When you have a real estate closing in New Jersey, a number of things may hinge on your closing date (other than the closing itself). You may need access to money from the funding from the sale if you are the seller. You may need to close on a given date, so that you can start paying the mortgage on any new property you are buying. You may need to close on time, so you can start a new job, or to make sure that the kids are in their new home for the start of a new school year.
Closing Date is Not Mandatory
And yet, despite all this, you may be surprised to know that closing on the closing date specified in the contract is not an essential event of the real estate contract. In fact, if a party needs extra time to close, or something happens that delays or postpones the closing date, the contract is still in effect, and there is usually no breach of the real estate contract.
Time is of the Essence Clauses
So, what happens if you absolutely need the contract to close on the closing date? The answer is a ‘time is of the essence’ (TOTE) clause. This is a clause that tells the court that the parties have agreed that closing on the agreed upon date is a material term in the contract, as important as any other vital term in the agreement.
The problem with TOTE clauses is that it is hard to get parties to agree to them because nobody wants to be in violation of the agreement, should something happen. Closings have many moving parts, are dependent on third parties like inspectors, lenders, surveyors or title companies handling matters in a timely fashion, and a host of other contingencies over which the parties to the closing do not always have full control.
That means that the parties may be hesitant to agree to a TOTE clause, knowing that it could subject them to liability for something that is out of their control.
Notice of Time is of the Essence
If there is a delay in the closing date, and there is no TOTE clause, a party can serve a TOTE notice that tells the other party that the contract must close immediately. Once the notice is served, the other party has to be given a reasonable amount of time to close. What is reasonable isn’t defined, and will vary in every case.
If there is a TOTE clause, and the contract still does not close on the specified date, the non breaching party has a right to compel the other party to close (called specific performance) or otherwise, the non-breaching party could sue for damages, if there are monetary damages that can be shown to be caused by the failure to close on the agreed upon closing date.
Contact our New Jersey real estate law attorneys at The Law Office of Agnes Rybar LLC today to help you with your real estate closing.