Time of the Essence in New Jersey and its Pitfalls
In New Jersey, most residential contracts are prepared by realtors on the New Jersey Association of Realtors form 118 standard contract. Paragraph 8 of that contract states that Time is of the Essence. It is critical to understand what this means, and how this affects your ability to close on time and avoid damages, and a lawsuit.
Time of the Essence is a mechanism created and enforced by the courts; there is no statute or ordinance determining the elements to making Time of the Essence in a contract in New Jersey. Consequently, the courts have elucidated three pivotal elements in determining a new closing date: (1) the date originally set for closing; (2) the date notice is given; and (3) the new date fixed for closing. Finn v. Glick, 42 N.J. Super. 514, 518-19 (App. Div. 1956).
Unfortunately, it has become common practice in New Jersey to set a new closing date about ten days after the Time of the Essence Notice. 13A N.J. Prac., Real Estate Law and Practice, 26.196 (2d ed.). This typically is impractical, and often, downright a breach of contract.
New Jersey Courts have well established precedent that contracts should be read to require a reading of the contract in a common sense manner and as a whole, with each word defined by its plain and ordinary meaning. Therefore, "where the terms of a contract are clear and unambiguous there is no room for interpretation or construction and the courts must enforce those terms as written." Karl's Sales and Serv., Inc. v. Gimbel Bros., 249 N.J. Super. 487, 493 (App. Div.), certif. den., 127 N.J. 548, (1991).
While most attorneys will remove time of the essence form the contract in their rider, it can be demanded later. It is therefore imperative to understand that time of the essence can backfire! In one case, a seller of real estate attempted to set a time of the essence closing with a two-week notice period that was held ineffective where two months following the original closing date had passed. Similarly, another court, in an unreported opinion, determined a two-week notice period ineffective after the purchaser was required to conduct a new appraisal after his mortgage commitment expired. So, regardless whether you are the buyer or the seller, sending and relying upon an ineffective time of the essence could result in damages against you, but failing to follow through on the time of the essence demand could waive your right to enforce it!
If you are looking for a real estate attorney in New Jersey to ensure you are properly navigating your way through the purchase or sale of real estate, you can email me at Ranalli@ranalli-law.com. Your rights and privacy are 100% protected. We never share or sell your information or email. No one wants spam email and I respect your right to privacy. I am here to help you.
