Defect Review

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.

Defect Review at Stage 6 is the formal QS process of reviewing, categorising, and financially assessing all defects notified during the Defects Liability Period (DLP), determining liability and cost implications, and ensuring the contractual defects management process is followed correctly so that the employer's rights are preserved. The QS's role is not to inspect defects (that is the Contract Administrator's and design team's role) but to manage the financial and contractual aspects: cost assessment, contractor non-compliance, employer-right-to-have-done-by-others costs, and insurance implications.

RICS Defects and Rectification (2nd ed.) establishes the professional framework for defects management at this stage. It distinguishes between contractual obligations (the contractor's right to rectify), common law remedies (where the contractor fails to rectify), and insurance/professional indemnity routes (for design defects). The QS must understand all three to advise the client correctly.

Defect cost assessment is a key skill: the QS must be able to value the cost of making good defects for the purposes of: (i) deducting from the contractor if they fail to rectify; (ii) advising the employer on the commercial case for accepting a cash settlement; and (iii) preparing a formal defects account where the contractor is in default.

Section 2

Key Principles

RICS Defects and Rectification (2nd ed.): patent defects (visible at PC), latent defects (not apparent at PC), design defects (designer/D&B liability); contractor's right to rectify during DLP under JCT Clause 2.38; employer's right to recover costs where contractor fails to return.
JCT SBC/Q 2016 Clause 2.38–2.40: CA may issue instructions for making good defects; contractor is obliged to make good within a reasonable time; if contractor fails, employer may employ others and deduct the cost from the contractor.
JCT SBC/Q 2016 Clause 2.40: the CA issues the Certificate of Making Good Defects (CMGD) once all instructed defects have been made good to the CA's satisfaction — this is the trigger for releasing the second moiety of retention.
NEC4 Clause 43: the Project Manager notifies the Contractor of defects; the Contractor has a Defect Correction Period (DCP) to correct each defect; if not corrected, the PM assesses and deducts the cost.
RICS Defining Completion (2024): latent defects remain recoverable within the limitation period (6 years simple contract; 12 years deed) even after the DLP ends and the CMGD is issued.
Insurance: design defects in Design & Build contracts may be recoverable under the contractor's professional indemnity insurance; patent defects should be covered by the contractor's workmanship guarantee.

Section 3

Practical Application

Step 1

At PC, prepare a consolidated Schedule of Defects from the PC inspection record; distribute to the contractor promptly via the CA; maintain the schedule as a live register throughout the DLP.

Step 2

For each defect notification, record: date notified, description, location, contractor's acknowledgement, target rectification date, contractor's actual rectification date, signed-off by CA date.

Step 3

Categorise defects as: patent (visible at PC, contractor's workmanship liability); latent (emerged during DLP, may be workmanship or design); design defects (designer/D&B contractor professional liability).

Step 4

Where the contractor fails to make good defects within a reasonable time, advise the CA to issue a formal instruction under JCT Clause 2.38 with a specified deadline; if still not rectified, prepare a cost assessment of engaging others.

Step 5

Prepare defect cost assessments using current market rates or competitive quotations; document the basis of assessment; issue formally as a deduction from the contractor's Final Account.

Step 6

For design defects, advise the client on the liability chain: the designer's professional indemnity insurance, the contractor's liability under a D&B contract, and any collateral warranty provisions.

Step 7

Before the DLP expires, issue a final defects inspection reminder to the client; ensure all outstanding defects are notified before the DLP end date — the contractor's contractual obligation to rectify ends when the CMGD is issued.

Section 4

Common Mistakes to Avoid

Employing others to rectify defects without first issuing a formal instruction to the contractor and allowing a reasonable time to return — this forfeits the right to recover costs from the contractor.
Failing to notify defects before the DLP end date — while latent defects remain recoverable at law, the contractual DLP mechanism (which is cheaper and faster) is lost after the CMGD is issued.
Confusing design defects with workmanship defects — pursuing the contractor for a design defect that is clearly the designer's liability wastes time and may expose the client to counterclaim.
Releasing the second moiety of retention before the CMGD is formally issued — premature release destroys the financial incentive for the contractor to return and make good.
Failing to update the defects register to reflect actual rectification — when the Final Account is agreed, the register must show all defects as made good and signed off.

Section 5

APC Competency & Quick Reference

Contract Practice Level 3 — defects liability, contractor's right to rectify, CMGD, cost deductions for non-rectification
Legal and Regulatory Compliance Level 2 — limitation periods, design defect liability, professional indemnity

What is the contractor's right to rectify defects and why is it important for the employer to respect it?

Under JCT SBC/Q 2016 Clause 2.38, the contractor has the contractual right to return and make good notified defects. If the employer uses others to rectify without following the contract procedure, the employer may not recover the cost from the contractor and may be exposed to a counterclaim. The right to rectify must be honoured before any deduction is made.

How should the QS assess the cost of defects that the contractor fails to rectify?

Issue a formal instruction via the CA with a specified deadline. If the contractor still fails to rectify, obtain competitive quotations or use market rates to assess the cost of engaging others. Issue the cost assessment as a formal deduction from the contractor's Final Account with full documentary support.

What are the limitation periods for defects claims in England & Wales?

6 years from the date of breach for a simple contract; 12 years for a contract executed as a deed. Latent defects discovered after the DLP ends but within the limitation period are still recoverable at law. The CMGD extinguishes only the contractual DLP mechanism, not common law rights.

Section 6

Completion & Final Account Checklist

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Task

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Schedule of Defects prepared at PC and issued to contractor via CA

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All defects categorised (patent/latent/design) with liability identified

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Contractor rectification dates tracked and CA sign-offs recorded

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Formal instruction issued where contractor fails to rectify within reasonable time

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Cost assessment prepared for any defects rectified by others

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Client reminded to inspect before DLP expiry and final defects notified

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CMGD received before second moiety retention released

Section 7

CPD Learning Outcomes

Apply the RICS Defects and Rectification framework to categorise defects, manage the contractor's right to rectify, and prepare cost assessments for deduction where the contractor defaults.
Advise clients on the contractual, common law, and professional indemnity routes for recovering defect remediation costs, distinguishing between workmanship and design liability.
Manage the Defects Liability Period commercially to ensure all defects are notified before the CMGD is issued and the second moiety of retention is protected until all defects are made good.

Section 8