Holding costs
Holding costs are an owner's ongoing delay losses (rent, loan interest, rates, storage) that a liquidated damages rate pre-estimates; calculating them defends the rate.
Ask Chalkline about this →Holding costs are the ongoing costs an owner keeps paying while a building project runs past its completion date: rent or temporary accommodation, loan interest on the construction finance, council rates, insurance, and storage of furniture. They are the legitimate financial interest that a liquidated damages (LD) rate is meant to pre-estimate, which is why calculating them properly is what makes an LD rate defensible.
This matters because of the penalty doctrine. An LD rate that is extravagant or grossly disproportionate to the owner’s genuine holding costs can be struck out as an unenforceable penalty (Andrews v ANZ [2012] HCA 30), and once the LD clause falls away the owner sues for actual proven delay loss instead. So the holding-costs calculation cuts both ways: for the owner it justifies the rate, and for the builder a rate tied to a documented holding-costs estimate is the defence against a penalty challenge, while a round number plucked from the air is the thing that gets the clause thrown out.
Work the figure out at signing, not after the job runs late. Add up the owner’s likely weekly rent or alternative accommodation, loan interest, rates and storage, and record the calculation alongside the rate in the contract particulars. See liquidated damages for how the rate is set and capped, and extensions of time for the builder’s main tool to avoid incurring them at all.
Also known as: Delay costs, carrying costs, time-related costs.
Category: Contracts / Delay and time.
Related
See also
References
- Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, via AustLII (verified 2026-05-09)
- Contracts Specialist: liquidated damages in NSW home building contracts (verified 2026-05-09)
Last updated: 2026-05-30. Verified: 2026-05-09. Quarterly review for currency.