What does "substantial completion" signify in construction contracts?

Substantial completion is a critical milestone in construction projects, signifying that the work is sufficiently complete according to the contract documents so that the owner can occupy and use the building for its intended purpose. This stage indicates that the project has advanced beyond mere construction, reaching a point where it can function effectively, even if some minor tasks or finishing touches may still be pending.

This concept is crucial because it establishes the timing for when certain responsibilities peak and shift. For example, once substantial completion is recognized, the owner may begin occupancy and assume responsibility for the liability and risks associated with the property. Moreover, this milestone can trigger various contractual provisions, such as the start of warranty periods and the obligation for final payment to contractors.

In contrast, the other options focus on aspects that do not accurately encapsulate the idea of substantial completion. For example, the final checklist refers to the items needed to finish the project rather than the condition of usability, while formal acceptance of the project represents a completion stage that occurs after substantial completion. Passing inspections is necessary, but not all inspections may be needed for substantial completion, which emphasizes practical usability rather than absolute perfection.