How K. Hovnanian Uses This Clause
K. Hovnanian purchase agreements have been documented to include daily closing penalty provisions. If the buyer cannot close by the specified date, the contract imposes per-day financial penalties that can accumulate rapidly. These penalties apply even when the delay is caused by the builder's own lender or last-minute changes to closing documents.
This provision typically appears within the purchase agreement alongside other terms that may limit buyer remedies. Because K. Hovnanian operates across multiple states, the enforceability and practical impact of this clause varies depending on where the home is located.
The closing penalty is particularly relevant for buyers using K. Hovnanian American Mortgage, the builder's affiliated lender, as delays in the lending process can trigger penalties that the buyer may have limited ability to prevent.
Builder-Specific Details
Affiliated Lender Connection
K. Hovnanian operates K. Hovnanian American Mortgage. Delays caused by the affiliated lender may still trigger closing penalties against the buyer.
Compounds Deposit Forfeiture Risk
Accumulated closing penalties can create financial pressure that makes buyers more likely to close on unfavorable terms or risk deposit forfeiture.
Standard Form Contract
This clause appears in K. Hovnanian's standard purchase agreement, which is generally presented on a take-it-or-leave-it basis.
State-by-State Enforceability
Enforceability of this clause varies by state. The following reflects K. Hovnanian's operating states.
| State | Status | Note |
|---|---|---|
| New Jersey | Uncertain | New Jersey courts evaluate per-diem penalty provisions under liquidated damages principles. The provision must be a reasonable pre-estimate of the builder's actual damages from delay. |
| Pennsylvania | Uncertain | Pennsylvania courts evaluate closing penalty provisions under liquidated damages principles. Penalty clauses may be challenged as unenforceable. |
| Maryland | Uncertain | Maryland courts evaluate per-diem penalty provisions for reasonableness under liquidated damages principles. |
| Virginia | Likely Enforceable | Virginia courts generally enforce per-diem closing penalty provisions if they represent a reasonable estimate of the builder's damages from delay. |
| Delaware | Uncertain | Delaware courts evaluate closing penalty provisions under general contract and liquidated damages principles. |
| Georgia | Likely Enforceable | Georgia courts generally enforce per-diem penalty provisions if they represent a reasonable estimate of anticipated damages. |
| Florida | Uncertain | Florida courts evaluate closing penalty provisions under liquidated damages principles. The reasonableness of the per-diem amount is subject to judicial review. |
| South Carolina | Uncertain | South Carolina courts evaluate liquidated damages clauses for reasonableness and may find excessive per-diem penalties unenforceable. |
| Texas | Likely Enforceable | Texas courts generally enforce per-diem closing penalty provisions if they represent a reasonable estimate of anticipated damages. |
| Arizona | Uncertain | Arizona courts evaluate closing penalty provisions under the Restatement approach to liquidated damages. |
| California | Uncertain | California courts evaluate closing penalty provisions under Civil Code § 1671 and general liquidated damages principles. |
| Ohio | Uncertain | Ohio courts evaluate closing penalty provisions under liquidated damages principles, considering reasonableness at the time of contract formation. |
| West Virginia | Uncertain | West Virginia courts evaluate per-diem penalty provisions under general contract and liquidated damages principles. |
Related Clauses in K. Hovnanian Contracts
This clause often works in combination with other provisions in K. Hovnanian's purchase agreements.
Daily closing penalties can accumulate and compound the financial pressure on buyers, making deposit forfeiture more likely.
Disputes over closing penalties must be resolved through arbitration rather than court.
The builder's liability for delays that cause buyer losses may be capped, while the buyer faces uncapped daily penalties.
What Buyers Can Do
- Understand the per-diem penalty amount and triggers. Review the exact daily penalty amount and what events trigger the penalty. Pay particular attention to whether builder-caused delays also expose you to penalties.
- Negotiate a reasonable closing timeline. Ensure the closing date allows adequate time for financing approval, inspections, and document review. Request extensions in writing if the builder causes delays.
- Be cautious if using the affiliated lender. If using K. Hovnanian American Mortgage, be aware that delays in the lending process may trigger closing penalties. Consider whether an outside lender might provide a more predictable timeline.
- Have the full contract scanned before signing. This clause is often one of several interconnected provisions in K. Hovnanian contracts that collectively limit buyer remedies. A contract scan can identify all of them.