Time Is Of The Essence: Defined And Explained
As you move through the home buying process, you may run into a “time is of the essence” clause. Although the exact time frame will depend on your unique transaction, you’ll likely find yourself in a race against the clock to meet the demands of the other party involved.
Let’s take a closer look at how this clause could affect you.
Time Is Of The Essence, Defined
“Time is of the essence” is a legal phrase used to specify the time period in which one party must complete its contractual obligations to the other party. Failure to meet deadlines set in a contract’s “time is of the essence” clause results in a breach of contract.
What Does ‘Time Is Of The Essence’ Mean In Real Estate?
Although you can find a “time is of the essence” clause in a variety of different industry contracts, these are fairly common in real estate contracts. Within a real estate contract, a “time is of the essence” clause creates a specified timeframe for the party to meet its obligations.
Even if this clause is not explicitly stated in a contract, the same principles can be applied through a “time is of the essence” letter. In order for a “time is of the essence” letter to be valid in the eyes of a court, it will need to include a reasonable timeline, clear stipulations, and information about what will happen if the party does not meet the specified timeline.
Any action that needs to be completed within a certain amount of time in a real estate transaction can be subject to a “time is of the essence” clause. A few examples include notices, document delivery, termination methods, and the closing date. A real estate contract should include specific completion dates for each time-dependent task in the process.
Failure To Meet Time Is Of The Essence Deadlines
When a “time is of the essence” clause is set forth in a contract, there will be consequences for failing to meet the deadlines.
For example, let’s say that you executed a contract on December 1, 2020. In the contract, you are required to deliver a survey of the property in 3 days. If you do not provide a survey of the property to the other party within 3 days, there would be consequences. You may be ordered to fund a new survey or face potential termination of the contract.
However, real estate laws vary by state. Make sure that you are familiar with the terms of the contract before moving forward.
Standards Of The ‘Time Is Of The Essence’ Clause
The specifics surrounding a “time is of the essence” clause may vary by contract. But the guiding principle of transparency between parties is always required. Here’s what you should find in a valid “time is of the essence” clause.
1. All Parties Must Be Aware Of The Clause
Importantly, all parties must be aware of the “time is of the essence” clause. If any party is unaware of their obligations under the clause, then it will not be enforceable. Everyone involved in the transaction needs to be aware of the time frame and the consequences of missing any deadlines.
2. All Parties Are Entitled To ‘Reasonable’ Postponement Of Closing Day
Of course, unforeseen problems and events can necessitate a postponement of closing day. Either party is entitled to request a “reasonable” postponement of closing day. However, the other party will need to agree to the new closing day.
Since the closing day is enforceable, failure to request a postponement resulting in a missed deadline can constitute a breach of contract.
3. Amending A Breached ‘Time Is Of The Essence’ Clause
Even if a party breaches the “time is of the essence” clause, it is possible to fix this mistake by amending the original clause. Without both parties agreeing to amend the breached clause, the missed deadline can result in significant consequences.
The Bottom Line
The “time is of the essence clause” is intended to keep both parties accountable throughout a real estate transaction. With specific deadlines and consequences laid out, the buyer and seller can move towards a successful closing day together.
If you would like to use the “time is of the essence” clause in your transaction, then consider contacting a real estate attorney. With their help, you can successfully add and enforce this clause. Plus, they will be able to guide you through any questions you have about real estate purchase agreements.