Trying to understand liquidated damages to us and liquidated damages to builder. Liquidated damages to the the builder What sort of delay would be caused by us to allow liquidated damages to be paid to the builders? Would asking for a variation cause a delay and hence trigger liquidated damages? How can a variation be asked for and not trigger liquidated damages? What are the allowable delays for the developer? What are the allowable delays for the builder, so that they can extend the time to complete? When are these liquidated damages payable? Any comments would be appreciated. Thanks
The answer to all of your questions depends on the contract you sign. You need specific advice on your contract and you should have it reviewed by a lawyer before signing.
Any decision which lies on the critical path may be a cause of delay. Eg. Brick or roof tile or window powder coat colour selection may cause a delay. Asking for additional works may cause a delay (depends on when you ask too) eg landscaping or building a pool.
Allowable delays will be set out in the contract and/or specified by agreement. It may include things like - wet days - any day where there is more than x millimetres of rain then trades might not work and even if they do the day is still not counted as - acts of god - floods, earthquakes, plagues of locusts - strikes/union action - affecting trades and/or supply - things outside the control of the builder - national shortage of bricks/timber/blah blah
LDs are only payable at the end of the contract ie after all variations have been agreed and extensions of time granted. It is not applied during the contact.
Liquidated Damages are paid by the builder to the owner - not the other way around. Consider them as a delay penalty (certainly now a way to make $ on the contract or reduce the contract sum) See the other comments about what constitutes LD
As Scott No Mates said above, LDs are paid at completion by the builder to the owner. However, when the owner causes delays, most building contracts would have a provision to allow an extension of time or even suspension of the works. The cost of these delays will naturally need to be paid by the owner to the builder as they will need to keep their staff and plan on site for a longer period than initially allowed. Some examples of delays caused by the owner (obviously depends on what is in the contract): -Not providing instructions to the builder on time -Not obtaining required approvals on time -Disputes with the builder or neighbours -Delay in payments to the builder -Delay in the delivery of materials to be supplied by the owner The list above is only the tip of the iceberg, there are many situations where your contract will provide for delay payments to the builder, and be sure that the builder is aware of them and may use them against you - depending on their experience they may have been in these situations many times and they are not in the business to lose money. There are situations where you must make a very important decision within a couple of days otherwise the builder will be entitled to claim delays. If you don't have experience in contract issues or don't have time to deal with the builder properly I strongly recommend that you have your contract reviewed and administered by a competent professional such as a lawyer, project manager or architect. It is a small investment that can save you a lot of money.
Some contracts include special conditions allowing liquidated damages to be held against moneys owing (i.e. unpaid progress claims).
