Buyers and sellers often think that they will be closing on the purchase or sale of a house on the closing date written in the contract for sale. However, in New Jersey, the closing date is not an “essential” term of the contract. Either party may request, and must be afforded a reasonable extension of the closing date. This can cause angst for buyers or sellers who believe that the contract date is set in stone.
The closing date in the contract is an estimated date for the closing rather than a “hard date”. If the parties agree to a “time of the essence” closing date, it can enforceable. It is, however, unlikely that attorneys for either party would agree to make the closing date an essential term, because it could subject their client to liability for breach of the contract if, even due to circumstances beyond their control, they were not able to close on the date stated in the contract. If time is of the essence, then failure to close on the date specified in the contract would constitute a material breach of the contract and subject the party to liability.
As an example for this discussion, let’s assume that the date closing is not made an essential term in the contract. Once the closing date specified in the contract has passed, the party who is ready to close can then set a new date for the closing and declare that that closing on that date is “time is of the essence,” provided the legal requirements to do so are met. At that point, if the non-declaring party does not close on the new date (usually two weeks after the declaration of time being of the essence), they will be in breach of the contract and subject to liability for that breach. The non-breaching party can seek remedies including specific performance, which compels the breaching party to proceed with the contract, or they can receive monetary compensation for the breach.