A time clause is a clause that may be contained in a real estate purchase contract that allows a party to invoke a time period in which a condition precedent must be removed. Failure to remove the condition precedent within the time period (72 hours for example) would result in the contract being canceled. If you are working with a real estate agent it is recommended that you use the state approved forms for UAR agents. This form specifies which contingencies must be removed in order to keep the contract alive in the event the seller sends the buyer a notice that the seller has accepted another offer. The terms of the contingencies are set forth in the real estate purchase contract itself and which contingencies are included in the time clause are specified in the time clause itself. It also should be clear that it is not the “time clause” itself that needs to be removed, but the conditions precedent that are set forth in the REPC and specified in the time clause that specifically need to be removed to comply with the terms of the time clause. Removing the time clause itself would most likely still leave the buyers with all the contingencies in place set forth in the original contract which would have been the reason that the seller would have wanted the time clause to exist in the first place.
For example, a time clause would be useful when a buyer brings an offer to a seller that is mostly acceptable but has some contingency in place that is not completely acceptable to the seller. An example would be a 60 or 90 day closing, or the purchase being subject to the sale of the buyers residence. The seller agrees to let the buyers move forward but wants to continue to market the property to additional buyers to see if something better will come along. The buyers are OK with this because they are not currently in a position to close on the property, but now have a right to close on the property subject to their conditions (and the time clause) at a future time. If the seller does accept an additional offer the seller can give the buyers 72 hours to remove the condition(s) precedent, IE subject to sale of buyers residence, due diligence, loan denial etc, (whatever contingencies have been specified in the time clause) and have earnest money go non-refundable subject to the terms set forth in the purchase contract and in the time clause. The buyer can still buy the property, but they must agree to step up and remove the contingencies they agreed to if they want to purchase the property. In the UAR form it is very clear that if the buyers do not respond by removing said contingencies within the time frame that is outlined the contract is automatically cancelled.
A time clause is used more frequently in our current market where it is taking buyers longer to sell their current residence.
If you live in Salt lake or Utah county and are looking to purchase or sell your property, please call me for a free consultation.
**This information is not legal advise and is not specific to your situation. Please do not rely on it in any way.**