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Residential Build Contracts – Can I Claim Liquidated Damages?

When you are building a home (or completing a significant renovation) it is not unheard of for the build to take longer than is contracted for. If the build does go over time, you may be entitled to liquidated damages under your contract.

What are liquidated damages?

Liquidated damages are an agreed amount to be paid by one party to another, in circumstances where the build time exceeds the time contracted.

To be valid, liquidated damages must be a genuine pre-estimate of the damages one party would incur if the build goes over time. Prior to entering a contract, you must ensure that the amount agreed (usually an amount per day) reflects the true loss that you would incur if the build went over time.

In calculating a genuine pre-estimate of liquidated damages, the following are usually considered: –

  1. Interest accrued on any loans on the project if the build goes over time.
  2. Any rent or other outlays paid while waiting for the build to be completed.
  3. Any other reasonable costs incurred as a result of the delay.

When are liquidated damages payable?

Liquidated damages will be payable when the build period exceeds the contracted time frame provided for in the contract. Most standard contracts entered into will provide either a fixed date for completion or a means of calculating the build period.

It is important that you understand how the build period is calculated prior to entering into the contract, to ensure that you understand when liquidated damages may be payable.

What steps need to be taken to claim liquidated damages?

Again, it will come down to the actual contract entered into.

Most standard form contracts will require to claim liquidated damages, you must serve a notice on the builder within a certain time frame. The actual time frame varies from contract to contract but its most seen to be a certain number of days from the date of practical completion.

Melissa Ban is an experienced and senior Solicitor at Stephens & Tozer Solicitors, working extensively in Litigation and Building and Property Disputes. As one of our property lawyers, Melissa has acted for builders, subcontractors, developers and homeowners, including proceedings against the QBCC.

Contact Melissa of our office to discuss your circumstances further.

18 February 2021

Category: All / General News / Property