Delay Costs Explained: How to calculate liquidated damages & prevent delays when building
Shockingly the average cost of home building delays is $4,600 every month. This is usually caused by failure to start on time or material delays, but there are simple strategies for how to avoid these costly delays or manage it with a builder when it occurs.
What are Liquidated Damages in my HIA Contract?
Liquidated Damages (LDs) are a pre-agreed mechanism in the HIA Building Contract which allow Owners to claim compensation if the Builder fails to complete the build within the timeframe specified in the contract.
LDs are often thought of as penalties, but instead it’s more helpful to think of the mechanism as a consequence of the agreed build timeline not being met.
How are Liquidated Damages calculated in my HIA Contract?
In the HIA contract, LDs are calculated on a predetermined daily rate which Owners nominate in the ‘Particulars’ of the contract before signing.
LDs must be based on a genuine calculation of damages to the Owner for delated building works. There must be a clear link that the costs will be directly incurred because of delayed completion of the project.
Costs to consider when calculating LDs:
Loan Interest
Additional Rent
Loss of Income
Fees
Storage Costs
Rental Costs
We have a Liquidated Damages calculator that we share with clients that helps calculate their weekly rate.
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Written by Annelyse, Building Contract Enthusiast, Project Manager, and founder of Build Together Project Management.
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