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Time is of the Essence

Friday, July 25, 2014   /   by Vanessa Saunders

Time is of the Essence













 



































Capuder Fazio Giacoia, LLP
Attorneys at Law









COURT CONFIRMS THE RULE THAT TIME OF THE ESSENCE CANNOT BE MADE


PRIOR TO THE CLOSING DATE STATED IN THE CONTRACT OF SALE


 


During the period between execution of the contract and the closing of title there are situations that arise where one of the parties may seek to compel the other party to act when that party is simply taking too long. Unless a contract of sale specifically states that "Time is of the Essence", either party to that transaction has a right to a reasonable adjournment; therefore, a closing date that is "on or about" or "on or before" and does not indicate that "Time is of the Essence" allows the parties to adjourn to a later date. In a recent case, the Court confirmed the longstanding position that a party to a real estate contract cannot make "time of the essence" thereby compelling the other party to act until after the date set for closing has passed.


 


On November 3, 2011 the parties entered into a contract whereby Kalmon Dolgin Affiliates, Inc., a co-defendant, was named as the broker of record. The other co-defendant was the Seller which hired the Broker exclusively for the sale of the property. As part of its contract with the Seller, the Plaintiff-Buyer paid $200,000 as a deposit towards the purchase price of $4,550,000. In addition, the Seller, through the agency of its broker, was to permit the Plaintiff-Buyer access to the premises at reasonable times and upon reasonable prior notice to Seller and its broker. The contract included a specified date of closing, 120 days from the date of contract, which fell on March 29, 2012; however, time was not of the essence.


 


On January 17, 2012 and continuing thereafter, the Sellers, through its agent, denied the Buyer's real estate broker access to the premises because the Buyer's real estate agent was offering to show the property to potential renters prior to the closing date without permission from the Seller or the Listing Broker. On March 13, 2012, the Buyer's attorney notified the Sellers confirming the March 29, 2012 closing date and indicated that such date was "time of the essence" to the contract. The Buyer's counsel responded asserting that there was no "time of the essence" clause in the contract and that the Buyer was entitled to a reasonable opportunity to close after the specified closing date. The Seller's counsel rejected that argument and responded with a letter stating that March 29, 2012 would be the closing date and that the Buyer would be in default if it failed to close on that date. In a letter dated March 21, 2012, the Buyer's counsel requested an adjournment of the closing to April 25, 2012, warning that, should the adjournment not be granted by March 23, 2012, the Buyer would file a lis pendens in light of the anticipatory breach by the Seller.


 


On March 27, 2012, a Notice of Pendency was filed by the Plaintiff-Buyer placing all prospective buyers on notice that a complaint had been filed concerning the real estate. In anticipation of the Buyer's failure to close on March 29, 2012, the Seller directed its broker to deny the Buyer and its representatives access to the premises. On March 28, the Buyers initiated an action against Seller seeking specific performance of their contract on the grounds that Seller had committed an anticipatory breach. On March 29, 2012, the Sellers held a closing before a notary public at which Plaintiff failed to appear and during which the Sellers tendered all the documents required to close title.


 


The Seller argued that the Buyer breached the contract by failing to appear at the March 29th closing, that no adequate reason was given for an adjournment, and that the Buyer was not entitled to specific performance because it was not ready, willing, and able to close on the date specified in the contract. The Seller further argued that the Buyer's second cause of action failed because the purported refusal to grant access to the property occurred after the Buyer had breached the contract, thereby excusing nonperformance by the Seller. The Plaintiff-Buyer argued in opposition that because there was no "time of the essence" clause in the contract concerning the closing date, the Seller had anticipatorily breached by refusing to grant the adjournment and had further breached the contract by refusing the Buyer's agent access to the property.


 


The Court determined that because there was no "time of the essence" clause concerning the closing date, the Buyer was entitled to an adjournment and the Buyer had not committed a material breach by failing to appear for the March 29th closing. Moreover, this Court ruled that the Buyer's requested adjournment date, April 25, 2012, would be the operative closing date on the contract. Plaintiff had to show it was ready, willing, and able to close by April 25, 2012 in order to be entitled to specific performance of the contract.


 


Following a bench trial, the Court held that the Seller's denial to the Buyer of access to the property constituted a breach of contract that entitled the Plaintiff-Buyer to recover the security deposit it had put towards the purchase price. However, it was also determined that although the Seller had breached the contract, the Buyer was not ready, willing, and able to close on the operative closing date, April 25, 2012, and therefore was not entitled to specific performance or recovery of any losses beyond its deposit. The Court concluded from the evidence, that although the denial of access constituted a breach of contract, such denial did not preclude the Buyer from obtaining the necessary financing. The Court found that it was the Buyer's own failure to comply with due diligence requirements set by its financing institutions that led to its lack of financing and inability to complete the purchase.


 


Revital Realty Group, LLC. v. Kalmon Dolgin Affiliates, Inc., Supreme Court, Kings County


 









Alfred M. Fazio, Esq. 
Capuder Fazio Giacoia LLP 

90 Broad Street 

New York, N.Y.  10004-2627  

212-509-9595








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Global Property Systems
Vanessa Saunders MBA MIMC CIPS - NYS RE Principal Broker
56 Lafayette Avenue Suite 320
White Plains, NY 10603
914-290-5258


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