Time is of the Essence in Real Estate: The Importance of Deadlines

When it comes to buying or selling property, timing is everything. That's why you may come across a clause in real estate contracts that states "time is of the essence." But what does this phrase really mean and how does it impact the parties involved? In this article, we'll explore the concept of time being essential in real estate transactions and its implications.

What Does the Expression "Time is of the Essence" Mean in Real Estate?

The expression "time is of the essence" is a common legal term found in real estate contracts. It refers to the amount of time that the parties have to fulfill their contractual obligations. This clause serves as a reminder that time is running out and failure to perform on time can result in a breach of contract.

Think of it as a deadline that both parties must meet. If one party fails to meet their obligations within the agreed-upon time frame, they are in breach of the contract.

This clause is typically used in contracts where there are certain urgencies or time-sensitive situations. For example, when one of the parties needs to start working immediately.

Examples of "Time is of the Essence" Clauses in Real Estate

Let's take a look at some examples of this clause in real estate:

• Authors who finish their books before the established release dates.
• Web design companies that deliver their work prior to product launch.
• Construction companies that complete their work before the inauguration.
• Real estate sellers who finish work in advance of fluctuations in the market.
• Couriers delivering packages on time.

These examples illustrate how time-sensitive certain contracts can be and the consequences of failing to meet the deadlines.

Examples for Buyers

Buyers may encounter strict clauses where time is of the essence. Here are a few examples:

If You're an All-Cash Buyer

1. Assuming you're purchasing a New Jersey home for cash, you have certain advantages over home loan applicants.
2. However, even if you did not include a contingency for a home inspection, you must still request one.
3. Requesting a home inspection takes time, and with the closing day approaching, it becomes crucial to meet the deadline.
4. Additionally, performing a property title search in NJ to ensure there are no liens can further delay the process.
5. Failure to meet both requirements on time can result in a breach of contract.

If a Loan Is Required

1. If you're finalizing a house purchase through a mortgage loan, various issues may arise.
2. An appraisal problem or a home inspection problem can cause delays.
3. Furthermore, unexpected liens discovered during the title search can complicate matters.
4. The time clause adds pressure as the closing date approaches, requiring all parties to meet their obligations.

Example for Sellers

1. Let's say you're selling a home in New Jersey and want to move as soon as possible. A time essential clause is included in the contract.
2. The contract states that the home appraisal must be completed by a specific date.
3. However, unforeseen circumstances, such as heavy traffic, can cause delays or missed appointments.
4. Breaching the contract by missing the appraisal appointment can lead to the buyer backing out of the deal.

General Rules for a "Time is of the Essence" Clause in Real Estate

It's important to understand the general rules that apply to these essential time clauses:

• Simply adding a closing date to the sales contract does not guarantee that the date is essential.
• If the parties do not make the closing essential or do not include it by the scheduled date, one party can choose a new date and make it essential.
• Breaching an essential time clause can be remedied through various methods, such as withholding down payment or forced title transfer.
• It is possible to avoid enforcing a time-essential clause if there is evidence of waiver or oral agreement.
• An agreed-upon closing date is enforceable, while failure to meet the deadline is considered a breach of contract.

In conclusion, a real estate contract that includes the phrase "time is of the essence" requires both parties to complete their obligations within the specified timeframe. This clause ensures accountability and keeps the transaction on track.

What is a Postponement of Closing?

When a real estate contract does not specify that time is essential, either party may have the right to request a reasonable postponement. The courts will examine the circumstances and facts of the case to determine whether a reasonable time was given to complete the purchase.

Factors that may be considered include the nature and purpose of the contract, the conduct and experience of the parties, and the absence of good faith. In some cases, a court may allow a postponement if it is deemed reasonable.

The Importance of Language in Specifying that Time is of the Essence

While a contract need not explicitly state that time is of the essence, it should clearly establish the execution time and consequences of default. Designating a closing date does not automatically make it essential.

For example, in the case of North Triphammer Development Corp v. Ithaca Assocs, the contract specified a closing date within 120 days but did not state that time was of the essence. The court found the language used to be ambiguous and vague, leading to the buyers' entitlement to a postponement.

Frequent Clauses that Require "Time is of the Essence"

Here are some common clauses where time is fundamental in real estate transactions:

1. The seller stipulates that the purchase offer must be accepted or rejected within 24 to 48 hours.
2. If the offer is accepted, the seller must provide a list of disclosures.
3. Real estate agents must submit offers confirmed with the buyer of the property.
4. Buyers must be approved for a loan shortly after the offer is accepted.
5. Both parties agree to close the sale on a specific date.
6. The review period by an attorney must be completed within a defined agreement.
7. The lender must honor the loan agreement and provide the necessary funds for the purchase.
8. The buyer must complete a home inspection before proceeding.

What Kind of Contracts Do Not Need the "Time is of the Essence" Clause in Real Estate?

Contracts that don't have strict deadlines may not require a time-essential clause. In situations where flexibility is needed and there are no fixed timelines, including this clause may not be relevant. However, it's crucial to understand the potential limitations and risks of not having specific deadlines.

If you're uncertain about including a time-essential clause in your real estate contract, it's best to consult with a lawyer. They can guide you through the process and ensure that your rights and obligations are protected.

Benefits of Using a "Time is of the Essence" Clause

The main benefit of using this clause is that it adds certainty and clarity to the transaction. It helps prevent misunderstandings or conflicts by setting clear expectations from the beginning. Additionally, it can provide a short extension period before legal rights are lost, allowing parties to remedy any delays.

Why Would a "Time is of the Essence" Clause Be Used?

A time-essential provision is typically used when a contract is time-sensitive or when one party requires more control over the fulfillment of obligations. It helps avoid potential problems that may arise from delays and provides a mechanism for resolving issues before voiding the contract.

However, it's important to draft this clause precisely and unambiguously. Courts will examine the contract to determine the intent of both parties.

Standards of a "Time is of the Essence" Clause in Real Estate

For a time-essential clause to be valid, it must meet certain standards:

1. The breached clause can be modified if both parties agree, but this may have consequences.
2. All parties must be aware of the clause and their obligations under it.
3. Reasonable postponements may be requested by either party, but the new closing date must be accepted.

These standards ensure accountability and a successful closing for both the buyer and seller.

Do I Need a Lawyer for a "Time is of the Essence" Clause in Real Estate?

It's advisable to seek the assistance of a lawyer when dealing with these types of clauses. A lawyer can ensure that all necessary measures are taken and that deadlines are met. They can also protect your rights and guide you through the legal aspects of a real estate transaction.

If you're facing challenges related to time-sensitive clauses in a real estate contract, our experienced attorney Carolina T. Curbelo is here to help. Contact our Ridgewood, New Jersey law firm, Curbelo Law, for efficient and reliable legal assistance with your real estate matters.