"Time of the Essence" in Real Estate Contracts

Often in real estate contracts, the closing date is both a cause of happiness, for both parties, and a cause for concern, particularly if one party cannot adhere to it. But, in all reality, the time of the essence, even if explicitly written in the contract, is of well…no essence.

I’m often asked “what does the closing date” mean? Its simple really, its merely a target date, one to base on things around, from the buyers mortgage being ready (if contingent) and all other issues relating to getting a file ready. In the usual standard sense the “on or about” closing date is a “30 day” window, so “on or about” July 1, means closing within the month of July, so once August 1 rolls around, that’s when a buyer, or seller, could be held to the closing date of July 1. But, even if a contract reads, in its most urgent way, “closing on July 1, time being of the essence” it still really doesn’t mean a whole heck of a lot. If July 1 comes about, and one party is not ready, or fails to schedule, the other party has to give sufficient notice to enforce the “time of the essence” and the party whom cannot perform, beforehand, would sent notice they cannot perform, thus in a way nullifying the “time of the essence”. What happens, is that the moving party sends a letter, basically extending the “time of the essence” by a minimum of 2 weeks, sufficient notice, and the closing hopefully takes place July 15. Remember, the sellers attorney holds the down payment (damages) as an escrow agent, it doesn’t automatically transfer to the aggrieved party if a clause is not performed.

So, as I say, these things have a way of working themselves out, but onlyafter a bit of posturing by both parties, and a series of letters that honestly, don’t mean much.

In essence, there is time.