Liquidated damages in construction contract - how much was yours?

[Yellownotblue]

We are about to instruct a builder for our extension (only a year later than planned 🙄). I am trying to estimate the level of liquidated damages in the event the project is not completed on time.

How did you calculate yours? And did you include a figure for inconvenience/loss of enjoyment (as separate from finance costs and other expenditures)?

I have the same question...are you in a position to share what you did / what figure you arrived at Yellownotblue?

No builder will sign a contract with a time limit and penalties on it
Plenty of work about
Material delays are rife
You won't get a builder guaranteed

Are you going to offer a bonus if they bring it in ahead of schedule?

This sounds like madness. It's a home extension - not a business. There is no cashflow, no actual loss, no measurable basis for enjoyment to calculate anything on. No builder would accept such conditions - and they'd be under no obligation to.

You'd be much better to negotiate multiple payments to be made at measurable and regular intervals (according to construction schedule). The builder will then have an incentive to keep the project on track due to cashflow issues, and you'll have something to hold them to account.

I’m a bit surprised at these responses - I didn’t think liquidated damages were that unusual. To the people poo-pooing them, I’d be curious to hear what experiences you’ve had. Many people pay to rent while works take place so more delay means more expense. In our case we have a follow-on contract that goes up in price if works are not complete. So there clearly are straightforward financial damages (different to a « penalty »). Loss of enjoyment is also painful though, that’s why I’d like to hear how Yellownotblue got on!

@dodoli
The vast majority of people do not rent while extension work is carried out and therefore do not incur these expenses.

Additionally it isn’t normal to have contracts that ramp up in price. Most people don’t do that - experience is my own extension, discussion with friends, family and work colleagues, including work colleagues in what I would consider to be premium London outside of zone 1.

Regardless, none of those points are relevant to a builder accepting terms at a time when they’re turning away work, which we all agree on.

You’re right thought that liquidated damage clauses can’t be punitive. I’m curious to understand how OP would calculate her costs of finance.

We did a big build project on our previous house (not extension but extensive renovation) and arranged to make a series of payments to the builder. So I think we paid about 20% up front and 20% once finished and we were happy with the work, then remaining 60% was spread between the weeks of work. That worked well. We found it was sorting out the final touches that caused some delays as builders are often on to the next project by then. So definitely agree no final payment until work completed to your satisfaction.

He did a new kitchen for us a few years later, we did same thing and we did run into delays - it was a family business and the grandson ended up in hospital. It was inconvenient for us but builder was trying his best in difficult situation and kept us in the loop. He was really grateful for our understanding and was really helpful sorting out a few small issues over the subsequent years and then bent over backwards helping us get our house ready for the market last summer.

So I'd look to do something that's fair, keeps communication open etc. good luck!

We had loads of provisions re the staged payments, but there was a holdback of 20% until 14 days after the final building control certificate was received which gave time for snagging. The 14 days was dependent on client satisfaction, which we were. Had a brilliant builder and he liked the detailed contract

@dodoli, sorry I just saw your post.

Our liquidated damages clause covers our rent and council tax for the temporary accommodation, in the event the project runs over and the delays are not caused by us. this is expressed as a set figure (e.g. £1000 per month, to be pro rated on a daily basis for any portion of a month).

The contractor didn’t have any problem with this.

We also have a holdback (I can’t remember what percentage) that is only payable a number of months after we move back in. This is to ensure the builders take care of all the snagging that may arise or be discovered after the work is completed. I think this is a standard clause.

@ClaudiaWankleman , without wanting to share too much information, finance costs did not apply in our case. I was just using that as an example.

Just because you don’t have experience of large scale renovations where people do move out, I can assure you it does happen!

Our builder did

This may explain why we’ve not had any material delays...

Wow to have no material delays.... you haven't even started the build

🧐

We are 4 months in and ahead of schedule. But carry on.

^That was to @Alexalee

Thanks for the responses!