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Pimentel v. La Borinquena Bakery, Inc.

A-4984-06T2 (N.J. Super. App. Div. 2008) (Unpublished)

TIME OF THE ESSENCE — Just because a real estate closing date has been set by court order does not mean that once that closing date has come, a party is not entitled to send notice of a time of the essence closing provided that the time given to close is reasonable.

A tenant entered into a seven year lease. The lease gave the tenant an option to buy the property any time during the lease term. The tenant was also given a right of first refusal to be exercised after the lease term expired. Litigation ensued between the landlord and its tenant, resulting in an order requiring the landlord to submit a sales agreement to the tenant and to complete the sale within forty-five days of the signing of the agreement. The closing date letter from the landlord to its tenant called for a time of the essence closing two weeks from the date of the letter. Two reminder notices were sent to the tenant by the landlord. The closing did not take place on the scheduled day, as the tenant claimed a lender funding problem and that its attorney was in court on unrelated matters. The day after the closing date, the landlord demanded substantiation that loan proceeds had been wired to the tenant’s attorney’s trust account. No sale occurred pursuant to the court’s order, and the landlord sought a declaratory judgment that the lease and that the purchase option had been terminated. The lower court held in favor of the landlord, finding that the time of the essence notice was reasonable.

The Appellate Division affirmed, finding that the time of the essence letter gave two weeks’ notice, with reminders, for a closing at a convenient location – the buyer’s attorney’s office. It held that the validity of the notice was not defeated by the existence of a court order requiring the landlord to sell. The Court found that it was the tenant’s delay in closing that had cost her the benefit of the bargain, and that the lower court was reasonable in concluding that the tenant breached its covenant of good faith and fair dealing by trying to push back the closing, and not keeping the landlord’s attorney updated on relevant information such as whether the lender’s funds had actually been wired.

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