When, Exactly, Is the Deposit Due?
Deposit deadlines? There are some dangerous false interpretations making the rounds. Hopefully, your buyers won’t fall into the trap. The consequences can be severe if they rely on inaccurate interpretations.
ORLANDO, Fla. – It’s fascinating working on the Florida Realtors Legal Hotline. We hear all sorts of issues and see trends develop, one five-minute call at a time. Sometimes, these trends are positive. Sometimes, however, they are concerning.
One trend I’ve noticed lately is people who adamantly insist that the deadline for a buyer to make a deposit is always calculated using business days. Sometimes it’s the caller, and sometimes they’re quoting someone who claims to be an authority.
What’s the actual answer? It depends on the contract the buyer signed.
Florida Realtors/Florida Bar Residential Contract for Sale and Purchase (and the “AS IS” version)
This is the most popular form contract used in Florida, so we’ll spend the most time on this one. The most recent version dated October 2021 has some slight changes to the date-counting section, so you may want to review it if you haven’t already.
Section 18, Standard F begins with the simple sentence, “Calendar days, based on where the Property is located, shall be used in computing time period.” There is no mention of business days anywhere in the section. There is an automatic extension if a time period or date ends or occurs on a weekend or national legal public holiday (or a day when that holiday is observed).
Using the deposit deadline as an example, if the deposit is due on a weekday, that’s the deadline. Since we’re using calendar days, they end at 11:59 p.m. So, if the effective date is Monday, and the buyer has 3 days to make the deposit, it’s due no later than 11:59 p.m. on Thursday.
If the effective date is Wednesday, though, the third day after the effective date would be Saturday. Therefore, the deadline would be automatically extended to Monday. In the rare event that Monday is a national legal public holiday (or a day when that holiday is observed), then the deadline would end at 11:59 p.m. on Tuesday.
Here’s the clause in its entirety:
F. TIME: Time is of the essence in this Contract. Calendar days, based on where the Property is located, shall be used in computing time periods. Other than time for acceptance and Effective Date as set forth in Paragraph 3, any time periods provided for or dates specified in this Contract, whether preprinted, handwritten, typewritten or inserted herein, which shall end or occur on a Saturday, Sunday, national legal public holiday (as defined in 5 U.S.C. Sec. 6103(a)), or a day on which a national legal public holiday is observed because it fell on a Saturday or Sunday, shall extend to the next calendar day which is not a Saturday, Sunday, national legal public holiday, or a day on which a national legal public holiday is observed.
Could the caller be thinking of a different rule, like a license law deadline?
My hunch is that this is where the confusion originated since the following deadlines are always calculated using business days. If a sales associate receives any deposit, the associate must “deliver the same to the broker or employer no later than the end of the next business day following receipt of the item to be deposited.” F.A.C. 61J2-14.009.
Brokers, on the other hand, must “immediately” deliver any deposits to the appropriate destination. F.A.C. 61J2014.008 defines “immediately” as the end of the third business day following receipt of the item to be deposited. Note that the clock would begin the day after the broker OR associate (or possibly another employee) received the funds.
Remember, though, that the licensee obligations are to satisfy FREC rules and have nothing to do with the contract a buyer signed. As we saw, if the buyer is using a FR/BAR contract, their deadline will be calculated in calendar days.
There is a nuanced question: Once the buyer delivered a deposit to their broker or associate, is that fact good enough to claim the deposit has been made under the FR/BAR contract? While this could potentially be an argument, I wouldn’t count on it if I were a buyer. The FR/BAR contract provides the deposit has been “made payable and delivered to ‘Escrow Agent’ named below [by the deadline].” I would certainly want to make sure the actual Escrow Agent has the funds well in advance of the deadline.
What about other contracts?
There are numerous ways to calculate time in contracts. My personal favorite is to keep things simple when you can. Just pick a date and time. For example, “The Buyer’s Deposit must be made payable and delivered to Escrow Agent no later than 5:00 p.m. on March 21.”
If you look at the Florida Realtors Commercial Contract or Vacant Land Contract, these do not currently match the FR/BAR calculation. Both use business days for time periods of five days or less, but calendar days for periods of six days or more. Their clauses also include an automatic extension for time periods that end on Saturday, Sunday, or a national legal holiday. There’s one slight difference from the FR/BAR automatic extensions, though, since the deadline would end at 5:00 p.m. (not 11:59 p.m.).
Of course, other contracts can have all sorts of other ways to calculate deadlines and may even include different penalties for missing those deadlines than what you’re accustomed to seeing. Hopefully, you can see the importance of inviting a buyer or seller to carefully read any contract to understand the rules they agree to when using that particular contract.
They can always retain the services of a real estate attorney to better understand all the terms and protect their interests. This is a particularly good idea when the stakes are high (large deposit), or if the party on the other side seems litigious or aggressive.
Joel Maxson is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication
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