This happens all the time. It’s the day of closing and the house isn’t finished.
The purchasers complete pre-closing inspection and realize there’s no way they can live in the house. They call their lawyer in a panic. “Do we have to close if it is not finished?” Reputable builders will not usually force purchasers to close on an unfinished house, but too often these days the electricians, plumbers and carpet layers are in a race to finish the house before the movers show up. As always, the answer depends on what your contract says. Does the contract require approval by the lender or the municipality prior to closing? I don’t know. I hope your contract does not say issuance of a Certificate of Occupancy “shall constitute conclusive acceptance by the purchaser.” This example explains why I urge people to spend some time and money on having such large contracts reviewed by an experienced Board Certified Construction Attorney.
If the contract is silent on the state of completion required for closing, the issue will be whether the work was sufficiently complete to permit “reasonable” occupancy of the premises. Before signing builder agreements for purchase and sale, buyers of new homes should hire a Board Certified Construction Attorney to examine the contract to ensure there is a clause that requires the builder or seller to close only when a certificate of occupancy has been issued by the building inspector, and your lender agrees construction is 100% complete, and they are ready to disperse. You would not want the city building inspector to have the final say on whether the purchaser must close. That standard of completion may be unacceptable! The final determination on whether you are required to close depends on the deal you cut in your contract.
If a completion issue is in dispute, try to establish with the seller an amicable holdback sufficient to insure the work is completed. Best regards.