If a real estate contract makes time of the essence, is it necessary for the seller to give the buyer an opportunity to close after the closing date has passed?

Posted By on June 14, 2016

Last Update: 7/18/18

According to Florida case law as of the date of this article, when a real estate contract contains a time is of the essence provision, it is not necessary for a seller to give notice to a buyer or give a buyer an opportunity to close after a buyer’s failure to perform on the closing date.

Rybovich Boat Works, Inc. v. Atkins, 587 So. 2d 519 (Fla. 4th DCA 1991)

In Rybovich, back in June 1985, Randall Atkins, Trustee, as the buyer, and Rybovich Boat Works, Inc. and Robert C. Fisher, as the sellers a entered into a written agreement for a purchase and sale option regarding some real estate in Palm Beach County.  If Mr. Atkins defaulted, their contract provided Mr. Fisher and Rybovich would keep all of the deposits as liquidated damages.

Read: Earnest Money Deposits – Is the Deposit in Dispute? – Is the Deposit Missing?

In the contract, they agreed that (1) any notice or elections under the contract which any party would be required to make were required to be given to the other party in writing; (2) the agreement could not be changed except in writing signed by both the parties; (3) any waiver of rights must be in writing; (4) no waiver of any right shall be deemed a waiver of any subsequent right or obligation; and (5) “time was of the essence” of the transaction, and the deal could be extended only by a written agreement between the parties.

Key to the contract were two provisions:  (1) Mr. Fisher and Rybovich agreed to convey marketable title free and clear of any liens and encumbrances except those set out in an exhibit, and (2) within fifteen (15) days after signing the contract, they would furnish Mr. Atkins with a commitment for title insurance.

Finally, closing was discussed in contract paragraph 8 as follows:

CLOSING

This transaction shall be closed … at the offices of Seller’s attorney….

[T]he date and time of closing … shall be established by purchaser, by giving at least seven (7) days notice thereof to seller.

The contract was then changed.  In fact, between September 1985 and November 1987 the agreement was amended in writing nine times. Eight of the amendments were done in order to push back the closing date.  Each time the contract was amended, the consideration for doing so was that the buyer provided additional deposit money.

By the time of the last amendment, Mr. Atkins had put up a total of deposits in escrow of $1,000,000.00.

The 8th Amendment included an acknowledgment by Mr. Atkins that the sellers had fully performed its obligations under the agreement.  Then came the ninth and final amendment.  It stated:

The date and time of Closing (the “Closing Date”) shall be established by Purchaser, by giving at least seven (7) days notice thereof to Seller; provided that the Closing Date shall not be later than December 5, 1987.

In the Ninth Amendment buyer again acknowledged and confirmed seller had fully performed all of his obligations under the agreement and that all of the provisions of the agreement except as expressly modified by the Ninth Amendment remained in full force and effect.

On December 5, 1987, the deal did not close.  There was no amendment to extend the time for closing. (A proposed Tenth Amendment was being negotiated but was never executed.)

Letters were sent between the parties.  Mr. Atkins complained the sellers could not close the deal because they were involved in a dispute with a licensee who occupied a portion of the premises.  The licensee blocked the sellers’ ability to close because they could not tender full performance.

So, the deal never went through. Two months later, the sellers went to the escrow agent that held the million dollar deposit.  They informed the escrow agent that Mr. Atkins was in default.  His default was described as his failure to close on December 5, 1987.

The following day, the sellers went to the bank with letters of credit, representing portions of the contract deposit.  They demanded payment.

They also filed a lawsuit against the purchaser for breach of the agreement, and to quiet title. Mr. Atkins answered their complaint with a general denial of their allegations as well as raising his own arguments as affirmative defenses.

At trial, the sellers won a summary judgment on buyer’s affirmative defense that seller could not have closed on the property because of title defects.

The buyer won summary judgment on the contract, with the judge acknowledging the buyer gave no notice of closing date as contemplated by the original agreement, as well as all of the amendments to the contract, and that the last possible closing date went by without buyer’s notice to close.

However, the trial court reasoned that seller should have known at least six days before the closing date that buyer had not given the notice.

The judge postulated that seller might then have set a closing date itself and established that it was ready, willing and able to close. The court concluded that “the only fair construction of the facts in this case is that by the parties’ inaction, there was either a breach by both occurring at the same time or an abandonment of the contract provision calling for a closing on or before December 5, 1987. In either event plaintiffs cannot recover.”

Of course, the judge’s decision was appealed.  The reviewing court did not agree with the trial court judge.  It found that the judge erred, because the trial court ignored the language of the written agreements.

The agreement was unambiguous.  There was both a time of the essence clause and an anti-waiver clause in the contract.

Where time is of the essence, no notice of a default is required. Delta Mobile Homes, Inc. v. Ehmann, 275 So.2d 269 (Fla. 3d DCA 1973).

When Mr. Atkins failed to set the closing date, and failed to close by the latest date called for in the agreement, he was in default.

As for his affirmative defenses, Mr. Atkins claimed that through the course of dealings between the parties, and the numerous extensions, seller waived or was estopped to enforce the time of the essence clause.

Although such time of the essence provisions may be waived by the conduct of the parties, this contract contained an anti-waiver provision which provided:

Except as otherwise expressly provided herein, no waiver of any rights or obligations hereunder shall be deemed to have occurred unless in writing signed by the party against whom such waiver is asserted and no waiver shall be deemed a waiver of any other or subsequent right or obligation….

Thus under the anti-waiver provision of this agreement the time of the essence provision could not have been waived unless there was a writing signed by the party against whom the waiver was asserted.

Because the contract was unambiguous, the buyer’s affirmative defenses of waiver and estoppel were defeated as a matter of law by the provisions of the contract itself. Summary judgment for the sellers was proper.

Related: Time is of the Essence Provisions in Florida Real Estate Contracts: What Does This Contract Language Mean to You?

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