In a recent Skyway staff meeting, I mentioned that I had nearly finished the construction of a new, improved chicken coop. (NOTE – My family and I live on a small acreage that is almost, but not quite, a hobby farm; we have chickens, dogs, kittens and a few ducks and geese.) Anyway, to relate this bit of news to something associated with contracting, I mentioned that even though the coop still needed to be painted and some interior security wires needed to be installed, I could still use part of the coop immediately. With heavy rains expected in the days to come, it was important that I get the chickens moved in as soon as possible, without compromising their comfort or security from predators. Luckily, the major work was done, and the coop was habitable and safe. In my statement, I cited the concept of “beneficial occupancy,” which is a term commonly used in construction contracts. The term refers to a situation where the work is not complete and full delivery has not been accepted by the customer, but enough of the project is complete so that the customer can begin to move in and “occupy” some of the space. It was a funny little quip about my chickens and their new, almost-complete housing, but it serves as a good illustration of the practice and potential hazards of beneficial occupancy.
In simple, clear terms, a contract involves the exchange of work for agreed-upon compensation. In construction projects, due to the long duration of the work being completed, and the ability to segment the work into phases, and even divide the physical workspace into incremental portions, it is possible to blur the lines between work completion and customer acceptance of that work. Essentially, as a project nears completion, the receiving customer may be afforded the opportunity to begin to move property and equipment into the space prior to the final inspection and acceptance. I emphasize the phrase “may be afforded,” as it is never a given, and usually always requires agreed-upon conditions from both the contractor and the customer.
There are several potential problems with beneficial occupancy. First, having the customer’s personnel and equipment moving in and around the job site complicates the contractor’s remaining job. The contractor must work around these additional personnel and items, and sometimes must halt their work to allow for customer access and transit. At a minimum, the schedule will be at least partially slowed down. Another potential problem lies damaged property or fixtures. Technically, the work has not been completed and the customer has not accepted the work, so the contractor is still responsible for the job site and the condition of the property and materials therein. Thus, if something is marred, broken or damaged by the customer, the contractor may find themselves doing re-work or repair at their expense. Additionally, liability is a concern, as customers move through the job site, which may still have equipment, materials or related items laying about. If someone were to be injured, the contractor is technically still liable, because the customer has not yet accepted the work and assumed responsibility for the site.
Of course, these concerns may be mitigated or alleviated by thorough discussion and signed agreement on terms, conditions, and relief from liability for both contractor and customer. But until these and other factors are addressed and resolved, beneficial occupancy is a valuable but potentially hazardous undertaking. Fortunately, my chickens have not complained about the unpainted exterior, and I have since completed the interior wiring, so the coop is sound and secure, if not exactly aesthetically pleasing. In my case, beneficial occupancy worked out well, with no rework or repairs required.