The closing date for a real estate transaction is typically agreed by the parties and set forth in the contract of sale. Traditionally, that date has been a target date, without any penalty if either party is unable to close title. This allows leeway in the event of a personal emergency such as a hospitalization or last minute business trip.
If the contract closing date comes and goes, and one party is ready but the other is not, the ready party can serve a “time of the essence notice” on the other. In the notice, a firm closing date is set forth, as well as the time and the place, and a recital of the contract closing date. This firm date should be at least 10 days after the contract closing date. While there is no law requiring a 10 day notice specifically. absent extraordinary circumstances, that is a reasonable period of time per the prevailing case law and my experience as a New Brunswick real estate attorney.
The notice must be sent to the other party and that party’s attorney by some reliable and verifiable means such as by regular and certified mail. Additional copies might be sent by fax or email.
The party serving the notice must prepare to perform its obligations on the time of the essence date. If this is a buyer with a mortgage loan to close, then the closing needs to be set up with the lender and the title company for that date. If it is the seller, then the house needs to be empty of personal property and the closing documents such as the deed and affidavit of title prepared.
The party serving the notice and its attorney must appear and be ready, willing and able to close on the time of the essence date. If the other party does not appear, then written confirmation of this default and resulting breach of contract should be sent to the non-appearing party and its attorney, again by some reliable means.
At that point, the non-breaching party would be entitled to file a lawsuit for damages and other relief as appropriate. Also, if it is the buyer that breached the contract, then the contract deposit should be held pending the outcome of the litigation.
It should be noted that in the latest form of residential real estate contract promulgated by the New Jersey Association of Realtors, the closing date is stated as to be “of the essence”. Competent counsel will delete that provision in attorney review.
Charles D. Whelan III has substantial experience invoking time of the essence in real estate transactions. He was just recognized as 2017 Transactional Attorney of the Year. Keep him in mind for your next closing.