Beware of Blanket “Time Is of the Essence” Clauses

Does your lease use the phrase “time is of the essence”? If so, you need to take a good hard look at what it covers. Explanation: When used to describe a lease obligation, “time is of the essence” means the obligation must be performed without any delay. It’s a formulation that landlords generally want to use with important and essential tenant obligations and special rights, like the exercise of a renewal option. 

The problems arise when the clause is used to describe all provisions of the lease. Such a blanket clause can have unexpected and unintended consequences. The first is that the duty to carry out lease obligations without delay falls on not just the tenant but you. A blanket “time of the essence” clause may also conflict with and cancel out other time limits specifically set out in the lease. 

Solution: Limit, Don’t Delete, “Time Is of the Essence” Clauses

Simply refraining from using “time is of the essence” in your lease may strip you of important protections. The solution is to avoid the kinds of blanket clauses that can come back to bite you while limiting your use of “time is of the essence” to tenant lease obligations that are truly time sensitive. There are two basic leasing strategies you can use:

Option 1: Use only in selected clauses. One option is to insert “time is of the essence” language only in the specific lease provisions to which you want the obligation to apply. Example: Here’s a sentence that uses the phrase to describe a tenant’s duty to exercise a lease renewal option:  

Model Language

To exercise this option to renew the Lease, Tenant must provide Landlord written notice of its election to exercise same, to be received by Landlord no later than [insert #, e.g., one hundred and eighty (180)] days prior to the expiration of the initial term, time being of the essence for the providing of such notice.

Option 2: Use in free-standing clause that refers to applicable lease provisions. The other approach is to incorporate “time is of the essence” into its own free-standing lease provision but indicating the specific provisions of the lease, i.e., tenant obligations, to which it applies. A free-standing clause, in other words, is okay to use as long as it’s not a blanket provision that applies to all of the respective parties’ obligations under the lease. 

Model Language

Time is of the essence with respect to Tenant’s exercise of any [insert special rights to which time is of the essence applies, e.g., exercise of the tenant’s option to expand, renew, or purchase] granted to Tenant under Sections [insert the lease section # of the respective election options referred to in the first part of the sentence, e.g., the option to expand, renew, or purchase] hereof.

Caveat: Time Is of the Essence Is No Guarantee

Attorneys caution that while requiring time to be of the essence generally increases your chances of winning in court against a tenant that delays its performance, that delay may not cause the tenant to completely lose a special lease right or option. As a matter of public policy, courts frown on forfeitures of important rights based on relatively minor infractions. Result: A court may grant a tenant that exercises its option late a break, especially if it believes that the value of the option to the tenant significantly outweighs the harm that the delay inflicted on the landlord.