Enforceability Status
Washington courts apply heightened scrutiny to liquidated damages provisions in residential contracts. Per-diem closing penalties may be enforceable if reasonable, but Washington's strong Consumer Protection Act and the state's tradition of protecting residential buyers create significant uncertainty for aggressive penalty provisions.
Legal Analysis
Washington courts evaluate per-diem closing penalties under the state's liquidated damages framework, which requires that the stipulated amount be a reasonable estimate of anticipated damages and that actual damages be impracticable or extremely difficult to ascertain. Washington follows principles consistent with the Restatement (Second) of Contracts Section 356 but has shown willingness to scrutinize penalty provisions closely.
Washington's active new construction markets in the Puget Sound region, including Seattle, Bellevue, and Tacoma, feature significant use of per-diem closing penalties. Given the high carrying costs in these expensive markets, builders often argue that daily rates of $150 to $300 are justified. However, Washington courts may apply closer scrutiny to these amounts.
The Washington Consumer Protection Act (RCW 19.86.020) is one of the strongest consumer protection statutes in the country. It prohibits unfair or deceptive acts in trade and commerce and does not require proof of intent. Builders who impose undisclosed or excessive per-diem penalties may face significant liability, including treble damages and attorney's fees.
Washington's Building Code (RCW 19.27) and contractor licensing requirements (RCW 18.27) create a regulatory framework for residential construction. While these statutes do not directly address closing penalties, the state's overall consumer-protective posture informs how courts evaluate builder contract terms.
Relevant Washington Law
Prohibits unfair or deceptive acts in trade and commerce. Does not require proof of intent. Allows treble damages and attorney's fees for violations involving undisclosed or excessive closing penalties.
Washington courts require that liquidated damages be reasonable and that actual damages be impracticable or extremely difficult to ascertain.
Governs contractor registration and conduct. Provides a regulatory framework for evaluating builder practices, including contractual terms imposed on buyers.
Builders in Washington Using This Clause
What Washington Buyers Should Know
- Leverage Washington's strong Consumer Protection Act. Washington's CPA does not require proof of intent for unfair practices claims. If per-diem penalty terms were not clearly disclosed or the daily rate is disproportionate to actual costs, buyers have a strong legal framework for challenging the provision.
- Demand a detailed cost justification for the per-diem rate. In Washington's high-cost markets, builders may cite significant carrying costs. Request a specific breakdown of daily expenses (loan interest, taxes, insurance, HOA) to verify that the per-diem rate is proportionate to actual costs rather than an inflated pressure mechanism.
- Negotiate mutual obligations for closing delays. Request that the builder be subject to a comparable per-diem credit if the home is not ready by the contracted completion date. Washington courts may view one-sided penalty structures unfavorably under the CPA's fairness standards.
- Consider engaging a Washington real estate attorney. Given the uncertain enforceability of aggressive closing penalty provisions under Washington law, attorney review before signing can identify problematic clauses and strengthen your negotiating position.