The Punch List Can Cause Problems: Common Issues and Best Practices

On a construction project, a punch list is essential to completing the job and getting paid. Let’s take a look at what exactly a construction punch list entails, how it affects payment deadlines, and how it could cause problems for lien rights.

What Is a Punch List?

A punch list is a document that lists final work items remaining before a construction project is considered complete. All work that does not conform to the specifications in the construction contract should be included in the punch list. It typically includes minor corrections, alterations, or repairs required before the release of final payment.

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When is a punch list used?

The punch list is typically the last step in the project in order to double-check that everything has been completed according to the owner’s specifications. It’s also known as a “punch-out list,” “close out checklist” or “final checklist.” In the UK, it’s called a snag list.

A well-formulated punch list will outline all tasks that need to be addressed before the structure is ready for occupancy. Punch work items are usually minor fixes. Most of the larger issues have most likely been corrected. These fixes could include any incomplete/incorrect installations or incidental damage on existing finishes or structures.

Fun Fact: The term “punch list” takes its name from the old process of punching holes in the margin next to the items on the list indicating that the task is complete.

Examples of punch list items

Items to test

  • Appliances
  • Equipment
  • Doors & windows
  • Thermostat
  • Plumbing fixtures
  • Mechanical elements
  • Internet/phone/cable
  • HVAC zoning
  • Etc.

Items to add

  • Light covers
  • Hardware
  • Paint touch-ups
  • Coating/sealant
  • Etc.

Items to fix

  • Plumbing leak
  • Damaged drywall
  • Improperly installed flooring
  • Pavement crack
  • Etc.

Items to remove

  • Trash
  • Equipment
  • Tools
  • Protective covers
  • Etc.

Who is responsible for punch list items?

Everyone on a construction project has a role to play in the execution of a punch list.

Typically, it’s the responsibility of the GC to ensure that all these line items are taken care of before a final completion certificate can be issued on the project. The GC may assign punch work to the subcontractors responsible for particular areas of work.

Generally, the GC will do a walkthrough with the owner to identify any incomplete or non-conforming work and create the initial punch list. Depending on what issues remain, certain subcontractors may be called back to the project to correct outstanding issues. For many projects, that’s as far as the punch list goes.

If the project has one, the architect also plays an important role in reviewing the punch list to approve final payments. The GC will send their punch list to the architect, who will then conduct their own walkthrough to determine what has been completed to their design specifications and what hasn’t.

The architect will then update the punch list and send it back down to the owner and GC. The GC is then in charge of sending out the punch list to the subcontractors and ensure they complete all the work.

Subcontractors typically bear the heaviest load in the punch list process. They are the ones who are performing much of the punch work and gathering all the necessary change orders and documentation that the GC must pass on to the owner. The best practice here is to start organizing these documents as soon as possible, rather than waiting until the end of the project.

Punch Work: Final Step Before Payment

The reason everyone on a project should be involved or concerned about the punch list is that it’s tied to final payment. An owner will typically be holding onto retainage payments until the punch list items are complete, which puts the fate of the contractor and subs in the owner’s hands.

After all, retainage often exceeds the profit margin on the job. When the contractor believes that he has reached substantial completion, they can request a “pre-final” inspection of the project. With any luck, the punch work needed will be trivial and the final payment won’t be too far off.

In most contracts these days, final payment is released when the punch list items have been completed to meet the contract specifications. Once “punched,” the list is then typically attached to the Certificate of Substantial Completion.

However, we have one key takeaway here: Retainage does not extend your mechanic’s lien deadlines!

Balancing Punch List Items & Lien Rights

Another possible challenge contractors may encounter is the effect on lien rights. Every state has mechanics lien laws that set filing deadlines. These deadlines need to be met in order to secure lien rights.

Typically, the lien deadlines starts ticking from the “date of last furnishing of labor/materials” or the substantial completion of the project. The tricky part here is that most states don’t include punch work when determining lien deadlines.

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Many would consider their last day of furnishing labor or material to the project or the completion date of the project to include punch list work, but in the mechanic’s lien context, they would be wrong.

For whatever reason, states almost universally exclude punch list, warranty, and other remedial types of work from any of these calculations.

The danger here is clear. If you don’t take this rule into account, your actual mechanics lien deadline could fall much, much sooner than you expect.

What if the lien deadline is approaching?

Earlier this week, I was speaking with a subcontractor who was in a not-so-rare dilemma. Punch list work on a project had gone so long that his mechanic’s lien deadline was approaching while he still had work to do on the site, and since he was still doing punch list work, payments were held up.

For the purposes of this discussion, it really doesn’t matter whether the amount withheld from the contract for punch list work is exaggerated or not, because in the mechanics lien context you’ll want to file a claim to secure everything owed to you – which will include amounts owed upon completion of punch list work.

The catch-22 is that your mechanics lien deadlines are expiring on money that you may not be contractually owed (because it’s contractually approved to withhold for any and all punch work).

Unfortunately, very few states address this issue in the mechanic’s lien laws. Usually, there is little guidance to the subcontractor or supplier if this situation arises. The best practice may be to simply file the claim for the amount you expect to be due after punch list acceptance.

And of course, there’s the issue of project relationships when confronted with a mechanics lien deadline while still on the project. Bottom line: it’s never a good thing when punch work goes on for so long that your payment rights (via the right to file a mechanics lien if unpaid) are due to expire.

Best Practices for Contractors & Subs

Because punch items are difficult to anticipate or define in a contract, it is important for subs to be prepared. The 3 keys to this are communicate, document, and educate!

Communicate

Having open channels of communication with your GC or project manager is crucial to successfully closing out your contract. Anytime there’s an interference or damage to your work – let them know, right then and there! The GC’s main goal is to reach the finish line too. The fewer the items, the easier life will be. So informing the GC as early as possible will reduce delays make closeout simpler and easier so both of you can get paid.

Document your work

Photograph anything and everything. Documenting your work with progress and completion photos can help ensure that you aren’t called back to do additional work. Many times, especially for trim-out and finish work, other contractors will begin the next phase of construction and potentially damage your completed work. If any issue arises, you’ll have photographic proof that you properly completed your work.

Learn more about documenting construction work

Educate yourself

Read your contract. Then, read it again! Make sure that your scope of work is as detailed as possible, and that your responsibilities are included. Otherwise, you might end up doing work or paying for items that are potentially outside your scope of work.

The Bottom Line on Punch Work

Each project faces its own unique challenges, but preparing a complete and accurate punch list will give everyone on the project a clear understanding of what needs to be done in order to finish the project.  Which is why we created this simple, easy to use, downloadable punch list template, to help you finish your project efficiently and profitably.

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The Punch List Can Cause Problems: Common Issues and Best Practices
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Punch list work might seem minor, but it has an improportionate impact on payment. Without getting punch work out of the way, retainage won't be released.
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levelset
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