Most contracts for the sale of real estate designate a date for the closing. While buyers and sellers generally prepare to close on that date, it is not always possible. Delays are not unusual and frequently reasonable under the circumstances. So how definitive is the closing date in the contract?
Most contracts for the sale of real estate in the central and northern areas of New Jersey refer to the closing date as an “on or about” or “on or before” date. This means that while the closing date has been agreed upon, neither party can legally require the other to actually close on that date. The reason for providing flexibility in the closing date is due to the sometimes uncertain nature of the parties’ schedules, availability of buyers’ funds, lender delays, mover’s schedules, etc., etc., etc.
In order to avoid any unreasonable delay in closing, a specific written notice can be provided to the uncooperative party to set a firm and final date. Generally, once the contract closing date has passed and all contingencies and conditions in the contract have been met or waived, either the buyer or the seller can make “time of the essence” by providing certain written notice to the other party setting a specific time, date and location for closing. The time period given the other party of the “time of the essence” date must be reasonable under the circumstances. (Generally, but not always, this is deemed to be 10-14 days). While cooperation in agreeing upon a closing date is usually in both parties’ best interest, some situations require a unilateral enforcement of a closing date. If the uncooperative party does not then close, they may be deemed in breach of the contract.
It should be noted that “South Jersey” contracts (generally those counties south of Mercer County) routinely provide for a “time of the essence” closing which would require the consent of both parties to change the closing date.
Effective as of July 30, 2009, lenders now have new requirements to provide certain disclosure notices to borrowers which may affect closing dates. In 2008, the Housing and Economic Recovery Act was passed to protect home borrowers from predatory lending practices and provide borrowers with disclosures regarding the cost of their loans in advance of closing. Regulations were enacted which now require lenders to provide initial mortgage disclosures to a borrower seven (7) business days in advance of any closing. If there is an increase of more the .125% in the Annual Percentage Rate, initially calculated, then a new disclosure statement must be provided to a buyer three (3) business days in advance of closing. Thus, with these new regulations, it is possible that a closing date, even if agreed upon by all parties, may have to be delayed to comply with these new regulations.
Thus, both buyers and sellers should be aware from the outset that the closing date listed in a contract, may not be definitive and that all parties should remain flexible in determining a firm and final date.