Time deadlines in real estate deals have never been more important than today. I experienced two deals just before the holidays that confirmed what happens or can happen when you miss a deadline.
In the first case, the buyers signed a deal with a builder several years ago and the home was ready to close. The home was worth over $200,000 more than what the buyers paid for it. As financing was left late, the buyers had concerns that they would not be ready to close in time and asked if I could request a short extension.
The builder’s lawyer replied that if I was not ready to close on the closing date and asked for even a one-day extension, the builder was going to cancel the deal, forfeit the deposits and re-sell the property for more money. I explained everything to my buyer clients and worked with them and their lender to make sure we had the funds in plenty of time for closing. I also made arrangements to wire the closing funds to the builder lawyer’s trust account, to avoid any situation of a courier with certified cheques being delayed on route. The deal closed on time.
In the second transaction, the buyer had 24 hours after acceptance to come up with the deposit. They only delivered part of the deposit, stating they needed an extra day because the funds were tied up. In the meantime, the seller received a higher offer from a second buyer and asked me if they could cancel the first agreement. My answer was yes and that is what was done. The first buyer was devastated with the results.
Here are the lessons to be learned:
1. Time is of the essence. Deadlines matter.
Courts have held that time deadlines, whether for delivery of deposits or waiving conditions, matter. If they are missed, even by a few minutes, it could result in the cancellation of the deal. Deadlines can be changed by an amendment signed by the buyer and the seller or their lawyers. Remember to diarize all deadlines so you don’t miss anything.
2. Do not leave anything to the last minute.
Even in an age of instant communication, emails are returned as unsent and faxes are returned as busy. If you cannot deliver the proper notice in person, make sure you send it and confirm it was received by the other side in advance of any deadline date.
3. Make sure deposit funds are available before you present any offer.
Speak to your buyers to make sure they can obtain a bank draft for any deposit within 24 hours of any offer being accepted. If your buyer says they will need more time, then just add in a clause that the deposit will be paid within 48-72 hours after acceptance.
4. Make sure all your financing conditions are satisfied well in advance.
Just because a buyer is approved for a mortgage does not mean that funds will arrive in time on the closing date. Make sure the buyer is working with their lender or mortgage broker to make sure that all lender conditions, whether it is employment income, payment of credit cards or obtaining a gift letter, have all been satisfied well in advance of the closing date, to avoid any last minute delays.
Be properly prepared so you and your clients do not lose any deals this year because of time deadlines.
Mark Weisleder is a senior partner, author and speaker at the law firm RealEstateLawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529.
