Enforceability Status
Ohio courts generally enforce per-diem closing penalty provisions when structured as reasonable liquidated damages. Ohio follows established common law principles requiring that the amount be a reasonable estimate of anticipated harm. The Ohio Consumer Sales Practices Act provides additional buyer protections.
Legal Analysis
Ohio courts evaluate daily closing penalties under the state's liquidated damages framework. A per-diem charge is enforceable if two conditions are satisfied: (1) the damages caused by the closing delay were difficult to estimate at the time of contracting, and (2) the daily rate is a reasonable forecast of the builder's anticipated costs. Ohio follows principles consistent with the Restatement (Second) of Contracts Section 356.
Ohio's new construction markets in Columbus, Cincinnati, Cleveland, and surrounding suburbs feature regular use of per-diem closing penalties. Daily rates typically range from $75 to $200. Courts evaluate whether these amounts reflect actual builder costs including construction loan interest, property taxes, insurance, and maintenance.
The Ohio Consumer Sales Practices Act (Ohio Rev. Code Section 1345.02) prohibits unfair or deceptive acts in consumer transactions. The Ohio Attorney General maintains a list of substantive rules defining specific deceptive practices. Builders who fail to disclose per-diem penalty terms or who misrepresent closing flexibility may face liability under this statute.
Ohio does not have specific legislation governing closing penalties in residential construction contracts. Enforceability is determined by common law principles. Ohio courts generally uphold freedom of contract but will not enforce liquidated damages provisions that are grossly disproportionate to the anticipated or actual harm.
Relevant Ohio Law
Prohibits unfair or deceptive consumer sales practices. Applicable when builders impose undisclosed or misleading per-diem closing penalty provisions.
Ohio courts require that liquidated damages be a reasonable forecast of just compensation and that actual damages be difficult to ascertain.
Regulates residential construction contracts and requires certain disclosures. Provides context for evaluating the enforceability of specific contract provisions.
Builders in Ohio Using This Clause
What Ohio Buyers Should Know
- Request a cost breakdown justifying the daily penalty amount. Ask the builder to itemize the holding costs that justify the per-diem rate. Ohio courts assess reasonableness based on the relationship between the penalty amount and the builder's actual daily costs for maintaining a completed but unoccupied home.
- Negotiate a grace period and mutual delay terms. Request that per-diem penalties not begin accruing until at least 7 to 14 days after the scheduled closing date. Also push for a reciprocal per-diem credit if the builder fails to deliver the home on time.
- Determine which delays are buyer-caused under the contract. Review the contract language to understand which delay scenarios trigger the penalty. Common issues like lender delays, appraisal problems, and title issues should ideally be carved out or at least clearly assigned.
- File a complaint with the Ohio Attorney General if terms were misrepresented. If the builder's sales team made representations about closing flexibility that contradicted the written contract, you may file a complaint under the Ohio Consumer Sales Practices Act through the Ohio Attorney General's office.