Enforceability Status
Pennsylvania courts generally enforce per-diem closing penalty provisions when structured as reasonable liquidated damages. Pennsylvania applies a well-established two-part test for liquidated damages. The Pennsylvania Unfair Trade Practices and Consumer Protection Law provides additional buyer protections.
Legal Analysis
Pennsylvania courts evaluate daily closing penalties under the state's liquidated damages framework. A per-diem charge is enforceable if (1) the damages from the breach were difficult to estimate at the time of contracting, and (2) the amount is a reasonable forecast of just compensation. Pennsylvania courts have a long history of applying this standard in contract disputes.
Pennsylvania's new construction markets in the Philadelphia suburbs, Pittsburgh area, and Lehigh Valley feature moderate use of per-diem closing penalties. Daily rates typically range from $75 to $200. Courts evaluate whether these amounts are proportionate to the builder's actual holding costs.
The Pennsylvania Unfair Trade Practices and Consumer Protection Law (73 P.S. Section 201-1 et seq.) is a broad consumer protection statute that prohibits unfair or deceptive acts in trade and commerce. Builders who fail to clearly disclose per-diem penalty provisions or who misrepresent closing flexibility may face claims under this statute, which allows for treble damages.
Pennsylvania does not specifically regulate closing penalties in residential construction. However, the state's strong consumer protection framework and the availability of treble damages under the UTPCPL create meaningful incentives for builders to ensure that per-diem charges are reasonable and clearly disclosed.
Relevant Pennsylvania Law
Prohibits unfair or deceptive acts in trade and commerce. Allows treble damages when builders impose undisclosed or excessive per-diem closing penalties.
Pennsylvania courts apply the Restatement standard requiring that liquidated damages be a reasonable forecast of just compensation where actual damages are difficult to prove.
Regulates home improvement contracts and provides consumer protections. While focused on renovations, it reflects Pennsylvania's policy of protecting residential buyers.
Builders in Pennsylvania Using This Clause
What Pennsylvania Buyers Should Know
- Understand the treble damages remedy under Pennsylvania law. The Pennsylvania UTPCPL allows courts to award treble damages for unfair trade practices. If a builder imposed undisclosed or unreasonable per-diem penalties, this provision provides significant leverage for buyers.
- Request documentation of the builder's daily carrying costs. Ask the builder to justify the per-diem rate with specific cost data. Pennsylvania courts assess reasonableness based on the relationship between the penalty and the builder's actual daily expenses for maintaining a completed home.
- Negotiate mutual delay penalties. Push for a reciprocal per-diem credit payable to the buyer if the builder fails to deliver the home by the contractual completion date. One-sided penalty structures should be challenged during contract negotiation.
- Coordinate closely with your lender to avoid preventable delays. Share the contractual closing date and penalty terms with your lender early. Many closing delays result from mortgage processing issues that can be addressed proactively with early coordination.