What Is a “Time Is of the Essence” Clause, and How Does It Impact the Contract?
What is a "Time is of the Essence" Clause?
A "Time is of the Essence (TIOTE)" clause refers to a clause that can be included at the time of real estate purchase agreements. This clause can come up when one is selling or buying property or working with contractors to build a piece of property and needs a contract. The clause states that failure to close the transaction by the date noted in the contract will result in a material breach under the agreement.
This is a legal phrase used to specify the period in which one party must fulfill its contractual obligations with the other party. Usually, this clause is used in real estate contracts, but it is important to note that it can also be found in other agreements. If the "Time is of the Essence" clause is not fulfilled by the time agreed upon in the contract, then priority will be given to the other party's right to exercise what comes next for the contract breach.
What Are Different Types of "Time is of the Essence" Clauses?
As noted above, "Time is of the Essence" clauses typically deal with matters about real estate. These clauses and timelines will be explained in great, specific detail in each of the agreements or contracts. Some important TIOTE clauses in real estate you might see include, but are not limited to:
Notices
Document delivery
Termination timing
The closing date
What is Included in a Valid "Time is of the Essence" Clause?
In an official "Time is of the Essence" clause, a set of agreed standards must be presented in each agreement. Both parties have to acknowledge an understanding of the criteria.
Each party must be mindful and aware of the set deadlines and the explained consequences that will arise if the deadlines are not met on time. Everyone knows that problems can occur, and events could need to be pushed back. However, both parties must be aware and agree to postpone closing days if those need to be adjusted.
Another standard consists of parties agreeing to fix the problem if there is a breach. If one party breaches the clause, it can be settled if the other party decides to amend the original clause and both agree.
How Does a "Time is of the Essence" Clause Impact the Contract?
In some states the law requires that the date specified in the contract as the "time is of the essence" date must provide the other party with a "reasonable" period to finish the transaction and close for the notice to be adequate and in effect. However, it is essential to note that this is on a case-by-case basis and could change depending on the parties and situation.
The various states may have different responses to the "Time is of the Essence" clause, so it is essential to note the specific requirements for your state. Meeting with an experienced real estate attorney can help you make the safest choice for your contract needs while following your state's regulations.
Partner With Us Today
Understanding real estate law and commercial property is our specialty. Come chat with an experienced commercial real estate lawyer today to learn about your contract, agreements, and clauses that come with it. To learn more about the details of your real estate contracts and how to work towards a better solution for your needs, contact a commercial real estate attorney at LareDiaz Law today by calling 267-675-7060.