The Punch List: Defining What It Is and How to Create It
In my last three blogs, I explained the importance of change orders. To review, these crucial forms document any modifications that occur which alter the construction project’s original scope of work. Whether there is a cost involved or not, change orders must be filled out so that you’re aware of every alteration.
Now that you understand why change orders matter, I’d like to move forward and discuss the Punch List. This stage of the project typically occurs once you finalize the “substantial completion” phase. Formally speaking, substantial completion means the project is at the point where the work may be used as intended. In other words, you can now live or work in this newly constructed space. But the structure isn’t perfect yet. That’s where the Punch List becomes relevant.
Essentially, the Punch List contains touch-up items that need to be repaired or completed before the job graduates to final completion. Things such as a loose doorknob, smudged paint or a crooked tile could qualify for the Punch List. All in all, the goal is to make the construction as perfect as possible when the job finally comes to a close.
I find it helps to think of a construction project in three parts:
- Construction Phase– This stage covers the period of construction from the start to the date that substantial completion is achieved.
- Punch List Phase – This stage covers the period from the date of Substantial Completion through the date that all Punch List items are completed and the construction work is finalized.
- Warranty Phase – This stage covers the period from the date of Final Completion through the date on which the Warrant expires.
Sometimes there can be confusion about whether a repair or replacement is covered by the construction contract or the Warranty. To resolve this confusion, determine if the Project reached Final Completion. If so, the repair is covered by the Warranty.
Basically, fixes on the Punch List are considered part of the original construction. As soon as these improvements are made, the project is finally considered to be complete and it enters the Warranty Phase. When the warranty ends, any other adjustments are considered outside of the construction job. So the contractor will have to be paid separately for this work.
Be aware, Property owners often have a ten percent retention built into their contracts. By holding back this percentage, the owners ensure that the Contractor will finish the Punch List items. If this amount of money isn’t held back, a contractor has no economic incentive to complete the Punch List.
One Final Note
The construction paperwork is a critical safeguard and should always be examined carefully. So before you sign any agreements, it’s always in your best interest to have an attorney look over the documents and advise you on the most appropriate route to take.
Next time, I’ll explain the warranty period.