Can I get my good faith deposit back after the the sellers missed closing datebecause they failed to obtain permits for an illegal remodel?

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Can I get my good faith deposit back after the the sellers missed closing datebecause they failed to obtain permits for an illegal remodel?

We are in the process of buying a home in Monmouth County. We were supposed to close on the house 3 weeks ago and in our contract it specifically states “time is of the essence.” We did not close because the sellers did not obtain permits for the basement kitchen that they built illegally. In our contract it specifically state that time is of the essence and that if the sellers/buyers do no do what is required then they could be in default. As of today, the sellers still don’t have permit approvals. Can I get out of this contract and possibly get my good faith deposit back?

Asked on September 20, 2011 under Real Estate Law, New Jersey

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Generally speaking, a "time of the essence" clause means that the performance by one party to the contract at a specified location, date and time is required in order to require performance by the other party to the contract, and a failure to perform by the time specified will be a breach of the contract. You seem to say that it "could be" in default.  Yes or no?  And does the rest of the papragraph specifically state that the buyer will receive the deposit back? There is generally a time frame to make a deman on time is of the esstence - generally 10 days notice - so I would look at your requirements for notice in the contract.  Let an attorney read it for you.  It is worth it.  Good luck.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

From what you write, it appears that you *may* be able to terminate the contract and get your deposit back. If the seller's missed the closing date due to their failure obtain required permits or do something required of them, they would be in breach of the contract; moreover, it is a material breach, in that the closing date--especially when the contract states that "time is of the essence"--is a critical term, going to the heart of the contract, and therefore one whose breach could allow termination.

The key issue, however, would be confirming that missing the closing date was due to the seller's failure--if, for example, you could have closed but chose not to (i.e. you could close without the permits, then either get the permits later--with seller paying for them--or sue the seller for monetary compensation), then it could possibly have been you who were in material breach by not closing; that is, for a nonmaterial breach of seller's, the recourse may be to close anyway, then seek apppropriate compensation. Not every breach by a seller allows the buyer to terminate the contract.

You therefore need to review the contact and the situation with an attorney, to see who breached what when, and how significant or material that breach was, to determine who has what recourse.


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