If you have bought or sold property, you have likely seen the phrase “Time Is of the Essence” in your contract. It sounds formal, but it carries significant legal weight.
This clause makes deadlines in a contract legally strict. When it applies, dates are not flexible targets. Missing one can put a deal at risk.
Jonathan White of Jordan & White was recently quoted in a national real estate article discussing how this clause works in real transactions. His comments focused on what buyers and sellers should understand before agreeing to these terms.
Why Timing Matters More Than You Think
In many contracts, deadlines such as inspection periods, financing approval, and closing dates are important. When a Time Is of the Essence clause is included, those deadlines become firm obligations rather than “target dates.”
Jonathan explained how this often plays out in competitive markets. “While termination is not always automatic, a seller can declare a default and walk away the moment a deadline passes. We most often see this when buyers submit a ‘cash’ offer to stay competitive while still working with a lender behind the scenes.”
Legal Consequences of Missing a Deadline
When this clause is active, the typical “grace periods” often associated with contract law disappear. If a party misses a deadline by even a few hours, the consequences can be immediate and severe:
- Declaration of Default: The non-breaching party can immediately declare the contract void.
- Loss of Earnest Money: Buyers risk losing their entire deposit if they fail to perform by the specified date.
- Lawsuits for Specific Performance: In some cases, a seller may be sued to force the sale, or a buyer may be sued for damages.
- Loss of Leverage: A missed date gives the other party the power to renegotiate terms or walk away for a better offer.
Extensions Are Not Automatic
Many people assume that if a closing is delayed, everyone will simply agree to extend the contract. That is not always the case.
Jonathan noted, “If the lender fails to close on time and the buyer requests an extension, the seller can refuse and invoke the Time Is of the Essence clause, especially if a stronger backup offer has emerged.”
An extension must be agreed to in writing and signed before the original deadline passes. Verbal agreements or informal emails are usually not legally sufficient.
How to Negotiate or Remove the Clause
Because of the high stakes involved, the “Time Is of the Essence” clause is often a point of negotiation. Here is how parties typically handle it:
- Specific Milestone Targeting: Instead of applying the clause to the entire contract, you can negotiate to have it apply only to the final closing date.
- Notice and Cure Periods: You can request a “Right to Cure,” which provides a 24- to 72-hour window to fix a missed deadline before a default is officially declared.
- Striking the Clause: In buyer-friendly markets, your attorney may suggest striking the phrase entirely to allow for more flexibility should a lender delay occur.
What Buyers and Sellers Should Keep in Mind
For Buyers:
- Make sure your financing is solid before removing contingencies.
- Stay in close contact with your lender to ensure they are on schedule.
- Request extensions in writing before a deadline expires.
For Sellers:
- Review whether the contract includes this clause to understand your “walk-away” rights.
- Monitor buyer performance closely to ensure they are hitting milestones.
- Understand how timing affects your leverage if a better backup offer arrives.
The Bottom Line
Real estate contracts are built around deadlines. When the phrase “Time Is of the Essence” appears, those deadlines become critical. Before signing, it helps to understand how strict timing requirements could affect your transaction. Clear communication and careful planning can prevent avoidable problems at closing.
If you would like to read the full blog post from Redfin, click here.