A TOC in construction indicates that the contractor has completed the work and may only have a few details pending. This legal document also allows the employer to safely use the work and assume responsibilities. Therefore, this document must detail all these aspects to avoid inconveniences.
In this article, you will be able to know the TOC meaning in construction and when this process occurs. In addition, you will learn the importance of the TOC, as well as what the Defects Liability Period is. Let us see:
The Taking Over Certificate (TOC) is the document that certifies the completion of work and that makes the occupation safe. In this case, to issue a TOC in construction, an engineer must inspect the work. Thus, if it determines that the work is adequate, it will proceed to issue the said certificate.
However, the above does not mean that the work must be complete, but rather that the construction is habitable. Therefore, the TOC highlights the most outstanding works of the work. In addition, with this document, the engineer releases the first part of the guarantee retention money.
This guaranteed amount is what the client retains if the contractor fails to complete the work as stipulated. Additionally, although this amount may vary, it is generally 10% of the total contract price. Similarly, if the contractor does not complete the work according to the contract, the employer can use the money to hire a contractor to complete it.
On the other hand, after the issuance of the TOC, the liability period for defects begins. In this case, the contractor will no longer be able to receive penalties for delays in the completion of the work, known as Liquidated and Proven Damages (LAD). The latter refers to the damages that the contractor must pay to the employer for the lack of completion.
Now that you know what is the TOC meaning in construction, it is time to find out in more detail when it occurs. Obtaining the Taking Over Certificate is only possible when the contractor has complied with all the requirements of the contract. In addition, this is the only way that the work is legally finished.
Consequently, the contracts between employers and contractors must establish the guidelines for the approval of the work. These guidelines are commonly as follows:
On the other hand, once the TOC is in place, possession, and risk of the work pass from the contractor to the employer. Therefore, the latter must take out adequate insurance for the work at the time of receiving the delivery of the finished project. This insurance must cover loss of use, damage, or destruction of the construction.
The issuance of a TOC in construction consists of the following steps:
Therefore, the contractor must carry out the respective repairs or complete the work to make a new request. Also, you can collect the requested documentation.
The completion date of the work is the one in the TOC or on the date on which it is considered issued.
Beginning in the 1970s, FIDIC contracts came into use in the Middle East. Specifically, we are talking about those in the Red Book of the FIDIC, the International Federation of Consulting Engineers. In addition, since then, both the public and private sectors have used contracts of this type.
Additionally, these contracts are relevant due to the lack of specific laws for construction projects in some countries of the region. In addition, the principles of interpretation and application of the general principles must be in place.
However, it must be taken into account that the legal basis of the FIDIC is English. In contrast, the laws of most Middle Eastern countries are based on civil rights and Islamic Sharia. As a consequence, there may be confusion or tension in establishing the terms of contracts between the FIDIC rules and local laws.
Therefore, some adaptations must be made to the rules of the FIDIC contracts to agree with those of each country.
This type of contract in the Middle East requires the engineer in charge of the work to confirm its completion. In addition, the contractor may sue if he believes that the Taking Over Certificate was not issued by the engineer for unfair reasons. This is especially the case when the employer wants to collect late damages from the contractor.
Therefore, it is of the utmost importance that known defects and points to be completed are clear. Therefore, the contractor must make the repairs and complete what is explicitly requested in the TOC.
Even when work has failed to meet the requirements for the TOC, they can be deemed taken. This aspect of the contract must be considered by the parties involved since there is a clause in the FIDIC contracts that defines this situation.
Subclause 10.2 states that an employer assumes the work if it occupies or uses it before the issuance of the TOC in construction. This is because, if the employer performs these actions, it would be certifying that the work is proper. However, if there is an agreement between both parties for temporary occupancy, there is no such assumption.
Also, when an employer occupies the building, there may be damage or disruption for which the contractor will not be responsible. However, the employer may consider using the facilities for the purposes of the contract, even if they do not meet the requirements. However, the employer can only do this after obtaining legal consent and permission.
In this case, the employer can divide the work into several parts and commission the work into those parts. With this, you avoid the possibility of the work being considered completely taken. However, if this possibility does not exist, the employer must carry out the necessary procedures to certify that it is a temporary measure.
Therefore, to avoid this type of inconvenience, the conditions for the completion of the work must be in the contract.
TOC in construction is important to both the employer and the contractor who performed the work. Once the employer receives the TOC, if it is for a business purpose, it becomes an income-generating asset.
On the other hand, in case the employer assumes the work after the time established in the contract, the contractor does not have to pay the costs for the delay. However, this should only happen if the demand for payment is in place after the delivery of the TOC.
Also, when the employer receives the TOC, the security of the termination of the contract decreases considerably. In this case, the performance guarantees decrease to 50%. In the same way, the employer must pay half of the guarantee retentions to the contractor.
The defects liability period (DLP) is the time in which the contractor needs to make corrections to the work. This time starts from the moment the work ends. In addition, during this period, the following generally occurs:
Similarly, the employer can renew DLP on contracts where the contractor performs a repair.
Generally, this process is similar in all cases. However, it will also depend on the agreements established in the contract. Next, we detail the process in detail:
In this case, it is the superintendent who certifies the costs of the repairs. Additionally, if the contractor does not pay for said costs, the contracting party may retain the agreed performance guarantee.
After the liability period ends, the contractor has the right to demand any outstanding payment. In addition, you can request the return of the guarantee deposit established between both parties. After this, the superintendent will issue a final certificate, which sets out the amount that the employer must pay the contractor.
If there is no money as debt and there is no defect, the employer must return the guarantee.
The TOC in construction is important for both the employer and the contractor, as it benefits them both. As for the contractor, he is free from the responsibilities of the work and receives the guaranteed retention payment. On the other hand, the employer receives the finished work and the guarantee of the repair of defects.
However, there may be legal implications if the TOC is denied by the engineer or employer for unjustified reasons. Therefore, we can offer you legal assistance on this or other different issues. Our company provides services that include the following:
Do you want to know more about the TOC meaning in construction and other legal topics? We offer you the opportunity to contact us and receive the assistance you need. To do this, you can contact us through the telephone number +971 433 16 688 or the email at [email protected]. We ensure that you will receive a callback.