Are the Deadlines in Your Real Estate Contract Absolute?

A typical residential real estate contract of sale calls for a closing of the sale to be held “on or about” a given date. The “on or about” language is generally construed to mean within a reasonable time (or within approximately thirty days of the stated date). However, some agreements state that time is “of the essence,” and in such cases, the closing date is strictly enforced. In some cases, a contract starts out with an “on or about” date, but delays ensue, and one of the parties loses patience, declares time to be of the essence, and demands closing on a specified date. The deadline then becomes absolute, provided the party who declared time to be of the essence gave the other side a reasonable time to perform.

In Iannucci v. 70 Washington Partners, LLC, the parties had an “on or about” closing date in February, and closing did not take place. In April, the seller set a closing date in May with time being of the essence, but offered to terminate the contract and return the down payment if the buyers failed to close on that date. The day before the closing the buyers informed the seller that they agreed to accept the return of their deposit and the cancellation of the contract. The seller responded that if the buyers failed to close on the sale, their deposit would be forfeited. Noting that a time-of-the-essence letter that does not give the other party sufficient time to perform is a nullity, the Appellate Division ruled in favor of the buyers.

In ADC Orange, Inc. v. Coyote Acres, Inc., the purchaser was obligated to make an interim payment towards the purchase price by a particular date. Because the contract contained no time of the essence clause, the New York Court of Appeals held that the purchaser had not materially breached the contract when he sent the payment in two weeks late.

Of course, as we frequently remind our clients, there are no guaranties in litigation. In Crane v. Kahn, decided two years after ADC Orange, the seller missed a deadline by two business days due to events beyond his control. But the Suffolk County Supreme Court ruled that the buyer was entitled to cancel, even though the contract contained no time of the essence clause and the seller still would have been able to close as scheduled.

For questions on any real property issues you are facing, call Steve Taitz or Linda Calder.