "minor electrical items": 12_700,
}
blocking = ["fire alarm verification", "occupancy permit"]   # items that prevent use
total = sum(remaining.values())
print(f"limit {limit(contract_price):,.0f}  remaining work {total:,.0f}")
if blocking:
    print("not yet: items that prevent use ->", ", ".join(blocking))
elif total <= limit(contract_price):
    print("substantially performed: certify the date")
# One week later, the fire alarm is verified and the occupancy permit issued.
blocking = []
print("after one week:", "substantially performed" if not blocking and total <= limit(contract_price) else "not yet")

limit 171,920  remaining work 148,500
not yet: items that prevent use -> fire alarm verification, occupancy permit
after one week: substantially performed

For the Rail Yard Commons the statutory limit is about 172,000 dollars and the priced remaining work about 148,000, so the formula is met. The building is not yet ready for use, though, because the fire alarm verification and the occupancy permit are outstanding. A week later both are done, and Ingrid recommends a date. The seasonal planting is the largest item, and Thibodeau notes that it would have been reasonable to deal with it as a separate item after substantial performance; the Act allows finishing work after that date, with its own holdback.

Holdback and the payment chain

Throughout construction the owner pays the contractor monthly on the consultant's certificate, and deducts the statutory holdback of 7.5% from every payment. The holdback is kept for the protection of those who might register liens against the land, mainly subcontractors and suppliers, and not as security for the owner against defects; the Manitoba Association of Architects and the Winnipeg Construction Association's guidance on completing contracts says plainly that it must not be used to pay for completing the work or remedying defaults. It is released after the lien period that follows substantial performance, if no liens have been registered. The prompt payment amendments in force since 1 April 2025 changed several of these timelines: owners must pay a proper invoice within 28 days, contractors must pay their subcontractors within 7 days of being paid, notices of non-payment must be given within 14 days, and the period for registering a lien was lengthened from 40 to 60 days. Contract administrators should check the current wording of the Act and its regulation before certifying any release.

The architect's certificate for payment is a statement that, to the best of its knowledge from its site visits and the contractor's application, the work has progressed to the point indicated and the quality is in general accordance with the documents. It is not a guarantee, and it is not a valuation of the contractor's costs. Certifying more than the work justifies harms the owner if the contractor later fails; certifying less than it justifies harms the contractor and, through the payment chain, every subcontractor. Ingrid reviews each application against the schedule of values, her own observations and the stored materials on site, and adjusts lines she cannot support, explaining why.

From substantial completion to final completion

After the substantial performance date the contractor finishes the remaining items, and the consultant reviews them as they are completed. The deficiency list shrinks quickly at first and slowly at the end; the last few items, such as a replacement panel that must be ordered or a seasonal planting, can take months. Each list must be specific: the item, its location, the document it relates to and who is responsible. Lists produced by the whole team walking the building together, with the contractor's own list as the starting point, are faster to close than lists that arrive item by item from different reviewers.

Final completion requires more than finished work. The contract lists the closeout submittals: record drawings showing the work as built; operation and maintenance manuals; warranties and guarantees, with their start dates; spare materials and attic stock; keys and access cards; training records for the city's staff; the commissioning report; and, before final payment, a statutory declaration from the contractor on CCDC 9A that all its accounts for labour, subcontracts and materials have been paid, with a current clearance from the Workers Compensation Board. When all of these are received and the last deficiencies corrected, the consultant issues the final certificate for payment.

Commissioning deserves its own word. Kofi Mensah, the mechanical engineer, has been working with the city's commissioning agent since design, and the functional tests of the heat pumps, the ventilation units, the controls and the lighting are the last major step before the building is handed over. The tests often reveal problems that no single trade owns: a sequence of operation written one way and programmed another, a sensor in the wrong place, a valve installed backwards. Some commissioning, such as seasonal tests of heating and cooling, must happen after occupancy, and the contract should say so, with the contractor's obligations continuing until it is done.

The year after completion is part of the job too. The contractor must correct defects that appear in the one-year warranty or correction period, and the consultant usually reviews the building with the owner and contractor about a month before the period ends, to list anything that has appeared. Ingrid adds a date to her calendar for eleven months after the takeover.

Exercise 11: closing the job

• Prepare the certificate of substantial performance for the Rail Yard Commons, with the date, the attached list and the responsibilities of each party after the date.
• Calculate the amount held back at substantial performance, the amount releasable and the date it may be released, citing the contract and the statute.
• Write a closeout checklist of every document required before final payment and assign each to a party.
• Plan the review before the end of the one-year period.

Self-check

• Have I separated items that prevent use from those that do not?
• Is my certificate dated and supported by what I observed?
• Do I know the current statutory periods for holdback, liens and prompt payment?
• Have I received every closeout document before recommending final payment?

Occupancy and the building official

Nadia Kostyshyn, the former plans examiner who reviewed the permit drawings in the last course, explains the city's side of completion. Before the building can be occupied, the building official must be satisfied that it meets the requirements for occupancy: the fire alarm and sprinklers verified, exits and emergency lighting complete, the elevators inspected under the province's elevating devices program, and the life safety items on the permit's conditions closed. The consultant and the engineers usually provide letters confirming that the work in their disciplines was reviewed and is in general conformity, and the city may issue an occupancy permit for part of a building while the rest is completed. Kostyshyn's advice is to start the conversation two months before the target date, with a list of the official's requirements and who will provide each one, rather than to discover them the week before opening.

Natarajan adds the owner's side. Taking over a building means taking over its risks: the city's insurer must cover it from the takeover date, its security staff must have keys and alarm codes, its maintenance staff must know how to run the heat pumps and the building automation system, and its librarians and program staff need time to move in before the public arrives. The contract's training requirements are therefore not a formality. The city schedules three weeks between the takeover and the public opening, and asks for the training sessions to be recorded so that staff hired later can watch them.