When a “Time of the Essence” Closing Date Keeps Rolling Like a Stone for 60 Days
“The recent decision of the Bankruptcy Court for the Southern District of New York in In re AAGS Holdings LLC, Case No. 19-13029 (SMB) (Bankr. D. Del. Nov. 12, 2019), underscores the ability of debtors — and specifically, for purposes of this client alert, parties to real property purchase contracts — to take advantage of the Bankruptcy Code’s 60-day tolling period to get more time to close on a purchase despite a “time of the essence” (TOE) closing deadline. The SDNY Bankruptcy Court … held that a debtor’s bankruptcy petition is not filed in bad faith when the petition is filed in order to obtain a statutory 60-day extension of a TOE closing deadline. The decision underscores the need for sellers to consider the effect of this automatic bankruptcy extension when negotiating with buyers over the terms of a consensual closing extension (e.g., fees and increased deposits) even if the contract does not have a financing contingency.” warn Adam C. Rogoff, Daniel Ross Berman and Caroline Gange in Kramer Levin’s Perspectives.
“The court found that the term “Closing Date” as defined in the PSA was, in fact, ambiguous.”
