By: Tracey Daniels O’Connell, Esq.
You’ve found your dream home! Your attorney has negotiated your contract; you’ve paid the deposit and arranged for a mortgage. You’ve marked the closing date on your calendar. But what exactly does the closing date in your contract mean?
A specific closing date or a closing set for “on or about” a specific date does not necessarily mean that that date is the day you will actually close on your hew home. Unless the contract specifically states the date is “time of the essence,” both parties are entitled to a reasonable adjournment. What constitutes “reasonable” is fact specific; the nature and object of the contract, the previous conduct of the parties, the presence or absence of good faith, the experience and sophistication of the parties, and the possibility of hardship or prejudice, are all factors that could be considered in determining “reasonableness”. As a general rule of thumb most real estate professionals consider thirty (30) day notice fixing a closing date to be “reasonable”.
A contract for the sale of containing the phrase “time is of the essence” creates the requirement that both parties to the contract perform within the time specified. Failure by one of the parties to perform on the closing date will constitute a material breach of the contract and may result in the forfeiture of the down payment. When granting an adjournment of an “on or about” closing date, a party can seek to make the new closing date “time of the essence” but sending a “TOE (time of the essence) notice” when a party cannot close on the set date doesn’t guarantee a closing on the new date, it only helps to build a case should one party look to the courts to enforce their rights in court.
So what happens if the actual date of closing is important to either the buyer or seller? It’s common for parties to need to coordinate a closing with the expiration of a lease or the sale of an existing home. It’s important to communicate your needs to your attorney up front to help ensure that all of the parties involved are on the same page and targeting the same date. Last minute closing adjournments often create financial and emotional chaos, but sometimes they cannot be avoided. The best strategy for dealing with the uncertainly of a closing date is to remain as flexible as possible. And to consider alternatives, such as pre- and post-closing occupancy agreements to bridge the gap between closing and moving.