Maybe – it depends upon the precise language of the contract. Most standard real estate contracts contain the following provision: “Settlement to be on or before ______________ (‘Settlement Date’).” So the question becomes whether this requires settlement on or before the settlement date. Or, stated differently: “Am I in breach of the contract if I do not close by the settlement date?”
Many people may be surprised to find out that typically the answer to the question is NO. The standard language given above is not enough to make the settlement date an essential or material term of the contract. In legal jargon, the language above does not constitute a “time is of the essence” term.
In Virginia, a “time is of the essence” term is not implied in a real estate contract. The Virginia Supreme Court stated in Sims v. Nidiffer, 203 Va. 749, 752 (1967), that simply naming a settlement date does not alone mean that time is of the essence. If you intend for time to be of the essence in your contract, you should include the term “time is of the essence.”
This still leaves the question: Should I make the settlement date an essential term of the contract and include the term “time is of the essence?” This depends upon your particular circumstances. If your particular situation dictates that closing must take place at a certain time then it may make sense to make time of the essence. However, there are numerous disadvantages to both buyers and sellers in using this language. An experienced Virginia real estate attorney can help you decide if your contract should include the term “time is of the essence.”