The standard residential contract of sale used by attorneys in the New York Metropolitan area will often state that the closing will take place, for example, “on or about December 1, 2018.” In New York, unlike many other states, the “Closing Date” contained in the contract, especially if the words “on or about” precede it, is a fluid date. It is rare that a closing actually occurs on the date specified in the contract. The phrase “on or about” has been interpreted by the New York courts to mean that either side has a reasonable period beyond the “on or about” date in which to close.
If all progresses on schedule, a closing can usually occur within 60 days after the contract has been fully executed by the seller and purchaser. However, not all real estate transactions proceed as planned. While many of the transactions do eventually close (unless a buyer is unable to obtain financing or an appraisal comes in too low), there are some that do end up in a dispute or litigation. If a party is unwilling to close within a “reasonable” time after the closing date, many times, before litigation is commenced, the attorney for the party wishing to close can send what is referred to as a Time of the Essence Letter (“TOE Letter”) to the other party. That letter will set forth a new closing date stating that “time is of the essence.” If the party receiving the letter does not close by that date they can be declared in default under the terms of the contract of sale.
It is important to note that the “time of the essence” standard is not a statutory standard but rather one established by the courts and case law, and is constantly changing depending on each case that is decided by the courts. While the courts are silent as to what constitutes a “reasonable” time, many real estate attorneys practicing in the New York Metropolitan area have come to a consensus that “reasonable” is generally about 30 days. However, the case law has explained that the other party must be given a reasonable time in which to act and what amounts to a reasonable time to perform depends on the circumstances of the case.
Whether dealing with a TOE Letter or an “on or about” closing date, the closing date and closing time frames can quickly change and extend far beyond the “on or about” closing date depending on the circumstances.