What Is This Clause?
A clause that imposes financial penalties — typically $100 to $250 or more per day — if the buyer delays closing for any reason. Some contracts also allow the builder to terminate the agreement and retain the buyer's deposit if the delay continues beyond a specified period.
How It Works
New construction purchase agreements typically specify a closing date. A daily closing penalty clause charges the buyer a per diem fee for every day past that date that the closing does not occur. These fees are imposed regardless of the reason for the delay — including delays caused by the builder's own failure to complete the home.
The practical effect is enormous pressure to close on schedule, even if the home has unresolved issues. A buyer who discovers problems during their final walkthrough must weigh the cost of per diem penalties against the risk of closing on a home with known defects. Some contracts pair the per diem with a termination right, allowing the builder to cancel the deal and keep the deposit after a specified delay period.
While some delays are legitimately caused by buyers, many closing delays in new construction result from the builder's own schedule — supply chain issues, labor shortages, permitting delays, or failure to complete punch list items. One-sided penalty clauses that penalize only the buyer for delays create an inherent imbalance.
Why It Matters
Per diem penalties of $100-$250/day can add up to thousands of dollars within weeks.
The financial pressure may force you to close on a home with known defects rather than waiting for them to be resolved.
Some contracts allow the builder to terminate and keep your deposit if the delay exceeds a certain period.
Which Builders Use This Clause
The following builders have been documented using this clause type in their purchase agreements.
State-by-State Enforceability
Daily closing penalties are generally enforceable if they are reasonable and clearly disclosed. However, one-sided provisions that penalize only the buyer (not the builder) for delays may be subject to challenge in some jurisdictions on unconscionability grounds. The reasonableness of the per diem amount is also a factor.
What Buyers Can Do
- 1Identify the exact per diem amount and when it begins to accrue.
- 2Ask whether the penalty applies if the builder causes the delay (e.g., the home is not complete by the closing date).
- 3Negotiate for a mutual delay provision that also compensates the buyer if the builder misses the closing date.
- 4If the home has unresolved issues at closing, document everything in writing to preserve your rights even if you close under penalty pressure.
- 5Consider whether the penalty represents a reasonable cost or is designed to coerce closing on a defective home.