Fact Pattern: I am the listing agent for a pending sales transaction with a 30-day escrow period. The last day falls on Thursday, July 4, 2019, which is a holiday. The seller wants to serve a 3-day Demand to Close Escrow.

Multiple Choice Question: What is the earliest day that the seller can serve the buyer with a Demand to Close Escrow (DCE)? Pick the best answer.

A. Friday, July 5.
B. Thursday, July 4.
C. Tuesday, July 2.
D. Monday, July 1. 

Answer: Answer A is wrong. It’s true that, if the close of escrow falls on a legal holiday, it rolls over to the next day (see paragraph 30F of the RPA). However, the seller does not have to wait until the day that escrow is scheduled to close to serve a DCE. Under paragraph 14G of the RPA, a DCE may be served up to 3 days before the scheduled close of escrow.

Answer B is also wrong. Although July 4 is the day that escrow was originally scheduled to close before accounting for legal holidays, the seller need not wait until then to serve a DCE.

Answer C may be correct. According to paragraph 14G of the RPA, a “DCE may not be Delivered any earlier than 3 Days Prior to the scheduled close of escrow.” Unfortunately, it’s not altogether clear whether the phrase, “scheduled close of escrow” as used in paragraph 14G, refers to the last day of the 30-day escrow period as originally stated in the contract (July 4), or the day after that (July 5), given that legal holidays are to be excluded. If “scheduled close of escrow” means the date escrow was initially scheduled to close as according to the way the contract was written, then the seller can serve the DCE as early as July 1 (Answer D). If, however, “scheduled close of escrow” takes into account the fact that legal holidays are to be excluded, then the seller must wait until July 2 to serve the DCE (Answer C).

Here are 3 reasons why Answer C is the best answer. First, it’ll be difficult for the seller to convincingly argue that the parties intended for the “scheduled close of escrow” to be on July 4, given that everyone knows that it’s a legal holiday and the County Recorder’s Office will be closed that day.

Second, paragraph 14G mentions the term, “Days Prior,” which is specifically defined in paragraph 30H of the RPA as “the specified number of calendar days before the occurrence of the event specified, not counting the calendar date on which the specified event is scheduled to occur.” Hence, even though “scheduled close of escrow” is not altogether clear, the “occurrence of the event specified” is obviously July 5, not July 4.

Finally, under a cost-benefit analysis, if the seller serves the DCE on July 1, the buyer may cause delays by arguing the DCE is defective for being too early. On the flipside, the seller is generally not going to get some huge advantage by serving the DCE on July 1, instead of waiting until July 2.

-Have a happy 4th of July in the land of the free and the home of the brave!

Copyright© 2019 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of July 1, 2019. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.