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What real estate closing clauses are appropriate for you?

Closing Thoughts by Jim Young
Sponsored by Andrews & Young, PC
Friday, March 28, 2014

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Q.   If one person in a residential real estate contract is not ready to close by the closing date in the contract, can the other person call the deal off?

A.    Well, you would think so, wouldn’t you?  What could be more obvious? But, in Connecticut, this is not permitted unless the contract says that “time is of the essence” when it comes to the closing date.

Generally speaking, a party that has made reasonable good faith efforts to be ready to close, but needs more time, is entitled to an additional period of time (say, 30 days).

I once had a case where the seller was an attorney from another state. He was astonished, and unhappy, to learn about this after the buyer wasn’t able to close by the contract date. The standard real estate contract does not have a “time of essence” clause, and most practitioners are hesitant to employ such a clause, as one can’t know ahead of time whether either party might need some extra time to close.

If closing by a specified date is very important to you, talk to your advisors about the potential benefits and disadvantages of employing such a clause.   Provisions can be crafted to impose charges on a party who does not close by the stated closing date, and these can be appropriate in some cases.

Q.   What is a “Hubbard Clause”?

A.   Generally, this is a label for a provision under which the seller agrees to sell his or her property, but the buyer does not have to close until he or she sells another property, usually their residence.

It is very important to pay close attention to the details of these provisions. Typically, if the seller gets another offer on his property notice is then given to the buyer. The buyer has a limited amount of time to drop the contingency and close on the purchase or back out of the deal and allow the seller to sell the property to the other party.

Some think a seller should avoid such a clause if possible, and that other potential buyers will avoid a property that is already under contract. Some sellers may want assurances from their agent that they will continue to aggressively market their property if a contract is signed with a Hubbard Clause.

Others take the position that if buyers are not beating your door down, little harm is done to put a house under a Hubbard Clause. If another offer comes along, the first buyers must either drop the clause and close, or get out of the way for the new buyer. Every situation is unique. But it may be a good idea to have a conversation about Hubbard clauses with your real estate agent when you list the property, so you can be better informed, and find out how they feel about such clauses.

The parties will want to pay attention to the following issues if a Hubbard Clause is considered:

How long does the buyer have to list their home for sale, if they haven’t done so?

If the buyer’s house is already on the market, is it reasonably priced?

How many days does the buyer have to drop the contingency upon receiving notice that the seller has received another offer?

Q.    What About Flood Insurance?     

Buyers may want to discuss with their advisors whether to include in their offer a provision that allows them to back out of any deal, if flood insurance is required to obtain a loan on the property, or is simply desired by the buyer in a cash deal, and cannot be obtained on terms acceptable to the buyer. Sellers will want to become educated about the recent developments as to flood insurance  and discuss with their advisors how these developments impact their property and interests.

Jim Young is an attorney with Andrews & Young, PC, with offices in Waterford and Groton, and can be reached at The statements made in this column are not intended to be taken as legal advice for any particular fact situation. Consult with an attorney.

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