Extension Request Denied: ‘But I Need More Time!’
A transaction usually contains key deadlines. When buyers and sellers can’t meet those deadlines, they often agree to an extension. But what happens if the other party won’t grant an extension? Here are three scenarios that show where parties stand if an extension is denied.
ORLANDO, Fla. – Buyers, sellers, landlords, and tenants often find it necessary to change the terms of an agreement. “I need more time” is a common refrain that causes one side or the other to request a deadline extension. But what pitfalls can occur if these negotiations fail?
Before we get started, what would a legal article be without a few disclaimers? Today’s topics are dense. I’m skipping over a ton of nuance to give a big-picture glimpse of what’s potentially at stake if someone can’t meet a deadline. Therefore, I would highly recommend anyone with questions about a potential case consult a lawyer for an analysis of strengths, weaknesses, and a range of possible outcomes before they commit to a course of action.
Both contract questions, (Loan Approval Deadline and Closing Date) use the Florida Realtors/Florida Bar Residential Contract for Sale and Purchase (or the AS IS version). Please note that other purchase and sale contracts could have very different outcomes.
Loan approval deadline
The loan approval period is winding down and, despite a buyer’s diligent efforts to get approved, the lender has yet to issue a loan approval. When this occurs, the buyer has two options to choose from. Note that they exercise the option they want by sending a WRITTEN MESSAGE to the seller or the seller’s representative. They can also have a lawyer, broker, or associate who represents them send the WRITTEN MESSAGE.
- Option 1: The buyer can terminate the contract. If they go this route, the contract is terminated, and they will be entitled to a return of their deposit.
- Option 2: The buyer can waive the loan approval. If they go this route, they are essentially gambling that they will be able to secure all funds required to close by the closing date. If they can’t secure the funds by closing, their deposit will likely be due to the seller unless they can find some other section of the contract that provides protection under the circumstances.
What happens to buyers who don’t send a WRITTEN MESSAGE selecting option 1 or 2? The contract provides that, by default, they have chosen option 2. Note that, if the buyer ends up in the default category because they failed to send anything in writing before the deadline expired, a unique 3-day window opens up where the seller can terminate the contract and return the buyer’s deposit:
“If Buyer fails to timely deliver either notice provided in Paragraph 8(b)(iii) or (iv), above, to Seller prior to expiration of the Loan Approval Period, then Loan Approval shall be deemed waived, in which event this Contract will continue as if Loan Approval had been obtained, provided however, Seller may elect to terminate this Contract by delivering written notice to Buyer within 3 days after expiration of the Loan Approval Period.”
Why did I just capitalize WRITTEN MESSAGE in the last few paragraphs? It’s because we’ve heard numerous stories about buyers who don’t seem to understand that, by failing to expressly send their choice in writing, the contract assigns option 2 as the default.
The closing date is generally the final deadline for both parties to perform. The Buyer’s funds to close should be delivered to the closing agent, all documents should be properly executed, and the seller should deliver access and possession of the property. But what if one side can’t meet this deadline and the other refuses to grant an extension? Their remedies are not identical.
Buyer: Section 15 of the contract provides that, if the buyer defaults, the seller may elect to retain the buyer’s deposit(s) as liquidated damages. This essentially means that the parties already agreed ahead of time that this sum of money is what the seller gets, regardless of how much harm seller suffers (or doesn’t suffer). It does provide an alternative, where seller can proceed “in equity to enforce this Contract.” This is too nuanced a topic for this article, so any sellers who want to know how this might apply to their situation, if at all, should consult their own lawyer.
Seller: What if the seller defaults? The contract allows the buyer to get their deposit back. It also gives them two potential remedies: damages or specific performance.
The word damages typically (but not always) means the buyer gets money. However, unlike liquidated damages, the buyer’s damages are unknown until the parties settle the case, or until a court approves a certain remedy. Specific performance generally means a court could force a reluctant seller to finish the transaction. Please note that a court always has discretion whether to grant specific performance or deny it. Even though the contract mentions it, a buyer would be well advised to not count on receiving specific performance unless their attorney advises that they have a strong case for it.
End of lease
What if a residential tenant needs a little extra time in the premises after a lease termination date, but the landlord refuses to grant the extension? Florida Statutes 83.58 provides an answer.
First, the landlord can file an action for possession, which is using the court system to force the tenant out. Additionally, the landlord can recover double the amount of rent for the period during which the tenant refuses to surrender possession. For example, if the tenant refuses to leave for a half month, they would owe a full month’s worth of rent.
Joel Maxson is Associate General Counsel for Florida Realtors
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