Contrary to what many people may believe, the closing date in a contract is usually only a target date. Generally, absent a “time is of the essence” provision, both New York and Connecticut laws give each party the right to adjourn the date set forth in the contract as the closing date for a reasonable period of time.
Parties to a contract may decide to put a “time is of the essence” provision in the contract when setting the closing date. In both New York and Connecticut, a “time is of the essence” clause in a contract indicates that the failure to close the transaction by the time specified will be considered a material breach under the contract.
If the contract does not contain a “time is of the essence” clause, either party may unilaterally make the closing date time of the essence by giving the other party “clear, unequivocal notice” that the failure to close the transaction by the date specified in the notice will be considered a default under the contract. Both New York and Connecticut law requires that the date specified in the notice as the “time is of the essence” date must provide the other party with a “reasonable” period of time to close in order for the notice to be effective. Generally speaking, courts have interpreted a “reasonable” period of time as thirty (30) days after the date of the notice. However, whether a period of time is reasonable under the circumstances is a fact-specific determination.
In New York, a time is of the essence notice must be delivered after the original closing date identified in the contract, otherwise it is not effective. On the contrary, in Connecticut, a time is of the essence notice may be sent before the closing date identified in the contract. However, both New York and Connecticut law requires that the date of closing set forth in the “time is of the essence” notice must be after the original closing date set forth in the contract.
The Real Estate and Transactional Department at Cuddy & Feder is available to address any questions you may have regarding closings and the sale of real property.