Real estate contracts are documents that form concerning the element of time. You may have heard the saying “Time is of the essence” when it comes to contracts and that is very true for real estate contracts. The dimension of time or timing is infused into the contract such that without certainty of dates and times the contract can be frustrating and unenforceable. Let’s talk through some of the most crucial aspects of this principle.
The most basic aspect of any real estate contract or the building block upon which all else rests is the acceptance of the contract by all parties. In the standard AREA purchase contract, there is a term that indicates that This offer/counteroffer will be open for written acceptance until [such and such date and time]. This term is filled in at the time of the initial offer and should be edited with each subsequent counteroffer since it indicates how long the party making the offer is willing to participate in the process without a firm acceptance. The offering or counter-offering party using this term is basically telling the other party they are moving on, and negotiations are ended if they cannot make an agreement by the stated time and date. If no agreement is reached the offer is no longer valid. For this reason, when this date and time passes the offer cannot be accepted as a contract without an amendment to this term and agreement by both parties, or better yet a new offer being written entirely to clarify the beginning of a new negotiation.
Communication is the key
If the contract is signed and initialed before this date and time, for which the offer is open for acceptance, then we have a valid contract correct? NOT SO FAST! For real estate contracts, it is not enough for the parties to sign and initial only, but legal obligations only begin after the contract has been signed, initialed by all parties, AND COMMUNICATED to the parties. This means that to ensure that your buyer is pending on that home they have always dreamed about, they need to accept the offer by signing the agreement, initialing all changes, and communicating the complete contract back to the seller. At that point, the parties have a contract and not a moment before. To tie it back to the offer acceptance, all of that must happen before the date and time window given for the offer to be accepted.
What can go wrong?
Jean and Pat are newlyweds who have just agreed with the sellers of their new dream home. The REALTOR® is sending them the final agreement to sign electronically while they are going to celebrate with a weekend of skiing in Banff. No one skis with a laptop so they will simply sign the agreement in the evening when they get back to the hotel. Unfortunately, when they open their email, they are disappointed to learn the seller accepted another offer while waiting for them to sign and communicate their acceptance. The only way for Jean and Pat to be certain they had something to celebrate was to sign, initial and communicate that acceptance back to the seller as quickly as possible.
These are not the only dates and times with consequences. Deposit dates that are not met in time may result in a seller voiding the contract. Condition dates that are not met on time automatically end the contract. Applicable dower consent which is not sent on time may result in the buyer voiding the contract. Because, as the old saying goes, time marches on, these hard and fast markers in the contract must be feared and respected to ensure all parties meet the expectations they have set for each other. It cannot be stated seriously enough that whatever dates and times are added to the contract are as firm and unbending as time itself so all dates and times should be added thoughtfully and generously enough to allow the parties to complete the work needed to be completed.
In hurried markets with multiple offers, the temptation is to favor speed over careful attention to the details, and too many times this causes frayed relationships and unenforceable contracts. Time is of the essence in a real estate contract and to use another old saying “Time waits for no man.” So be sure to take a little extra time to consider how important time is in your next contract.
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619