Enforceability Status
Colorado courts generally enforce per-diem closing penalty provisions when they qualify as reasonable liquidated damages. Colorado applies the Restatement standard requiring that the amount be a reasonable forecast of just compensation and that actual damages be difficult to calculate. The Colorado Consumer Protection Act may provide additional buyer protections.
Legal Analysis
Colorado courts evaluate daily closing penalties under the state's liquidated damages framework, which follows the Restatement (Second) of Contracts Section 356. A per-diem charge is enforceable if it represents a reasonable estimate of the builder's anticipated damages from closing delays, and actual damages would be difficult to calculate at the time of contracting.
In Colorado's competitive front-range housing markets (Denver, Colorado Springs, Fort Collins), builders commonly include per-diem penalties in new construction contracts. Daily rates typically range from $100 to $200. Colorado courts will examine whether the stated rate is proportionate to the builder's actual costs of holding a completed but unsold home.
The Colorado Consumer Protection Act (C.R.S. Section 6-1-105) prohibits deceptive trade practices, including making false or misleading representations in connection with the sale of goods or services. Builders who misrepresent closing date flexibility or fail to clearly disclose per-diem penalty terms may face liability under this statute.
Colorado's Homeowner Protection Act (C.R.S. Section 38-33.3-101 et seq.) governs various aspects of residential property ownership but does not specifically address per-diem closing penalties. Enforceability is determined primarily by common law principles and the general liquidated damages analysis.
Relevant Colorado Law
Prohibits deceptive trade practices in consumer transactions. Applicable when builders fail to clearly disclose or misrepresent per-diem closing penalty provisions.
Colorado courts apply the Restatement standard, requiring liquidated damages to be a reasonable forecast of just compensation where actual damages would be difficult to prove.
Governs construction defect claims and includes notice requirements. May be relevant when closing delays relate to construction quality issues or failed inspections.
Builders in Colorado Using This Clause
What Colorado Buyers Should Know
- Review the total potential penalty before signing the contract. Calculate the cumulative cost of per-diem penalties over a 30-, 60-, and 90-day delay scenario. In Colorado's market, appraisal and lending delays are common, and the total penalty exposure can be significant if the daily rate compounds over several weeks.
- Negotiate a mutual delay penalty provision. Colorado builder contracts often penalize buyers for closing delays without imposing comparable obligations on the builder. Request that the contract include a reciprocal per-diem credit payable to the buyer if the builder fails to deliver the home by the contracted completion date.
- Understand what triggers the penalty and what excuses delay. Review the contract to determine which types of delays are buyer-caused versus excused. Common issues like appraisal shortfalls, title defects, and lender-mandated repairs may or may not be classified as buyer-caused depending on the contract language.
- Consider engaging a Colorado real estate attorney before signing. An attorney experienced with Colorado new construction contracts can evaluate whether the per-diem rate is reasonable and identify provisions that create asymmetric risk. Legal review before signing is more effective and less costly than disputing penalties after they accrue.