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Colahan v. Stefanowicz

A-3115-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; TIME OF THE ESSENCE—Absent a time of the essence clause, a seller can be compelled to convey a property where there has only been a slight delay in the buyer being available for a closing and where the seller, by its silence, lulled the buyer into believing there was no objection to the delay.

Parties entered into an agreement for the sale of a single family residence. All parties signed by March 2, 2003. The agreement provided for settlement on March 29, 2003. It did not contain a “time of the essence” provision. All parties and their separate real estate agents were aware at the time of the agreement that there were problems with the accuracy of the property’s legal description. The existing survey did not correspond with the metes and bounds description of the property. In the seller’s own deed, the metes and bounds description was crossed out. The seller testified that he had experienced ongoing problems with local officials because of the inaccuracy of his metes and bounds description and survey. The agreement provided that the seller would convey marketable and insurable title.

Because of the known survey problem, the agreement provided that sale was conditioned upon satisfactory review of the existing survey. The agreement gave the buyer fourteen days from the end of attorney review of the agreement to disapprove of the agreement. The absence of any notice of disapproval within this time would indicate approval. Eleven days after the agreement was signed, a surveyor produced a revised metes and bounds description. The title company told the real estate agents that a survey, matching with the metes and bounds description, was required to make the title insurable. It became apparent that preparation of the new survey might not be completed by the agreed-upon closing date, and the buyer’s real estate agent prepared an addendum to the agreement. The addendum provided that the obligation to close was contingent upon the seller providing a revised survey and legal description of the property. Further, if this could not be done to satisfy the buyer’s title insurance company, the buyer, at his sole discretion, could void the contract of sale, extend the time for the seller to obtain proper documentation, or accept any different documentation. The addendum also extended the settlement date to April 11.

The buyer signed the addendum and turned it over to his real estate agent who delivered a copy of it to the seller’s real estate agent on March 17. There was a conflict in the testimony as to whether the copy given to the seller’s realtor was signed or not. According to the seller, his agent told him about the addendum and attempted to show it to him, but the seller claimed it was unsigned and refused to look at it. The seller insisted that unless the document was signed, he would not review it. Therefore, he felt as though he was still bound by the original agreement.

The title company, relying on the advice of both real estate agents, scheduled settlement for April 11. It sent notices to all parties. The seller denied receiving the notice. The title company received a revised and complete survey on March 31, and furnished it to the parties on April 3. At about that time, the seller informed his agent, who in turn informed the buyer and his agent, that he was no longer bound to complete settlement because the contract had expired. On April 11, the buyer went to settlement, signed all necessary documents, and deposited the funds required to complete settlement. The seller did not attend and did not produce a deed to convey title. The buyer then sued for specific performance.

The lower court ordered the seller to convey title in accordance with the agreement of sale. It pointed out that by April 3, the only conditions that were ever suggested in the addendum had been satisfied and, at that point, there was no basis in fact or in law for either party to deny its obligations under the agreement. Consequently, the lower court concluded that the seller was bound in equity to agree to the contract modification.

On appeal, the Appellate Division pointed out that absent a time of the essence provision in a contract for the sale of real property, the stated closing date is only tentative. Equity may require specific performance of a real estate sales agreement after the time stated for completion of the transaction, unless it was the parties’ intent that time was to be of the essence. There is no set time limit beyond which a contractual party may exceed a specified closing date and still be entitled to specific performance, but it must be reasonable.

The Court also noted that although the buyer could have terminated the contract pursuant to the agreement based on the deficient survey, he actually pursued the purchase by pressing for a revised survey acceptable to the title insurance company. He demonstrated his willingness by continuing, unabated, in his efforts to obtain an insurable survey which would have enabled the seller to deliver marketable and insurable title by the buyer’s scheduled settlement date of April 11. Had the seller informed the buyer that he would not agree to an extension upon learning in mid-March that the survey work might have extended beyond March 29, the buyer might have been able to press for acceleration of the survey work. However, the seller chose to remain silent, knowing there would be a delay, thus lulling the buyer into a belief that he had no objection to the brief adjournment.

Therefore, since there was no “time of the essence” clause in the agreement and there was only a thirteen-day delay, the Court affirmed the lower court’s decision to compel the seller to convey the property.

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