Defects Liability Period Management

Section 1

Purpose

Note on JCT editions: JCT has published the 2024 Edition. This guidance cites JCT SBC/Q 2016 clause references; the commercial and payment mechanisms are substantively unchanged in the 2024 edition, but specific clause references should be verified against the contract edition in use on any given project.

Defects Liability Period Management is the structured process by which the QS and Contract Administrator manage the contractor's obligations to return and rectify defects during the DLP, maintain accurate records of all notifications and responses, and protect the employer's financial position through retention and defect cost assessment. The DLP (typically 12 months under JCT SBC/Q 2016 Clause 2.38) is neither an inspection period nor a snagging list — it is a contractual right for the contractor to make good defects notified by the employer.

Effective DLP management requires a systematic approach: regular inspection cycles, prompt notification of defects, rigorous tracking of the contractor's rectification programme, escalation where the contractor fails to respond, and preparation for the pre-expiry final inspection. The QS's role is to manage the financial and contractual dimensions of this process, not to inspect the physical works.

Poor DLP management is one of the most common causes of unrecovered defect costs in the construction industry. Clients who fail to notify defects before the DLP expires, release retention prematurely, or fail to engage other contractors correctly forfeit contractual rights that may have been worth significant sums.

Section 2

Key Principles

JCT SBC/Q 2016 Clause 2.38: the CA shall issue instructions for the making good of any defects, shrinkages, or other faults appearing within the DLP; the contractor is obliged to make good at no cost to the employer.
JCT SBC/Q 2016 Clause 2.39: the employer may require that defects be made good by the CA issuing an instruction; alternatively, the employer may accept a deduction from the contract sum in lieu of making good.
JCT SBC/Q 2016 Clause 2.40: once all instructed defects are made good, the CA issues the Certificate of Making Good Defects; this is the trigger for release of the second moiety of retention under Clause 4.20.2.
NEC4 Clause 43: the Supervisor notifies the Contractor of defects; the Contractor corrects each defect within the Defect Correction Period (DCP) agreed in the Contract Data; failure to correct allows the Project Manager to assess and deduct the cost.
RICS Defects and Rectification (2nd ed.): contractor must be given the opportunity to rectify before the employer employs others; the right to recover costs from others without following this procedure may be lost.
RICS Retention (GN 90/2012): the second moiety retention is the financial mechanism underpinning the contractor's DLP obligation; it must not be released until the CMGD is issued.

Section 3

Practical Application

Step 1

At PC, set up the DLP tracking register: DLP start date (PC date); DLP end date; all sections/phases with their individual DLP end dates if sectional completion applies; first inspection date (typically 3 months after PC); final inspection date (1 month before DLP end).

Step 2

Conduct an initial inspection at 3 months and issue a Defects Notification covering all identified defects; confirm the contractor's programme for making good; set a follow-up inspection date.

Step 3

Mid-DLP (typically 6 months): conduct a review inspection; check that previously notified defects have been made good; issue further notifications for any new defects or uncorrected items; identify any systemic defect patterns requiring design team review.

Step 4

Conduct the pre-expiry final inspection at least 1 month before DLP end; issue the final Defects Notification covering all remaining defects; confirm in writing that the DLP expires on [date] and that this is the last opportunity to notify contractual defects.

Step 5

Monitor the contractor's rectification programme after the final inspection; chase non-compliance in writing with a clear deadline; where the contractor fails to return, seek CA instruction to employ others under JCT Clause 2.39.

Step 6

Once all defects are confirmed made good by the CA, request issue of the CMGD; instruct the second moiety retention release immediately via a HGCRA-compliant payment notice.

Step 7

After the CMGD, confirm the position on any latent defects identified after the DLP — these remain recoverable within the limitation period under common law; advise the client accordingly.

Section 4

Common Mistakes to Avoid

Failing to conduct a final inspection before the DLP expires — once the DLP expires and the CMGD is issued, the contractor's contractual obligation to rectify at no cost is discharged.
Employing others to rectify without following the JCT Clause 2.39 procedure — the employer's right to deduct the cost of remediation may be lost if the contractor was not given the opportunity to return.
Confusing the DLP with the limitation period — the DLP is a contractual mechanism (typically 12 months); the limitation period (6 or 12 years) is a common law right to pursue defect claims that survives after the DLP ends.
Allowing multiple sections' DLP dates to become confused — where sectional completion applies, each section has its own DLP end date and its own retention moiety; failure to track these separately leads to premature or missed retention releases.
Issuing a blanket sign-off on defects without the CA confirming each item is made good — the QS must confirm with the CA that every item on the final defects list has been physically inspected and signed off before the CMGD is issued.

Section 5

APC Competency & Quick Reference

Contract Practice Level 3 — DLP management, defect notifications, CMGD procedure, retention release
Legal and Regulatory Compliance Level 2 — limitation periods, contractor's right to rectify, deduction for non-rectification

What is the contractual basis for the Defects Liability Period and what does the contractor's obligation entail?

Under JCT SBC/Q 2016 Clause 2.38, the DLP runs from PC for the period stated in the Contract Particulars (typically 12 months). The contractor is obliged to make good all defects, shrinkages, and faults appearing during the DLP at no additional cost to the employer. The contractor has the contractual right to rectify — the employer cannot engage others without first allowing the contractor to exercise this right.

What happens if the contractor refuses to return and rectify defects during the DLP?

The QS should advise the CA to issue a formal instruction under JCT Clause 2.38 with a specified deadline. If the contractor still fails to rectify, the employer may elect to have the defects made good by others under Clause 2.39, and the reasonable cost is deducted from the contractor. This deduction must be formally assessed and documented — it is a deduction from the Final Account, not a self-help remedy.

How does sectional completion affect DLP management?

Each section has its own DLP running from its own PC date. The DLP end date, retention release date, and CMGD for each section must be tracked independently. The CA issues a CMGD for each section separately; the retention for each section is released on the CMGD for that section. Conflating sections' DLP dates leads to incorrect retention calculations and potential HGCRA non-compliance.

Section 6

Defects Liability & Post-Occupancy Checklist

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Task

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DLP tracking register set up at PC with all section end dates

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3-month inspection conducted and defect notifications issued

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Mid-DLP review conducted and systemic defects identified

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Pre-expiry final inspection conducted at least 1 month before DLP end

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Final Defects Notification issued before DLP expiry date

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Non-compliant contractor chased in writing with CA instruction issued

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CMGD received after all defects confirmed made good by CA

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Second moiety retention release instructed via HGCRA-compliant payment notice

Section 7

CPD Learning Outcomes

Manage a Defects Liability Period systematically — setting up a DLP tracking register, conducting scheduled inspections, issuing defect notifications, and escalating non-compliance — in compliance with JCT SBC/Q 2016 Clauses 2.38–2.40.
Advise clients on the contractor's right to rectify, the employer's right to deduct remediation costs for non-rectification, and the distinction between the DLP and the common law limitation period.
Manage sectional completion DLP dates independently, ensuring each section's CMGD and retention release are correctly timed and documented.

Section 8