The 10% Real Estate Penalty: Why Mitigation in Summary Proceedings Rarely Succeeds

A project developer, a €825,000 property, and failed financing

Imagine this: as a project developer, you enter into a purchase agreement for a property valued at €825,000. When financing unexpectedly falls through and the purchase fails to materialize, the seller acts immediately. The agreement is dissolved, and the seller demands the 10% contractual penalty: a staggering €82,500. This can have a massive impact on your business operations and cash flow.

What is a contractual penalty and why 10%?

In Dutch real estate practice, a penalty clause of 10% of the purchase price is the standard. It serves as a powerful incentive: it compels parties to fulfill their obligations. Once a buyer defaults, this penalty is, in principle, immediately due and payable.

Can the court mitigate the penalty?

Article 6:94 of the Dutch Civil Code offers the possibility of mitigating a penalty, but the threshold is very high. A judge will only intervene if the penalty is 'excessive and unacceptable' under the given circumstances. The judge does not look solely at the actual damage incurred, but weighs the nature of the agreement and the parties' positions.

What did the preliminary relief judge decide in this case?

In the recent ruling (ECLI:NL:RBDHA:2025:26028), this exact scenario unfolded. A project developer argued for mitigation due to bankruptcies in the sector and the seller's relatively low actual damages. However, the court ruled that the penalty clause is an essential part of the agreement and awarded a significant portion of the claim; even after mitigation, a sum of €40,000 remained due.

Why can the judge award this in summary proceedings?

Although judges are generally cautious with monetary claims in summary proceedings, awarding them is possible if the claim is sufficiently plausible and there is no insurmountable restitution risk. In this case, it was evident to the judge that the buyer had defaulted, making it likely that the claim would stand in any future substantive proceedings.

Why does it weigh so heavily that the buyer was a professional party?

The buyer here was not an unaware consumer, but a professional party. The lack of a financing contingency clause and repeated requests for extensions showed that risks were knowingly taken. Stricter standards apply to entrepreneurs than to private buyers; you are expected to be aware of the legal consequences of such a contract.

What does this mean for you as an entrepreneur?

• Always include a precise financing contingency clause if funding is not 100% secured.
• Be aware that a 10% penalty in the commercial real estate market will not be easily 'waived' by a judge.
• Keep in mind that a judge can intervene significantly even in summary proceedings, which can have immediate consequences for your working capital.

What should you do now?

Are you involved in a dispute over a penalty clause or about to sign a purchase agreement? Have your contracts reviewed by a specialized lawyer beforehand. In real estate matters, prevention is significantly cheaper than litigation.

Case Reference

This blog post is based on ECLI:NL:RBDHA:2025:26028.