Liquidated damages versus an early finish bonus on the same 14 week rehab scope

Rehab contracts funded by outside capital increasingly carry one of two structures on the same kind of scope, and the split in the market suggests the industry has not settled on which actually gets a house finished. The liquidated damages version sets a substantial completion date with a stated dollar amount, commonly in the low hundreds per calendar day after that date, capped around 5 percent of contract value. It is clean on paper and it survives lender review. What it tends to do in practice is change behavior in ways nobody intended. Crews price the risk in before ground is broken, so bids commonly come back 4 to 6 percent higher than they would without the clause. Then any crew falling behind starts papering the file with delay notices, weather days and owner-caused change order impacts, and by week ten the conversation has shifted from drywall to causation. Whether a liquidated damages clause is enforceable at all, or reads instead as an unenforceable penalty, is a state law question, and the actual language should go past counsel before it is signed. The bonus version sets the same target date with a flat bonus, commonly a few thousand dollars, owed only if the crew hits it and nothing owed if they miss. It costs more when it works and nothing when it does not, and it puts the general contractor and the calendar on the same side rather than opposite sides of a dispute. The tradeoff worth naming: a bonus can feel like paying extra for something already bought, and money tied to speed can pull attention toward the parts a final walkthrough will not catch. A useful way to size either number is against daily carry cost, which commonly runs somewhere in the low hundreds per day on a funded rehab. A damages rate set near that carry cost roughly covers the lender's downside, and a bonus equal to two or three weeks of carry is a comparable order of magnitude from the other direction. Both structures are defensible; which one actually produces a finished house on time tends to depend more on the crew relationship than on which clause is in the contract.