Enforceability Status
Georgia generally enforces per-diem closing penalty provisions when structured as liquidated damages. Georgia has a specific liquidated damages statute (O.C.G.A. Section 13-6-7) that requires the damages to be difficult to calculate and the amount to be a reasonable estimate. The Georgia Fair Business Practices Act provides additional consumer protection.
Legal Analysis
Georgia has a statutory framework for liquidated damages under O.C.G.A. Section 13-6-7, which provides that parties may agree in advance to an amount to be paid in case of breach when damages are difficult to determine. Per-diem closing penalties are evaluated under this statute. The agreed-upon amount must not be so disproportionate as to constitute a penalty.
Georgia's major new construction markets in metropolitan Atlanta, Savannah, and Augusta feature widespread use of daily closing penalties. Per-diem rates typically range from $100 to $250 per day. Georgia courts assess whether these amounts bear a reasonable relationship to the builder's actual costs of holding a completed home.
The Georgia Fair Business Practices Act (O.C.G.A. Section 10-1-390 et seq.) prohibits unfair or deceptive practices in consumer transactions. Builders who fail to clearly disclose per-diem penalty provisions or who misrepresent closing date flexibility during the sales process may face claims under this statute.
Georgia courts have historically favored freedom of contract, and liquidated damages provisions that meet the statutory requirements of O.C.G.A. Section 13-6-7 are generally upheld. However, a provision that operates as a pure penalty rather than a reasonable estimate of damages will not be enforced.
Relevant Georgia Law
Authorizes parties to agree in advance to a damages amount when actual damages are difficult to determine, provided the amount is not disproportionate and does not constitute a penalty.
Prohibits unfair or deceptive practices in consumer transactions. Applicable when builders impose undisclosed or misleading per-diem closing penalty terms.
Governs construction defect claims and requires notice to the builder before litigation. Relevant when closing delays result from construction quality issues requiring repair.
Builders in Georgia Using This Clause
What Georgia Buyers Should Know
- Understand Georgia's statutory liquidated damages framework. Georgia law under O.C.G.A. Section 13-6-7 requires that liquidated damages represent a reasonable estimate where actual damages are hard to calculate. If the per-diem rate appears disproportionate to the builder's actual costs, it may be challenged as a penalty under this statute.
- Request documentation of the builder's daily holding costs. Ask the builder to provide a breakdown of costs justifying the per-diem amount, such as construction loan interest, property taxes, insurance, HOA assessments, and utility costs. This information helps you evaluate whether the charge is a reasonable estimate or an excessive penalty.
- Negotiate for mutual delay accountability. Many Georgia builder contracts penalize buyers for closing delays while granting the builder open-ended construction timelines. Request a reciprocal per-diem credit if the builder fails to complete the home by the contractual delivery date.
- Confirm what events trigger versus excuse the penalty. Review the contract to determine whether delays caused by lender issues, appraisal problems, or title defects are treated as buyer-caused delays. Negotiate for carve-outs that prevent penalties when the delay is outside the buyer's reasonable control.