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Home Properties of New York, L.P. v. Ocino, Inc.

341 N.J. Super. 604, 775 A.2d 671 (App. Div. 2001)

TIME OF THE ESSENCE; WAIVER—Continuing to negotiate with the other party even after a time of the essence closing date has been set does not necessarily result in a waiver of the time of the essence requirement.

A developer submitted site plans to a planning board for the construction of 400 units of affordable housing. The Council on Affordable Housing (COAH) approved a plan that required 281 units to be priced at market value, 47 units to be reserved for low income occupants, and 47 units to be reserved for moderate-income occupants. The developer then entered into a contract of sale with a buyer. The contract set a closing date, but provided that the closing date could be adjourned to allow the buyer to apply for tax credit financing. If the buyer did not obtain tax credit financing by a given date, then either party could cancel the contract. After the closing date passed, the developer sold the property to a new owner, subject to the earlier contract with the first buyer. The new owner sent a time of essence letter to the first buyer. The time of essence letter set forth that if the first buyer did not receive a tax credit during the first cycle during which tax credits are awarded by the New Jersey Housing and Mortgage Finance Agency (NJHMFA), then the closing was to take place on a given, fixed date. If the first buyer was informed that it would be receiving a tax credit, closing would be adjourned to a later date. The first buyer did not respond to the time of essence letter. Also, it did not receive the tax credits and did not close on the dated fixed in the time of essence letter. The new owner sued the first buyer, seeking a determination by the court that the contract was terminated if the first buyer failed to close on the date provided for in the time of essence letter. While the case was still pending, the new owner sent the first buyer a letter terminating the contract. It then attempted to minimize its damages by seeking approval of the site plans for the project with COAH and NJHMFA. However, because of the ongoing lawsuit between the new owner and the first buyer, COAH and NJHMFA required the new owner to seek the participation of the first buyer in the approval process. The new owner negotiated with the first buyer to obtain the approvals and tax credit financing for the project. At the same time, new owner continued to maintain that, despite the ongoing negotiations, the contract was terminated because the first buyer failed to close by a given date. The lower court held that the new owner, by continuing to negotiate after the closing date passed, waived the time of essence demand. However, the lower court found that since the first buyer did not close within a reasonable time after the date specified in the contract, the contract was terminated. On appeal, the Appellate Division agreed with the lower court that the contract was terminated but, it disagreed with the lower court’s finding that the new owner waived its time of the essence demand. It found that the new owner’s offer of cooperation with the first buyer in order to mitigate its financial losses was not inconsistent with its position that the contract was terminated due to the first buyer’s failure to close by the date specified in the time of the essence letter.

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