Practical Completion and the Building Safety Act: Should Gateway 3 Certification Be a Condition?

The Building Safety Act 2022 introduced a significant shift in the regulation of building safety in England, particularly for higher-risk buildings (HRBs). Central to this regime is the introduction of three statutory “Gateways” which operate at the planning, design, and completion stages. Gateway 3, in particular, functions as the final hurdle: a completion certificate issued by the Building Safety Regulator (BSR) confirming that the building can be safely occupied.

The implications of Gateway 3 have prompted legal and commercial debate in the construction industry. One practical question—of growing importance to developers, funders, and contractors—is whether the issuing of this regulatory certificate should form part of the contractual definition of practical completion (PC) under the building contract.

This article considers the risks and advantages of doing so. It evaluates the enforceability of such provisions in light of two decisions from the Technology and Construction Court and the Court of Appeal, and it offers commentary on the commercial and drafting considerations that may arise.

Practical Completion: A Matter of Construction and Context

The concept of practical completion has always defied strict legal definition. It is primarily a matter of fact and degree, guided by case law and, where relevant, by the express terms of the contract. In general, practical completion marks the stage at which the works are finished to a standard that allows the employer to take possession and use them for their intended purpose.

In Mears Ltd v Costplan Services (South East) Ltd [2019] EWCA Civ 502, the Court of Appeal reaffirmed that minor defects or non-compliances—particularly where they can be remedied without significant disruption—do not necessarily prevent practical completion. In that case, the Court rejected the suggestion that a relatively minor departure from design drawings could defeat practical completion, particularly in the absence of clear contractual language to that effect.

More significantly, the Court in Mears endorsed the view that practical completion is capable of being defined by the parties. If a contract stipulates particular preconditions to practical completion, such as certification, inspection, or the delivery of specified documents, those requirements will be enforceable—provided they are drafted with sufficient clarity. Ambiguity, or reliance on implied obligations, will not suffice.

Lidl v 3CL: Conditional Entitlements Require Express Drafting

This principle was applied in Lidl Great Britain Ltd v 3CL Ltd [2023] EWHC 2270 (TCC), where the court considered whether a contractor’s failure to provide adequate operation and maintenance (O&M) manuals affected its entitlement to payment. The court held that, unless the contract expressly made delivery of such documents a condition precedent to payment, a failure to provide them would not, by itself, suspend the employer’s obligation to pay. However, the absence of proper O&M manuals could prevent practical completion and expose the contractor to claims for breach of contract.

The judgment provides a useful warning for those drafting contracts which attempt to link key contractual milestones—such as practical completion—to administrative or regulatory events. The Court reiterated that conditional obligations must be stated clearly and unambiguously. If the contract merely requires the contractor to use reasonable endeavours, or to cooperate with a process, that is not the same as making the process itself determinative of contractual rights.

When read together, Mears and Lidl form a consistent line of authority. They make clear that while it is open to parties to define practical completion by reference to a regulatory certificate such as Gateway 3, they must do so using express and unequivocal language.

Drafting Gateway 3 as a Condition to PC: Challenges and Clauses

There is, in principle, no legal impediment to defining practical completion by reference to the issuing of the Gateway 3 certificate. The Building Safety Act does not interfere with parties’ freedom to contract. If an employer wishes to delay the certification of PC until the regulator confirms that occupation is permitted, it is free to do so.

However, this drafting approach raises both legal and practical concerns.

From a legal perspective, the central risk lies in enforceability. A clause that merely implies a link between Gateway 3 and PC—without stating it expressly—is unlikely to be upheld by a court. Ambiguity may result in a finding that PC has occurred based on the physical state of the works, regardless of whether the certificate has been issued.

From a practical standpoint, tying PC to Gateway 3 can create commercial uncertainty. The BSR is not a party to the contract. Delays in issuing a certificate may arise from matters outside the contractor’s control, including regulatory backlog, procedural queries, or late-stage clarifications. Without appropriate risk allocation, a contractor could be exposed to ongoing liquidated damages even after completing the works to a satisfactory standard.

Where parties do wish to proceed with this approach, the drafting should leave no room for doubt. One possible clause reads: “Practical Completion of the Works (or any Section thereof) shall not be deemed to occur, and the Employer shall not be obliged to issue a Practical Completion Statement, unless and until the Building Safety Regulator has issued a completion certificate under section 58 of the Building Safety Act 2022 in respect of the Works (or that Section).”

This clause makes PC conditional on a specific external event. It removes ambiguity and provides a clear test. It also protects the employer from prematurely triggering post-PC obligations, such as final account settlement or release of retention.

That said, its enforceability will depend on other parts of the contract. The allocation of responsibility for making the Gateway 3 application, paying any associated fees, responding to regulatory queries, and rectifying refusals must be clearly addressed elsewhere.

Alternative Approaches: Commercial Flexibility and Mitigation

Many employers may wish to link PC to Gateway 3, but balk at the uncertainty it introduces. For these projects, there are several alternative drafting strategies which may preserve commercial leverage while avoiding regulatory risk.

One approach is to define PC by reference to the physical state of the works, but make final payment or a portion of retention conditional on the Gateway 3 certificate. This separates physical readiness from regulatory approval, while preserving incentives for the contractor to assist with the application process.

Another option is to include a post-PC obligation for the contractor to provide assistance with Gateway 3 within a defined period. This could be reinforced by a specific damages mechanism or a secondary retention. The benefit of this model is that PC can occur when the works are complete, but the employer retains a remedy if Gateway 3 is delayed or refused.

Parties might also consider including a tailored extension of time mechanism for Gateway 3-related delays, or a liquidated damages “holiday” between physical completion and certificate issue. This would protect the contractor where the delay is due to the regulator, rather than any default on its part.

In all cases, the key is clarity. The parties must understand, and reflect in writing, how risk is to be apportioned in the event of regulatory delay.

Conclusion

The introduction of Gateway 3 creates a new legal and regulatory reality for HRB projects. It is not just a statutory requirement; it is also a potential contractual milestone. Whether or not to link it to practical completion is a matter of commercial judgement—but if parties do so, they must draft with precision.

The lessons from Mears and Lidl are clear. Express drafting is essential. The intention must be visible on the face of the contract. Conditions precedent will not be implied. And any link between PC and Gateway 3 must be framed as a true condition—not merely as an aspiration or administrative target.

For lawyers and contract drafters, the challenge is to navigate this new terrain with care. The Building Safety Act may be relatively new, but the principles of contractual certainty remain as relevant as ever.