If you have ever requested an extension for finance or a pest and building inspection then you will likely have come across the phrase “time is of the essence” in correspondence from your conveyancer.
All Queensland standard REIQ property contracts include a “time of the essence” clause.
This benefits both buyers and sellers as, essentially, “time is of the essence” means that parties to a contract must perform their contractual obligations by the due dates as set by the contract. It assists in giving clear timeframes and deadlines throughout the transaction and reduces any unnecessary delays.
What conditions are affected?
In relation to residential property sales, “time is of the essence” means that the deadlines for certain obligations must be adhered to including, but not limited to:-
- payment of initial deposit;
- payment of balance deposit (if any);
- building and pest condition; and
- finance approval.
The importance of parties meeting their obligations within the deadlines set out in the contract extends to settlement day. The contract will state the agreed time that settlement is to occur on the settlement date.
What happens if you can’t meet a deadline?
If for some reason, settlement cannot be reached at the specified time, the other party can terminate the contract and possibly sue for breach of contract. In relation to a property sale, if the buyer is at fault, the deposit will be forfeited and released to the seller. If the seller is at fault, the contract can be terminated, and the deposit is released back to the buyer.
There may be occasions where it is not possible for a party to meet the deadline dates as set by the contract. This may only come to light as time progresses and unforeseen issues arise. One of the most common sticking points is slow finance approvals due to delays in processing by mortgage brokers or banks. In these circumstances it may be possible for the dates listed in the contract to be extended. Any extension of time needs to be made with the mutual agreement of both parties. If an extension is required, your conveyancer will need sufficient time to submit the request for an extension and obtain the necessary agreement.
There can be significant effects of a party not meeting their obligations in relation to time under a contract. If a party is not able to complete an obligation under the contract on or before the due date, the contract may be terminated, and the party may be in breach of the contract. In some situations, the defaulting party may also be liable to the other party for costs and compensation.
The best thing to do if you think you might have trouble meeting a deadline is to talk to your conveyancer. They will know what steps you need to take and will ensure that your interests are protected.
New editions of the of the Contract for Houses and Residential Land (17th ed.) and Contract for Residential Lots in a Community Title Scheme (13th ed.) were recently released on the 20th January 2022. In these new editions there has been an update to the provisions relating to time, specifically in relation to the settlement date.
The updated clause gives the buyer or seller the right to extend the settlement date. Either party can request a five business day extension any time up to 4pm on the pre-agreed settlement date if the party is unable to settle due to the delay of a financier, or any other reason. This update was introduced to assist in circumstances where buyers are potentially unfairly affected by delays outside of their control.