Rewritten in November 2026 to reflect the law at that date. This is general information, not legal advice.
When a builder finishes late, the cost can be real: extra rent, storage or lost business. This guide explains what the law in England and Wales lets a client do about delay, and what it does not. Contracts often call late-completion charges "delay penalties", but in English law a true penalty clause is unenforceable. The correct term is liquidated damages, and the difference matters.
Start with the contract
Your first job is to read the contract and find three things:
- The completion date (or a period, such as "12 weeks from start").
- A liquidated damages clause, which sets a fixed sum the contractor pays for each day or week of delay, for example £200 per week.
- An extension of time clause, which lets the completion date move for certain events, such as client changes, exceptional weather or delays caused by the client.
If there is no fixed completion date, the law usually implies that the work must be finished within a reasonable time.
Liquidated damages clauses
A liquidated damages (LD) clause is an agreed figure for delay. If it is valid, you can claim the stated rate for the period of culpable delay without proving your actual loss. The other side of the bargain is that the LD rate is usually all you can recover for that delay, even if your real loss turns out higher.
Is the clause enforceable?
Older guides say an LD clause must be a "genuine pre-estimate of loss". That is no longer the test. In Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis [2015] UKSC 67, the Supreme Court said the true question is whether the clause is a secondary obligation that imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in having the contract performed. Only then is it an unenforceable penalty.
A weekly rate negotiated between businesses is rarely struck down. A clause is far more vulnerable if the figure is extravagant compared with anything the client could lose from late completion.
When LDs may not be claimable
- Extensions of time: if the contractor was entitled to an extension, LDs only run from the extended completion date.
- The prevention principle: a client cannot usually hold a contractor to a completion date that the client's own acts (late access, late information, extra work) made impossible. If the contract has no mechanism to extend time for that kind of delay, the completion date can fall away, leaving the contractor obliged to finish within a reasonable time and the LD clause hard to apply. Well-drafted extension of time clauses exist to avoid this.
- Notice requirements: many standard-form contracts require the client to issue specific notices (for example a non-completion notice) before deducting LDs. Missing a step can cost you the right to deduct.
If there is no liquidated damages clause
You can still claim general damages for breach of contract. You must prove that the contractor was in breach (it failed to finish by the agreed date or within a reasonable time), that the breach caused your loss, and the amount of that loss. Recoverable losses are those that were reasonably foreseeable when the contract was made, and you must take reasonable steps to keep them down. Typical items include alternative accommodation, storage and, for businesses, provable lost profit.
The Late Payment of Commercial Debts (Interest) Act 1998 is not a route for delay claims. It gives a business supplier statutory interest when a business customer pays an invoice late. It does nothing for a client whose job is finished late, though it may apply against you if you withhold payment from a contractor without a valid contractual basis.
Is time "of the essence"?
In most building contracts, time is not "of the essence". That means a late finish entitles you to damages, but not automatically to end the contract. Time is of the essence only if the contract says so clearly or the circumstances make it obvious. Where delay becomes unreasonable, a client can sometimes serve a notice giving a reasonable final deadline; failure to meet it may then justify ending the contract. Terminating wrongly is itself a breach and can leave you liable to the contractor, so take advice before doing this.
Consumers: extra statutory rights
If you are an individual having work done on your home by a trader, the Consumer Rights Act 2015, section 52 implies a term that the service will be performed within a reasonable time where no time is fixed. What is reasonable is a question of fact. Under section 54, a consumer can seek a price reduction for unreasonable delay, and can also claim damages or, in appropriate cases, treat the contract as at an end. Business clients rely on the general law of contract instead.
Practical steps
- Keep records: the contract, programme, emails, site photos with dates, and a diary of who was on site.
- Put concerns in writing early: state the agreed date, the delay, and that you reserve your rights.
- Follow the contract's notice procedure before deducting any liquidated damages.
- Record your losses with receipts, invoices and quotes.
Resolving the dispute
Negotiation and mediation
Most delay disputes settle. Start with a clear letter setting out the delay, the contract terms and your figure; mediation is often worth trying before court.
Adjudication
Under the Housing Grants, Construction and Regeneration Act 1996, a party to a construction contract can refer a dispute to adjudication at any time. An adjudicator decides quickly, and the decision is binding unless and until the dispute is finally decided by a court, arbitration or agreement. However, under section 106 this statutory right does not apply to a contract with a residential occupier, meaning a contract principally about work on a house or flat the client lives in or intends to live in. Homeowners only have adjudication if their contract expressly includes it.
Court
In the county court, claims are allocated to a track largely by value:
| Track | Typical value |
|---|---|
| Small claims | Up to £10,000 |
| Fast track | £10,000 to £25,000, trial of no more than one day |
| Intermediate track (claims issued from 1 October 2023) | £25,000 to £100,000, trial of no more than three days |
| Multi-track | Over £100,000 or complex cases |
Fixed recoverable costs apply on the fast and intermediate tracks, which limits the legal costs the winner can claim back. See the Civil Procedure Rules, Part 26 and GOV.UK guidance on making a money claim. Before issuing, send a letter of claim.
Time limits matter: a claim for breach of a simple contract generally must be brought within six years of the breach.
Key points
- "Delay penalties" are properly called liquidated damages; a true penalty is unenforceable.
- The test since 2015 is whether the clause is out of all proportion to your legitimate interest, not whether it is a genuine pre-estimate of loss.
- Without an LD clause, you can claim proven general damages for delay.
- The Late Payment Act covers late invoice payment, not late completion.
- Consumers have a statutory right to work done within a reasonable time.
- Statutory adjudication is not available to residential occupiers unless the contract provides it.