Time (Of The Essence) Is On My Side, Yes It Is…

Contracts are full of language that may seem unimportant, boilerplate, confusing, or just plain useless. Real estate contracts are no different. The standard FAR/Bar forms for sale and purchase of residential property, “AS IS” contracts, and even vacant land contracts all contain provisions that you see all the time, but rarely have to really address. Terms like “force majeure,” “waiver,” or even “AS IS” may appear on the surface fairly straightforward as to what they mean, but to those who have had real estate deals in the balance over definitions of those words, they understand not just the importance of those terms, but also the ramifications of how they can affect a sale. Well, the term “time is of the essence” is no different.

At first blush, “time is of the essence” seems a rather easy concept to understand. Two parties sign a contract to sell a piece of property, and it is important to perform the required tasks timely, whether it is the date of closing, a property inspection, depositing the earnest money deposit, or providing a loan commitment. But not so fast, my friend, depending upon where in the contract the term “time is of the essence” is placed can make all the difference as to what provision or provisions, it applies to. For example, you can typically find the time is of the essence clause in paragraph F of the Standards in a FAR/Bar real estate contract. Standard F usually begins this way: “Calendar days shall be used in computing time periods. Time is of the essence in this Contract.” It would appear by reading this that this term applies to every deadline, every time frame included in the Contract. However, Florida courts have not been so generous in applying “time is of the essence” to a real estate contract. In fact, Florida courts have held that “time is of the essence” clauses in real estate contracts are not always boilerplate, or “stock” language. Rather, the courts look to the expressed intent of the parties in applying the term. In fact, courts are reluctant to apply a general provision that “time is of the essence” to every obligation to perform in a real estate contract as each obligation carries a different level weight and importance. Because of this, while “time is of the essence” may clearly apply to the “Closing Date” or the earnest money deposit as essential and material terms to perform under the contract, it is not as clear as to whether it would be applicable to an inspection period or a loan commitment time. The reason being is that a contract can still close without either party strictly adhering to the time frames agreed to under the contract for a loan approval or a property inspection. In fact, there are usually remedies available if those deadlines are not met, such as the contract will close as if there were no loan approval contingency or the buyer accepts the physical condition of the property if the buyer fails to timely complete the property inspection during the inspection period.

So, what does this mean to you? Obviously, to avoid any potential problems at closing, you should always try to meet all deadlines in the contract. Deadlines such the closing date or when deposits are due, must be strictly adhered to; missing those deadlines by even a few minutes can result in a deal being cancelled, or worse yet, a breach of contract. For other contractual deadlines, if you cannot perform within the time agreed to, try to get an extension to perform BEFORE the deadline expires, rather than after. “Better to ask for forgiveness rather than for permission” DOES NOT apply to real estate contracts. However, even if you miss one of the deadlines, do not automatically assume the deal is over or that your client is in trouble. An experienced real estate attorney can work with your client to resolve an issue that that may appear, on its face, to be a problem.”

Sincerely,

Mark C. Mann, Esq., mcmann@berlinpatten.com
Berlin Patten Ebling, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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