Contractor Liquidated Damages

I'm wondering what people are seeing in the market for liquidated damage terms in their construction contracts for commercial and multifamily projects. I'm curious if people see the market soften and terms are getting better than they were in 22-23

I'll start: 

Market: Mountain West 

Damages: $500/day after a 15-day grace period. 

Comments (10)

Most Helpful
  • Associate 3 in RE - Comm

By law, liquidated damages are supposed to be a reasonable going-in estimate of what the actual damages due to a delay might be. If they're set high enough that they're clearly a penalty rather than a reasonable estimate of actual damages, they could be thrown out by a court as unenforceable. So, $500/day is not really a meaningful number in the abstract; you have to look at the size of the project and the expected rent levels, at a minimum, to estimate what your damages might be. 

patrick_bateman_, what's your opinion? Comment below:

I haven't seen this myself either but I've heard from contractors that there is more inventive for the GC to work overtime to avoid the possibility of damages or getting caught up in a lawsuit. They may never pay them in the end but they might be more willing to spend there money to ensure delivery stays on schedule to avoid the risk all together.

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  • Analyst 1 in RE - Comm

What exactly are liquidated damages and more specifically, in this context?

greenlander., what's your opinion? Comment below:

LD's in my experience usually are way smaller than any financial damage caused by delayed project.  Plus there will be a bunch of outs for LD's, i.e. shitty inspector, plan check delays, supply chain issues, etc to protect the contractor.  So much stuff out of their control and most contractors are usually incentivized to move quickly anyways and onto the next job.

If you can get them in there good but more of a minor deterrent.

  • Associate 3 in RE - Comm

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