How to Claim Liquidated Damages for House / Project Construction Delays

Construction delays can cause significant financial and personal inconvenience. If your contract includes a liquidated damages clause, you may be entitled to compensation for time overruns. This guide explains what liquidated damages are, how to claim them, and the steps to enforce your rights.

What Are Liquidated Damages?

Liquidated damages are a pre-agreed amount specified in a contract, payable by the builder for each day or week they fail to meet the agreed completion deadline. These clauses are designed to compensate you for predictable losses caused by delays, such as:

• Loss of rental income.
• Additional accommodation costs.
• Storage fees for belongings.

Unlike general damages, liquidated damages do not require you to prove the exact amount of loss, as the compensation is predetermined in the contract.

How Do Liquidated Damages Work?

A typical liquidated damages clause might state something like:

“The contractor agrees to pay the client £500 per day for each day the project remains incomplete beyond the agreed completion date.”

In this case, if the project is delayed by 10 days, the builder would owe £5,000 in liquidated damages.

When Can You Claim Liquidated Damages?

You can claim liquidated damages if:

• Your contract includes a liquidated damages clause.
• The builder failed to complete the project within the agreed timeframe.
• The delay was caused by the builder’s actions or negligence.

However, you cannot claim liquidated damages if:

• The contract gives the builder an extension of time for the cause of the delay (some contracts cover events such as exceptionally bad weather). Without such a clause, weather or supply problems are normally the builder’s risk.
• The contract does not specify a completion date.
• The delay was caused by changes or additional work requested by you.

Steps to Claim Liquidated Damages

1. Review Your Contract

Start by carefully reviewing your contract to ensure it includes a liquidated damages clause. Key elements to look for include:

• The agreed completion date: The deadline by which the project should have been completed.
• The liquidated damages amount: The daily or weekly rate specified in the clause.
• Conditions for claiming damages: Any exceptions or requirements outlined in the clause.

If the contract does not include a liquidated damages clause, you may need to pursue general damages instead.

2. Gather Evidence

To support your claim, collect evidence showing:

• The agreed timeline: Copies of the contract, emails, or text messages confirming the completion date.
• The delay: Records showing the project’s actual progress and completion date.
• The cause of the delay: Proof that the builder’s actions or negligence caused the delay.

This evidence will be essential if the builder disputes your claim.

3. Notify the Builder

Before pursuing legal action, notify the builder of your intent to claim liquidated damages. Write a formal letter or email that includes:

• A reference to the liquidated damages clause in the contract.
• The agreed completion date and the actual completion date.
• The total amount of liquidated damages you are claiming.
• A deadline for the builder to respond or settle the claim.

Many builders will prefer to settle at this stage to avoid legal disputes.

4. Seek Legal Advice

If the builder refuses to pay, consult a lawyer who specializes in construction disputes. They can help you assess your claim and determine the best course of action, such as mediation or filing a legal claim.

5. File a Claim

If the issue cannot be resolved amicably, you may need to file a claim in court. The process depends on the value of the claim:

• Small Claims Court: For claims up to £10,000, where the process is simpler and less formal.
• Fast Track Court: For claims between £10,000 and £25,000, with stricter timelines and cost controls.
• Intermediate Track: For most claims between £25,000 and £100,000 (since 1 October 2023), with fixed recoverable costs.
• Multi-Track Court: For claims exceeding £100,000, requiring legal representation and potentially expert witnesses.

Be prepared to present evidence of the delay, the liquidated damages clause, and the amount you are claiming.

Defending Against a Builder’s Challenges

Builders may attempt to challenge your claim for liquidated damages by arguing:

• The delay was caused by unforeseen events beyond their control.
• The liquidated damages clause is invalid because the amount is excessive or punitive.
• Changes to the project caused the delay.

To counter these arguments, provide clear evidence that the delay was within the builder’s control and that the daily rate protects a legitimate interest and is not out of all proportion to it, which is the test set by the Supreme Court in Cavendish Square Holding v Makdessi [2015].

What Happens If Liquidated Damages Are Not Specified?

If your contract does not include a liquidated damages clause, you may still claim general damages. Unlike liquidated damages, general damages require you to prove the actual financial losses caused by the delay, such as:

• Additional accommodation or storage costs.
• Lost rental income if the property was intended for letting.
• Costs incurred from hiring alternative contractors.

Key Takeaways

• Liquidated damages: Are pre-agreed amounts payable by the builder for delays, outlined in the contract.
• When to claim: If the builder fails to meet the agreed completion date and the delay was within their control.
• Steps to claim: Review the contract, gather evidence, notify the builder, and file a claim if necessary.
• Alternative remedies: If no liquidated damages clause exists, pursue general damages to recover actual losses.
• Legal support: Seek legal advice to navigate disputes and strengthen your claim.

Claiming liquidated damages can help you recover losses caused by construction delays. By understanding your contract and following the correct steps, you can enforce your rights and hold the builder accountable.