17 December 2025
Buying a home is not something most people do every day. It is therefore important that both parties understand the obligations arising from a property purchase agreement.
When the buyer or seller fails to comply (correctly) with the purchase agreement, this can result in a contractual penalty. In some cases, additional damages may also be claimed; however, the penalty can also be reduced by a court. This article explains everything you need to know about the penalty clause in property purchase agreements.
In the standard purchase agreements of the Dutch Association of Real Estate Agents (NVM), a penalty clause of 10% of the purchase price is included. The penalty becomes payable when the buyer or seller fails to properly perform the agreement, such as not transferring or taking delivery of the property. Although it is possible to include a different clause, a 10% penalty is customary.
Before the penalty can be enforced, a notice of default (ingebrekestelling) must be issued. This is a written demand requiring the defaulting party to fulfil all obligations unconditionally within a set period. If the party still fails to comply, the agreement may be terminated, and the penalty then becomes due in principle. For more information on termination, see our article ‘The termination of property-related purchase agreements‘.
Under Article 6:94 of the Dutch Civil Code, a court may in some cases reduce a penalty. In practice, this rarely happens. The court will only exercise this power where enforcing the clause would, in the specific circumstances, lead to an excessive and therefore unacceptable outcome.[1]
In doing so, the court must not only consider the relationship between the actual loss and the size of the penalty, but also the nature of the contract, the content and purpose of the clause, and the circumstances under which it was invoked.[2]
If the contractual penalty does not cover the full loss suffered, it is possible to claim additional damages. In property sales, Article 7:36 of the Dutch Civil Code plays an important role in assessing the loss when the property is ultimately not transferred.
In such cases, the loss must be determined by comparing the hypothetical situation in which the contract had been properly performed with the actual situation after termination of the purchase agreement.[3]
In other words, the damage is determined by the difference between the agreed purchase price and the market value.[4] If a buyer fails to complete the purchase and the seller can only sell the property to another buyer at a lower price, the seller is entitled to the difference between the two prices. The same applies in reverse if the seller refuses to transfer the property and instead sells it to another party for a higher price.
The penalty clause in a property purchase agreement plays a key role in ensuring compliance with contractual obligations by both the buyer and the seller.
If you are dealing with a defaulting buyer or seller, it is advisable to seek legal assistance. Please feel free to contact me or one of the other real estate law specialists at GMW advocaten if you have any questions.
[1] District Court of The Hague, 23 April 2025, ECLI:NL:RBDHA:2025:6773, para. 5.6
[2] Supreme Court, 16 February 2018, ECLI:NL:HR:2018:207 (Protec – Easystaff)
[3] District Court of Rotterdam, 15 June 2022, ECLI:NL:RBROT:2022:4629, para. 4.5
[4] Supreme Court, 6 March 1998, ECLI:NL:HR:1998:ZC260, and Supreme Court, 24 September 2004, ECLI:NL:HR:2004:AP7760
