Enforceability Status
Michigan courts generally enforce per-diem closing penalty provisions when structured as reasonable liquidated damages. Michigan follows established common law principles for evaluating liquidated damages, and the Michigan Consumer Protection Act provides additional protections against deceptive contract terms.
Legal Analysis
Michigan courts evaluate daily closing penalties under the state's liquidated damages framework. A per-diem charge is enforceable if the amount was a reasonable estimate of anticipated damages at the time of contracting and actual damages would be impracticable or extremely difficult to calculate. Michigan follows principles consistent with the Restatement (Second) of Contracts Section 356.
Michigan's new construction markets in metropolitan Detroit, Grand Rapids, and Ann Arbor feature moderate use of per-diem closing penalties. Daily rates typically range from $75 to $175. Courts assess whether these amounts are proportionate to the builder's actual holding costs.
The Michigan Consumer Protection Act (MCL 445.903) prohibits unfair, unconscionable, or deceptive practices in trade and commerce. Builders who impose undisclosed or excessive per-diem penalties may face liability under this statute. However, the Act has certain exemptions for transactions specifically authorized by regulatory statutes.
Michigan does not have specific legislation governing closing penalties in residential construction. Enforceability is determined by common law principles and the reasonableness standard. Michigan courts generally uphold freedom of contract but will not enforce liquidated damages provisions that are grossly disproportionate to anticipated harm.
Relevant Michigan Law
Prohibits unfair, unconscionable, or deceptive practices in trade and commerce. Applicable when builders impose undisclosed or excessive per-diem closing penalties.
Michigan courts require that liquidated damages be a reasonable forecast of just compensation and that actual damages be impracticable or extremely difficult to calculate.
Governs residential builder licensing and professional conduct. The licensing board may consider complaints about unfair contract practices.
Builders in Michigan Using This Clause
What Michigan Buyers Should Know
- Review the per-diem rate against Michigan's moderate carrying costs. Michigan's home prices are generally moderate compared to coastal markets, which means builder carrying costs are correspondingly lower. Ensure the daily penalty rate is proportionate to actual costs in the Michigan market.
- Negotiate a grace period before penalties accrue. Request a buffer of 7 to 14 days after the scheduled closing date before per-diem charges begin. Short delays due to lender processing are common and a grace period prevents unnecessary financial pressure.
- Push for mutual delay provisions. Request a reciprocal per-diem credit if the builder fails to deliver the home on time. One-sided penalty structures that only burden the buyer should be challenged during negotiation.
- Account for Michigan's seasonal construction factors. Michigan's weather can affect construction schedules, particularly during winter months. Ensure the contract does not penalize you for closing delays caused by the builder's inability to complete construction on the originally projected timeline due to weather-related setbacks.