Before Signing the Lease
THE LEASE IS SIGNED, THE BUILD-OUT HAS STARTED
WHAT IS A PUNCH LIST AND WHY IS IT NECESSARY?
By Kyle Gorman/President/SCG West
Tenants should find out what the contractor’s punch list and closeout process looks like. For this week’s insight, I chose to expand upon this for those that aren’t familiar with what a punch list is. Below is a more detailed explanation of what a punch list is, and why a proper punch list is necessary.
Have you ever packed for a routine trip, confident that you remembered to bring all of your essentials, only to find out a day later when you’re half-way across the country that you forgot an item that should have been easy to remember? I definitely have. The solution to this dilemma is to make a checklist of all the items you need to bring for your trip. That way, when you pack the items into your suitcase you can check them off one-by-one, verifying that you have everything you need. If you have it all written down on paper, you’re no longer responsible for the impossible task of remembering everything in your head.
In the same way, a punch list is used in construction projects to make sure a project is fully completed. In a construction project, once the contractor decides that a project has reached substantial completion, he or she along with the owner will write a construction punch list, outlining all of the tasks that still need to be completed in a project that was not explicitly referenced in the original contract. There are so many different variables surrounding construction projects that it is virtually impossible to plan for absolutely everything in the original contract. Requiring a completed punch list ensures that minor problems aren’t left outstanding once a contractor approaches completion. It also eliminates any ambiguity or possibility of forgetting items that might be missing before the contractor exits the project.
An important function of the punch list is that it makes sure the owner and the general contractor agree upon what qualifies the project as completed. Once shown the punch list, the owner has the ability to add to it. It is common for owners to walk the project site along with their project team in order to see if there is anything left to add to the punch list. The project team will check if the building has been constructed according to his or her plan.
Without a punch list, the general contractor might insist that the project is completed while missing pieces of the project remain. This could cause the project owner to withhold payment to the contractor which could lead to legal disputes and other project pitfalls, all of which waste ample amounts of time and money.
A punch list avoids this problem because it compiles an agreed-upon list of all the minor things that still need to be completed. This way, when the contractor says the project is completed, he can show a fully checked off punch list and the owner will not just have to take his word for it. The punch list contains small changes/fixes to the original project that the contractor can easily fix without major additions to the cost of construction. Fixes that cause major additions to the construction cost are called change orders, which we will elaborate on in a later blog post.
The contractual agreement between the owner and contractor will usually specify that a punch list needs to be completed and signed off in order for the contractor to receive final payment. This means that once the contractor completes the punch list he can receive payment from the owner and officially close out the project. A proper punch list ensures that everyone is on the same page.
In order to avoid lengthy punch list items that may lead to increased project time, project owners should try to maintain communication with the project team while the project is occurring. A good practice is for the contractor to record photos of the project while it is still in progress. These photos should be shared with the owner so that any errors along the way will be made known to the owner sooner rather than later. It is better for the owner to stay on top of any project errors while the project is still in progress so that the contractor does not inherit an enormous list of things to fix after the fact. It is also harder to explain all the things that went wrong several months after the fact. For this reason, maintaining contact with the contractor builds trust.