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Franco v. Rampello

A-3926-01T3 and A-5451-01T3 (N.J. Super. App. Div. 2003) (Unpublished)

TIME OF THE ESSENCE—In connection with a court ordered closing, a seller may not need not wait beyond the normal close of the business day for its buyer to have its funds available, and the buyer may lose its right to close under such circumstances.

A month-to-month residential lease included an option granting the tenant the right to purchase the house by a given date at a given price. The tenant timely sought to exercise the option, but the landlord-seller rejected the exercise. A court determined that the option was valid and ordered that “the closing must take place within a ‘reasonable amount of time.’” The tenant then forwarded a contract with a mortgage pre-approval letter in accordance with the lower court’s holding. The seller rejected the contract of sale because the “preapproval contained a third party ... on the mortgage.” The Court then ruled that there could not be a third party on the mortgage and issued another order enforcing the lease option and setting a fixed closing date. The tenant then forwarded a second pre-approval letter containing only its own name. The seller responded with a contract requiring a deposit by a given date. The tenant requested an extension of time to deposit the money, but the landlord-seller refused. The Court then granted a further extension of the closing date and required that the deposit be made by a given date. The deposit was delivered, but the landlord-seller returned it because it “intended to seek reconsideration.” Its request for reconsideration was denied.

The seller refused to comply with the then-current court order and also refused to allow surveyors on the land. The lower court found the seller in contempt and extended the closing date. The day before the now-scheduled closing, the seller wrote saying that it was selling only the rental property, not the entire property. Another court order was issued setting yet another closing date and ordering the seller to pay a small amount of attorneys’ fees to the buyer. When the time came for closing, the tenant-buyer had the mortgage proceeds and deposit monies in its attorney’s trust account. It also had all but about $4,000 available, but claimed that the money would arrive via money order by 9:30 p.m. that evening. The seller refused to close and this time it obtained a ruling from the court that the contract was null and void because the tenant-buyer did not have sufficient funds at the closing, even though the money was eventually available by 9:30 p.m. that evening. The Appellate Division agreed with the lower court that the tenant-buyer had almost one full year to have the funds in place. Further, it agreed with the lower court “that there was no requirement for the [seller] to wait into the evening for an additional money order to be dropped off by an ‘unknown third party.’” It agreed with the lower court that the tenant-buyer did not timely comply with the applicable court order and felt that the lower court was correct in concluding that the buyer should have had the funds available “by the normal close of business on the date set.”

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