What Are ?
Real estate liquidated damages are a type of contractual clause in an agreement between two parties that is designed to protect against one party not fulfilling their obligations. This clause typically defines a certain amount of money to be paid if the terms of the agreement are not met. It’s important to note that liquidated damages are only valid in certain circumstances, and one should not assume they are applicable in all situations.
When Are Liquidated Damages Used?
Liquidated damages are a common part of real estate contracts, and are typically used in the following cases:
- Sale of a Property: Liquidated damages clauses may be included in an agreement between a seller and a buyer in case of a breach of contract. This could include a buyer that fails to make a payment in the stipulated time frame, or a seller that fails to complete on-time.
- Lease Agreements: Liquidated damages clauses may also be used in rental agreements to protect the property owner if the tenant breaches the lease. This could include any activity that is causing a disturbance or damage to the building or its surroundings, or a violation of the payment-related terms of the agreement.
- Sublease Agreements: When a tenant subleases a space they have already leased, they may use a liquidated damages clause to protect their interest in the case of a breach of the contract.
How Are Liquidated Damages Calculated
When liquidated damages clauses are included in a real estate contract, the amount of money to be paid in the case of a breach of contract is specified. This amount must be reasonable and in proportion with the harm that would be caused by the breach, and should normally not exceed twice the damage actually suffered by the affected party.
Conclusion
Real estate liquidated damages are a type of contractual clause that is used to protect both parties in the case of a breach of contract. This clause sets a specified amount to be paid to the affected party, which must be reasonable and in proportion to the damage caused by the breach. It’s important to note that liquidated damages clauses are only applicable in certain circumstances, and one should not assume they are applicable in all cases.