Property: Time is of the Essence
August 12, 2013
By: James F. Morey
Use by permission, Naples Board of Realtors Naples Realtor Magazine
A frequent question asked of a closing agent in the context of handling residential real estate transactions is “did you receive the Buyer’s additional deposit?” Certainly this is a legitimate question for many reasons. First, we all want to abide by the contract. Second, always good to know all is moving forward positively with the transaction. Finally, whether a real estate licensee, licensed broker, attorney, or closing agent it is our job to keep track of and monitor those details. What if the additional deposit was not made on time? People travel, people get tied up, financial institutions may delay wiring funds, mail is lost, people forget and a multitude of other reasons could plausibly explain the delay. Is it a breach of the contract to be late with a deposit? The answer to that question and the implication of going beyond a date for performance of a task in a contract depends on the specific contract provisions and the concept of whether time is of the essence.
Time is considered to be of the essence such that a delay in performance would constitute a material breach of a contract1. How do you know if time is considered to be of the essence? One way to determine is when there is an express recital in the contract that is the case. Take for example the language set forth in Standard O of the NABOR Sales Contract (Residential Improved Property) (4/1/2012) which reads: “Time is of the essence for closing title.” Another example is found in the Florida Association of Realtors®/Florida Bar Residential Contract for Sale and Purchase (Rev 6/2010) in Standard F which reads: “Time is of the essence in this Contract.” A third example of this express language is found in the Paragraph 11 of the 2013 Florida Association of Realtors® Contract for Residential Sale and Purchase which reads as follows: “Time is of the essence for all provisions of this Contract.” Where such express provision for time of the essence is included in a contract it will be recognized both in law and equity. That means if you miss a time deadline in the performance of a contractual obligation it will be a material breach and the breaching party is subject to the default remedies set forth in the contract. In addition to express terms as set forth above, time may be of the essence due to the conduct of the parties. For example, the concept of time of the essence may be imposed where notice has been given to a defaulting party requiring that the contract be performed within a reasonable stated time frame2. Unless there is a determination that time was of the essence, a brief delay by one party in the performance of a contract covenant does not discharge the other party’s contractual obligations3.
So, back to the question of what happens if a deposit was not made on time. As to the express provisions of the Florida Association of Realtors®/Florida Bar Residential Contract for Sale and Purchase (Rev 6/2010) and the 2013 Florida Association of Realtors® Contract for Residential Sale and Purchase such a failure would technically be a material breach of the contract and therefore expose the Buyer in that instance to the Seller’s default remedies. This may mean being exposed to the loss of deposits made and deposits to be made. Clearly not a good result. The language in the NABOR Sales Contract (Residential Improved Property) (4/1/2012) is more forgiving in such a circumstance. While time is of the essence in the NABOR Contract as to “closing title”, it is not expressly applicable to all dates. That being said, let’s consider two important points. First, while a brief delay in performance of the dates other than the Closing Date may not be a technical breach in the context of the NABOR Contract, the delay must be in fact brief and reasonable. Second, and very important, if the Seller in such case makes a written demand for the deposit to be made within a specific time frame, there is case law to support that the demand date is now subject to time of the essence provisions.
In summary, transactions go smoothly when everyone adheres to the terms of the contract and all time frames set forth in the contract. Therefore, it is important to calendar important dates, send reminders, and stay on top of it for sure. This is particularly important if the contract you are working with is either the Florida Association of Realtors®/Florida Bar Residential Contract for Sale and Purchase (Rev 6/2010) and the 2013 Florida Association of Realtors® Contract for Residential Sale and Purchase. Finally, and most importantly take note of Standard R, line 416 of the NABOR contract which reads: “The parties have agreed to deal in good faith with respect to all provisions of this Contract.” Working in good faith and fair dealing, extending professional courtesies, and working to keep the deal together is what truly makes the most sense for all of us and our clients.
- Fla. Jur. 2d., Contracts § 184.
- Centurion Air Corp., Inc. v. United Parcel Service Co, 420 F. 3d 1146.
- Westcorp Gov Sec Inc v. Homestead Air Force Base Fed Credit Union, 697 F. 2d 911
James F. Morey, Esq., is a member of the NABOR Legal Resources Committee, and a Florida Bar Board Certified Real Estate Attorney practicing with the firm of Bond, Schoeneck & King, PLLC, 4001 Tamiami Trail N, Suite 250, Naples, Florida 34103.