When real estate is sold, the contract typically specifies that the closing will take place “on or about” a specified date. These “words of art” mean that the specified date is merely a “target date” and that the parties intend to close sometime in its vicinity; furthermore, each party will be entitled to an adjournment for a “reasonable time,” if needed, which New York courts have consistently defined as thirty (30) days.
While the parties can include a “Time is of the Essence” clause, which holds either party in default should they fail to close on the exact date and time specified, it is rarely, if ever, done as most attorneys will not risk an unforeseen event causing their client to default.
Alternatively, provided the parties agree to it, a provision can be included requiring a penalty be paid by the party causing the delay. However, all too often, if the purchaser wishes to delay, he will claim that the seller’s title is “defective” in some way to justify his refusal to close.
Some reasons a purchaser may not be ready to close on the date agreed to include:
- The purchaser is obtaining a mortgage and the lending institution has not issued a mortgage commitment. Where the delay is caused by the purchaser’s lender failure to issue a mortgage commitment in the time required by the contract, the seller can refuse to extend the purchaser’s time to do so. This, however, will most likely result in the purchaser cancelling the contract which will entitle him to a full refund of his contract deposit.
- The purchaser has obtained a mortgage commitment, but the lender is not ready to close yet. While there is little recourse for the seller in this situation, these types of delays typically last for only a few days.
- The purchaser needs to sell his current house in order to buy the new one but has been unable to do so in the time frame required. Since residential real estate contracts are rarely, if ever, contingent upon the sale of the buyer’s current house, the seller may hold purchaser in default once the thirty (30) day adjournment – which the purchaser is entitled to – has expired.
- External circumstances make it “inconvenient” for the purchaser to close within 30 days of the target date. In these instances, the seller may hold purchaser in default once the thirty (30) day adjournment the purchaser is entitled to has expired.
During instances when the seller has the right to hold the purchaser in default, the seller can schedule a “Law Date.” This is done by notifying the purchaser that the time to close has passed and that on a specified date and time – the date and time must allow the purchaser a “reasonable time” to appear (usually thirty days from the date of the letter), at a certain place (usually the seller’s attorney’s office) – the executed deed will be available for delivery. If the purchaser fails to appear and pay the balance of the purchase price, he will be held in default and forfeit his deposit.
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