In connection with every real estate transaction in New York, real estate attorneys and real estate agents discuss with their clients, whether they are sellers or buyers, what the “closing date” will be and how it is to be determined, often utilizing terms such as “on or about closing date,” “reasonable time” and “time of the essence.” Most real estate contracts provide for an “on or about” closing date, which basically means an “estimated” closing date. The key takeaway is that an “on or about” closing date is not set in stone and is subject to reasonable extensions and adjournments depending on issues which may arise.
The ‘On or About’ Closing Date
In an attempt to explain to their clients what is meant by an “on or about” closing date, many agents and attorneys tell clients that this means the parties automatically have a 30-day extension beyond that date to close. Unfortunately, this is not the case. Others fail to explain to clients that an “on or about” date is just an estimated target and should not be relied on to make moving plans, schedule other closings, etc. Often, the parties do not end up closing “on or about” the date contained in the contract and it is imperative that both seller and buyer clients are made aware of this. Buyers and sellers should know that if any issues arise, the closing date could be pushed back by days, weeks or months.
The ‘Time of the Essence’ Closing Date
While most transactions and contracts in New York contain an “on or about” closing date, some contracts, although a rarer occurrence, provide for a “time of the essence” closing date. In this instance, a contract does set a specific date, and if either party fails to close by that date it would lead to a default. In the case of a buyer, it could mean the loss of the down payment. For sellers, it could lead to a lawsuit against the seller for specific performance (i.e., an action filed in seeking a judgment requiring the seller to close).
Continue reading “LEGAL CORNER: Court Decisions Regarding ‘Time of the Essence,’ ‘Reasonable Time,’ Retaining the Down Payment in Transactions”