Time Is of the Essence

Imagine this:

Smith and Sandy agree to buy and sell a charming home in Toronto. They’ve signed all the paperwork, and everything seems on track—until the closing date arrives. Smith is ready with the payment, but Sandy isn’t fully prepared to hand over the keys. What happens now? Does the deal fall apart?

Have you ever heard of real estate deals falling through because one party wasn’t ready “on time”? Or maybe you’ve experienced a rushed extension right before closing day?

In Ontario, this kind of scenario can have serious legal consequences—and it all comes down to one crucial phrase written into nearly every real estate contract:

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⚖️ What Does “Time Shall Be of the Essence” Actually Mean?

Paragraph 20 of the standard form of Agreement of Purchase and Sale (Form 100)
published by the Ontario Real Estate Association states as follows:
“Time shall in all respects be of the essence…” It sounds like some kind of tea.
What does that phrase mean?

📌 Equal Responsibility Between Buyer and Seller

Firstly, it is important to note that it applies equally to the buyer and seller.

Secondly, it is not specific to the occurrence of a single event, that is, it applies to every provision in the agreement that includes a time limit or a particular date.

Thirdly, it is mandatory.

Fourthly and most importantly, a time limit or a particular date in the Agreement is
treated in the legal sense as “critical” meaning that the time limit or particular date is a binding obligation or provision in the Agreement.

It is not just a ‘target’ time limit or a ‘target’ date. For example, the Closing Date is binding on both seller and buyer. If one party is ready on the Closing Date and the other is not, that situation has important legal consequences.

📅 What Happens If a Condition Is Not Met on Time?

If a buyer’s condition or a seller’s condition has a time limit (which is commonly the case), then if the condition is not addressed in a timely manner, then the Agreement should set out the consequences (commonly the Agreement states in that context that the Agreement is at an end).

Therefore, when the terms of an agreement are being drafted, it is important to carefully fix appropriate dates and time limits.

And this provision is why if a buyer needs more time to satisfy a buyer’s condition, both seller and buyer must amend the Agreement to extend that time limit, failing which the Agreement generally states that the Agreement is at an end.

📌 Why You Must Include “Time Remains of the Essence” in Extension Agreements

In a different situation, if a seller’s lawyer and a buyer’s lawyer are mutually agreeing to extend the closing date, it is important to include a term in the mutual extension agreement that “Time remains of the essence”.

In the context where the parties mutually agree through their respective lawyers to extend the closing date one day to accommodate one of the parties, the inclusion of the term that time remains of the essence means that if one of the parties is still not ready on the new date, and the other party is ready, the important legal consequences will apply on the new closing date.

*** This article was reviewed and contributed to by Bruce E. Bussin, Solicitor.
Bruce Bussin is a practicing lawyer based in Toronto, Ontario, with experience in real estate law and other legal matters. Learn more about Bruce Bussin here.

• Office: 416-364-4925

• Email: Bruce@bussinlaw.com