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You are here: Home / Archives for legal

legal

Time is of the Essence: What Does it Mean?

November 7, 2016 by khproperties Leave a Comment

Time is of the Essence

The phrase “time is of the essence” is used often in real estate contracts and we’ve mentioned it numerous times in our posts breaking down real estate forms and addenda. What exactly does it mean and what are the implications to buyers and sellers when they are reminded that time is of the essence in a real estate contract? For our example purposes, we’ll be speaking in terms of the 1-4 Family Residential contract, although the verbiage appears in multiple places on different forms and addenda. The same concept will apply to anywhere you see “time is of the essence” written, but if you have a specific case or question, as always, we recommend you contact your real estate agent or if there are serious legal questions being asked, call your attorney for legal advice.

Time is of the Essence: The Clock is Ticking

Simply put, time is of the essence is a legal phrase used to remind all parties that the clock is ticking. The legal dictionary section of thefreedictionary.com defines it as:

Time is of the Essence. A phrase in a contract that means that performance by one party at or within the period specified in the contract is necessary to enable that party to require performance by the other party. Failure to act within the time required constitutes a breach of the contract.

In real estate contracts, the time that we’re talking about is based on the executed contract. There are quite a few important performance items that hinge upon time – from the option period to delivery of documents to notices and things like ways to terminate…even the closing date itself. All of the dates in the contract are rooted in the executed date. And as time is of the essence, failure to comply with those dates and timelines could have serious negative consequences, some of which can be considered breach of contract and have much larger legal consequences.

In the 1-4 Family Residential contract we use in Texas, this executed date can be found on Page 8. That date is the mother of all dates and is considered to be day zero – where the clock begins ticking.

Time is of the Essence: Example

Let’s say for instance you executed a contract on February 3, 2017. In that contract you have 3 days to deliver the survey and T-47, a 10 day option period, and a financing period of 14 days. That would mean that on (or before) February 6, 2017 you would need to deliver the survey and T-47, on February 13, 2017 your option period would expire, and after February 17, 2017 you would no longer have the right to terminate the contract because you could not get financing under the terms laid out in the Third Party Financing Addendum. It is important to note that most timelines expire at the end of the day (many contracts say 11:59PM), but not all of them do – the option period expires at 5PM (local time to the property).

So what happens if time is of the essence and you fail to comply? The consequences vary – turn to your contracts or associated addenda for answers to those questions as they are often laid out within the contract (for instance, if Paragraph 6.C.(1) is used to obtain a survey and T-47 and they are not delivered in the prescribed time, the buyer has the right to order a new one at the seller’s expense). If the answers are not laid out clearly, then you should seek the advice of an attorney before proceeding so that you fully understand the consequences and legal ramifications of your failure to perform per the contract.

Your best bet is to be aware of the timelines and make sure that anything required of you while under contract is done in a timely fashion and falls within the allotted time frame. If more time is needed, make your agent aware of this fact as it may be possible to extend the timeline for some things, but it will take the agreement of the other party.

image courtesy of Alex Lehner

Filed Under: Real Estate Tagged With: legal, real estate contracts, terminology

The Legal Side of Real Estate Contracts

July 6, 2016 by khproperties 3 Comments

Legal Side of Real Estate

When it comes to the legal side of real estate, things can seem a little scary. Sometimes, it’s easy to forget that you’re involved in a legally binding contract while buying a house. You get swept up in the emotion of it all and it just seems like everyone is doing everything as if it were just a normal sale. But it isn’t. Those contracts and all that paperwork legally binds you to that sale. It’s not like purchasing a soda at the local convenience store where you can just walk away and end the purchase. Termination is serious business in real estate and knowing that you are signing legal documents is a key piece to the process. And when things do go sideways and you’re heading to mediation or the courts to determine the outcome, understanding the contracts, what you’ve signed, and what it all means to you can make all the difference.

CONSULT AN ATTORNEY BEFORE SIGNING: TREC rules prohibit real estate license holders from giving legal advice. READ THIS CONTRACT CAREFULLY.

– One to Four Family Residential Contract (Resale)

Broker cannot give legal advice. READ THIS LISTING CAREFULLY. If you do not understand the effect of this Listing, consult an attorney BEFORE signing.

– Residential Real Estate Listing Agreement Exclusive Right to Sell

CONSULT AN ATTORNEY: Broker cannot give legal advice. This is a legally binding agreement. READ IT CAREFULLY. If you do not understand the effect of this agreement, consult your attorney BEFORE signing.

– Residential Buyer/Tenant Representation Agreement

The quotes above are taken directly from some of the forms you may have signed (or will be signing). Each one says the same thing – you’re about to sign a legal document, your broker or agent cannot give you legal advice as they are not attorneys, and if you do not understand what you’re about to sign, you should have a lawyer review it before you sign.

The Legal Side of Real Estate

In the excitement of buying or selling a house (even renting), it’s easy to forget that all those pieces of paper sitting in front of you are a legally binding contract. Sure you know they’re an agreement between you and the parties involved, but we know it doesn’t always sink in that there are legal ramifications to all that paperwork. As we call most of the documents “forms” it gives it a much looser feel – it doesn’t sound quite as scary to sign a form, does it? A form is just something you fill out. A contract is something you need a lawyer to draw up. Our forms are drawn up by lawyers though, so they are carefully worded legal documents. When you read through them, you will see that they contain answers to most of the “what if” questions you might have – they provide guidance and remedies for just about every situation you can think of. They are written and updated by teams of legal experts from the Texas Real Estate Commission, the Texas Association of Realtors, and the San Antonio Board of Realtors (or your local board if you live outside of our area). There may also be some forms that your brokerage or the other brokerage in the transaction requires as well and these are also written by lawyers in order to provide additional safety and protections that have been deemed necessary by the company.

Because you are signing legal documents which become legally binding between you and the other parties, it is important to understand that while your real estate agent deals with these documents day in and day out and knows them intimately, they are not attorneys and as such, can not give you legal advice. When an agent takes their first real estate class and all the way through their careers, this point is hammered into their heads. It’s a delicate line they walk – they deal in legal paperwork all day long, but because they don’t have a license to practice law, they cannot interpret the meaning of the contracts and suggest the outcomes and legal ramifications. They cannot advise you how to proceed, only that you should consult an attorney. Sometimes, clients get a bit frustrated by this, as they know we have seen so much and have a ton of experience with the legal ramifications of these contracts, but for us to give that advice or guidance is against the law in and of itself. Most agents know an attorney or two, so if you have questions, ask them for a referral to a lawyer who specializes in real estate. We even have one that works for Kimberly Howell Properties as an agent – Shann Chaudhry – and we recommend him to many of our clients when they have questions about how the law affects their contractual obligations.

Of course, whenever you sign a legal document, you should know what you’re signing. Ask questions. Read. Pay extra attention to sections in bold and (it goes without saying) always read the fine print. And when in doubt, stop the process and have Conveyancing Solicitors in Liverpool review the documents. Never sign something if you don’t know what it means for you. The legal side of real estate can be a bit scary, but it doesn’t have to be. Know what you’re signing and always seek to learn more about the process and what it means to you.

image courtesy of Sam Howzit

Filed Under: Real Estate Tagged With: real estate, legal, attorneys, lawyers

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