On some occasions, as you progress through the home buying process, you may come across a clause that appears in real estate contracts written as: “Time is of the essence”.
Certainly; Timing is everything, especially when buying or selling property. Therefore, individuals who find themselves in these scenarios should first contact our NJ real estate attorney.
What Does The Expression “Time Is Of The Essence” Mean In Real Estate?
The expression “Time is of the essence” is a legal term commonly found in real estate contracts. This phrase talks about the amount of time that the parties to a contract have to fulfill their contractual obligations.
- This legal term serves to remind all parties involved in a real estate contract that time is running out for them.
- It is also defined as a contract term that requires the successful performance of one of the parties within a period of time to require the performance of the other party.
- Failure to perform on time would result in a breach of contract.
In other words, the time clause is essential, it means that if one of the parties to a contract does not meet the agreed deadline, they will be in breach of the contract.
This clause is usually used in contracts where there are certain urgencies due to a situation. For example, when one of the parties needs to start working immediately.
2023 Examples Of Clause Defining Time Is Of The Essence In Real Estate
Some general examples of this clause include:
- Authors who finish their books before the established release dates.
- Web design companies that deliver their work prior to product launch.
- Construction companies that complement the work before the inauguration.
- Real estate sellers who finish work in advance of fluctuations in the real estate market.
- Couriers delivering packages on time.
Next, we will detail other examples that are frequently seen in the real estate market:
Example For Buyers
Buyers may have several strict clauses that time is of the essence. Here are a few:
if you’re an all-cash buyer
- Assuming that an individual wishes to purchase a New Jersey home for cash, they will have several advantages over home loan applicants.
- However, the buyer who will pay cash for the home must first request a New Jersey home inspection, even if you did not include a contingency to this inspection in your offer.
- Requesting a home inspection has taken the buyer several days, with closing day very close.
- Likewise, the buyer should perform a property title search in NJ to ensure the seller has no liens.
- Although they will pay cash, the buyers have been delayed because they have not been able to meet both requirements on time.
If A Loan Is Required
- A buyer finalizes the purchase of a house through a type of mortgage loan, but several problems began to get in the way of this.
- The buyer first received an appraisal problem and later a home inspection problem. The latter was because the property raised doubts about its current state.
- As if that weren’t enough, the real estate title search also turned up liens that the buyer was unaware of.
- Although the buyer can work this out, the time clause is of the essence, putting pressure on all parties involved as the closing date approaches.
Example For Sellers
- Assuming an individual is about to sell a home in New Jersey and wishes to move as soon as possible. As a result, a time essential clause is included in the contract.
- In the contract, it states that the home appraisal in New Jersey must be completed by a specific date.
- As a result, the seller must give the appraiser access to his property by a certain date. This type of appraisal can take a week or two.
- However, the appraisal could not be scheduled on time, as the appraiser had to cancel due to a last minute emergency. Therefore, when the appraisal is scheduled, it will be on its due date.
- So the sellers got stuck because there was a lot of traffic, so they missed their appointment with the appraiser. This leads them canceling their appointment or postponing it to another day.
- As a result, the seller breached the contract, which would lead the buyers to back out of the deal with their security deposit.
General Rules For A “Time Is Of The Essence” Clause In Real Estate
The basic rules applied for these essential time clauses include:
- Closing date does not guarantee that it is essential: Simply adding a closing date to the sales contract does not guarantee that that date is essential.
- One party can choose an essential date: If the parties do not make the closing essential or do not include it by the schedule date, one party can choose a new date and make it essential.
- Possibility of remedying the clause: If an essential time clause is breached, it can be remedied in several ways. For example, applying down payment withholding or forced title transfer.
- Clause avoidance: If a party attempts to enforce a time-essential clause, it can be fairly avoided. For this, it must be based on a waiver that demonstrates the conduct or an oral agreement.
- Clause enforceability: At an agreed closing date, the essential time is enforceable. Otherwise, it will be considered as a breach of contract.
In conclusion, a real estate contract that has the term “Time is of the essence” obliges the parties involved to complete their obligations within the determined time.
What Is A Postponement Of Closing?
When a contract for the sale of real property does not specify what time is essential, either party may have the right to a postponement. This postponement must be reasonable as of the closing date.
- By granting a continuance, the other party may impose a condition that time is of the essence. The success of this condition depends on the specificity of the notice and the reasonableness of the time.
- In determining whether prospective buyers were given a reasonable time to complete the purchase, the courts will examine the circumstances and facts of the case.
- In making this determination, a court may consider any of the following factors:
- The purpose of the contract.
- The conduct and experience of the parties.
- The absence of good faith.
In the case Miller v. Almquist, the contract specified the closing date, but did not specify whether time was of the essence. As a result, the buyers were entitled to a postponement of the closing date.
The Importance Of Language In Specifying That Time Is Of The Essence
As a general rule, real estate contracts that contain the phrase “time is of the essence” will create the requirement that the parties comply within the indicated time. However, a contract need not state that time is of the essence.
This is because the contract may specify:
- Execution time, and
- A default warning in the event of a default on that date.
In addition, the mere fact of designating a closing date on a real estate contract does not necessarily make that date an essential one.
In the case of North Triphammer Development Corp v. Ithaca Assocs, the contract established that: “The closing of the transaction contemplated in this agreement, will occur on or before a date that is not later than 120 days from the date of agreement.”
In addition, the seller also attempted to make time of the essence, but the court found the language used to be ambiguous and vague.
The language used was: “[b]y way of postscript, I merely want to note that time is of the essence for a closing and your cooperation would be greatly appreciated.”
Frequent Clauses That Time Is Of The Essence
Next, we will show some of the most common clauses that time is fundamental or vital (of the essence) in these processes:
- The seller stipulates that the purchase offer must be accepted or rejected within 24 to 48 hours.
- If the offer is accepted, the seller must submit a list of disclosures.
- Real estate agents must submit an offer after it is confirmed with the buyer of the property.
- Shortly after accepting the offer, the buyer must be approved for a type of loan.
- Both parties agreed to close the sale on a specific date.
- A clearly defined agreement is in mind to complete the review period by an attorney.
- The lender will have to honor the loan agreement and provide all requested funds for the purchase of the home.
- You must wait for the buyer to complete a home inspection.
Applying for a loan can sometimes be complex, since you must meet all the requirements to apply for a mortgage in New Jersey. Because of this, we have prepared a blog where we show what not to do when applying for a mortgage.
What Kind Of Contracts Do Not Need The “Time Is Of The Essence” Clause In Real Estate?
Some contracts are not required to include a time essential clause. This is because this clause is only included if there are deadlines that the parties to the contract must meet.
Therefore, if one of the parties does not have deadlines and can take all the time necessary to fulfill their respective obligations in the contract, this clause may not be relevant. In addition, there is a risk that the flexibility of the individual is limited.
We strongly recommend that our readers contact us first if they are about to sign a contract. Our attorney Carolina T. Curbelo will help you diligently.
Benefits Of Using A Time is of the essence Clause
The main benefit of using this clause is that if an individual misses the deadline, they could lose their contract rights. In addition, the individual who fails to comply with this time could also lose certain legal benefits.
- This clause creates a high level of certainty and clarity for all parties involved to interact with each other during a real estate transaction.
- The time is of the essence clause also helps prevent misunderstandings and potential conflicts. As a result, set clear expectations from the start of the contract.
- This type of scenario is also useful when there is a very short extension period. For example, two or six days after initially missing a deadline before legal rights are lost.
Why Would A Time is of the essence Clause Be Used?
When an individual has a time essential provision, it is usually because the contract is time sensitive. In addition, one of the parties to the contract requires more control over the obligations.
- This is often due to potential problems that could arise in the future if a transaction takes longer than desired.
- In some cases, courts may allow one party to fix the problem before voiding a contract. However, this clause must be used as a condition for a payment.
- This clause must be strictly adhered to, which is specific and precise without any ambiguity. This is because a court will look at the contract to find out if that is what both parties really intend.
What Do You Need To Know About Including A Real Estate “Time Is Of The Essence” Clause In A Contract?
It is essential to note that including this type of clause in a contract could affect the ability to make agreements. However, there are certain terms that should not be included in the contract if they already have this essential time clause.
- An example is that if a contract has both a time is of the essence clause and a penalty clause, a court might find the time is of the essence clause unenforceable.
- This is because the time is of the essence clause may allow individuals additional time to complete the terms of the contract.
- However, accepting a penalty clause does not anticipate that there may be any kind of delay in the process.
Deciding whether or not to include the time is of the essence clause requires knowing in advance whether there are limits to how specific the time-limit can be.
If it is not clear to meet the deadlines in the contract, it might be useful to establish an extended period where the parties can agree on an additional amount of time. This will allow them to complete the terms of the contract.
Sending The Time is of the essence Letter
One party to a real estate contract may send the other party a time is of the essence letter. This letter will serve as legal notice and is usually sent after the closing date stated in the contract has passed.
The time is of the essence letter shows the date, time, and location where the deal will be closed. In addition, it establishes that failure to comply with this requirement will lead to the total breach of the contract.
The party sending this letter will be obligated to give the other party the opportunity to comply with the agreement within a reasonable period of time.
Standards Of A “Time Is Of The Essence” Clause In Real Estate
This clause has certain details to take into account, since these elements must be found in a valid time is of the essence clause:
- Modification of a breached time is of the essence clause: If one of the parties breaches this clause, it is possible to correct this error. To do this, both parties must agree to modify the original clause, but this can have significant consequences.
- All parties must know the clause: The parties must be aware that the time is of the essence clause. If one of the parties is unaware of its obligations based on this clause, then it will not be enforceable.
- All parties have the right to a reasonable postponement: Either party shall have the right to request a reasonable postponement of the day of closing. However, the other party must accept the new closing day.
These standards are intended to hold parties accountable throughout a real estate transaction. Therefore, there will be specific deadlines and established consequences, so that the buyer and seller move together towards a successful closing.
Do I Need A Lawyer For A “Time Is Of The Essence” Clause In Real Estate?
It is advisable to have the help of a lawyer to help individuals with these types of clauses. Thanks to the help of a lawyer, it can be ensured that all the necessary measures are being taken to enforce the established clauses.
- Additionally, a good attorney can help individuals meet all required deadlines.
- Therefore, lawyers can help ensure that the rights under the contract are protected at all times.
- Our lawyer Carolina, has extensive experience in these issues. She has been helping her clients with all of her real estate matters for over 10 years.
If you are struggling with these clauses in a real estate contract, feel free to contact our Ridgewood, New Jersey law firm. At Curbelo Law we can help you efficiently with your respective legal needs.