THE DATING GAME
Bryan D. Lytle, Esq.
I recently had a question concerning a closing date extension on a REIN contract, the buyer was having trouble getting the loan approved, and the seller was understandably impatient. The closing date in the contract was August 15. On August 25 the parties executed an amendment that provided “the closing date will be extended an additional fifteen days for the purpose of curing issues relating to buyers’ financing on the subject property.”
So, was the new closing date August 30, September 9, or September 19? Think for a moment before you read on for my answer, not just for your answer but to see if you can identify my reasoning for all of the possible dates I listed. I think there is a plausible basis for choosing any of those dates and this illustrates why you, as the draftsman, always should be as precise as possible.
As you know, under the REIN contract there is an automatic extension to the closing date (ten-day default) in order to cure title defects or obtain financing. The listing agent really wanted to know when her seller could get out of the deal – and I think the analysis is three-fold: does the fifteen days run from the date of the amendment, from the closing date originally specified in the contract, or from the original closing date plus ten days; and, in any such case does the ten day “extension period” under the REIN boiler plate language still apply to that new date? This is why there are several possible answers.
While this is something about which reasonable people might well disagree (and if there were no disagreement then the intent of the parties should control), in my view the amendment, due to the way it was worded, served to insert a new, formulaic, closing date in the contract as though it were written in the Settlement Date blank in paragraph eight of the contract, and as a result the additional ten days still applied and ran from that new date. So, I think the correct answer is the new Settlement Date was August 30 and the new buyer’s financing drop-dead extension date was ten days later, or September 9.
I think this question illustrates several points. First, when writing dates, or extending closing dates, it is always better to provide a firm, specific, date rather than a formulaic date. When one uses a formula that formula is always open to some interpretation whereas a hard and fast date is not. Moreover, with the REIN contract one should always be mindful of the “extension period” and specifically address that as well. Finally, here the seller was getting tired of waiting so I suspect the seller really wanted to impose a real, hard, deadline – in other words to make the closing date “of the essence” and to re-market the property in the interim. Consequently, I would suggest you use one of the following three clauses (or a variation thereof, confirm with your broker) in an amendment when you want to extend the closing date:
The August 15 Settlement Date set forth in paragraph eight (8) is hereby extended, by agreement, to August 30, 2023. All other provisions of the contract remain in effect, including the Settlement Date ten (10) day extension set forth in paragraph eight (8).
The August 15 Settlement Date set forth in paragraph eight (8) is hereby extended, by agreement, to August 30, 2023; provided, however, that time is now of the essence as to Buyer’s obligations to close on or before August 30, 2023, and the Settlement Date ten (10) day extension set forth in paragraph eight (8) is hereby deleted.
The August 15 Settlement Date set forth in paragraph eight (8) is hereby extended, by agreement, to August 30, 2023. All other provisions of the contract remain in effect, including the ten (10) day closing date extension set forth in paragraph eight (8). The parties further hereby agree that until Buyer closes Seller shall have the right to continue to offer the Property for sale, actively market it for that purpose, and seek new offers [insert your particular kick-out language here or adapt from the REIN First Right of Refusal form in order to set forth what happens if a new offer is received].
Obviously the clause you choose, and how you write it, is dependent upon which side of the transaction you have and the desires of your client, and there are many good variations of the kick-out clause so insert your favorite at the end of option three if desired.
As always, please do not hesitate to email me at drsozphilandbrian@lytlelaw.com if you are having dating problems, or if you have any questions or suggestions for future topics please email me at bdlytle@lytlelaw.com
©2023 Brian D. Lytle, Esq. This is a reprint of an article printed in the Realtor Update, a publication of the Virginia Peninsula Association of Realtors. Readers are cautioned that the law or the contract may have changed since it was written. Always check with your broker and attorney