NEWS
REAL ESTATE – ENFORCEABILITY OF THE ATTORNEY-REVIEW NOTICE PROVISION OF A STANDARD FORM REAL ESTATE CONTRACT
April 18, 2017
MICHAEL J. RANKIN reports on a recent New Jersey Supreme Court decision concerning whether the attorney-review provision of a standard form real estate contract, which specifies that notice of disapproval must be transmitted to the real estate agent or broker by certified mail, telegram, or personal service, must be strictly enforced.
On January 12, 2014, prospective buyers signed a contract to purchase a certain condominium from the seller. The real estate agent prepared, and the parties used, a standard form real estate contract. Seller signed the contract on January 14, 2014.
The agreement included an attorney-review clause which gave the parties’ respective attorneys three business days to review the contract before it became legally binding. If buyers’ or seller’s attorney disapproved the contract, the clause required that he or she notify the “REALTOR(S) and the other party . . . within the three-day period.” Any notice of disapproval was required to be sent to the “REALTOR(S) by certified mail, by telegram, or by delivering it personally.”
A bidding war began on the subject condominium on the same day that the attorney-review period commenced, and the seller accepted a higher bid from other prospective buyers.
One day before the attorney-review period expired, the seller’s attorney e-mailed and faxed a letter to the original buyers’ attorney disapproving the contract. After the three-day deadline passed, the original buyers’ attorney e-mailed a letter to the agent, and faxed the seller’s attorney a copy, stating that “the 3 days within which an attorney may terminate this contract ha[ve] expired. The contract is now in full force and effect.”
The original buyers then filed a breach of contract complaint in the Superior Court against the seller and other buyers demanding specific performance and requesting a temporary restraining order to enjoin the sale of the condominium to anyone other than plaintiffs. Plaintiffs claimed that because the three-day period within which notification must have been communicated had passed, and neither plaintiffs, their attorney, nor their agent received proper notification of disapproval, “the contract became effective.”
The trial court denied the application for a temporary restraining order and ultimately dismissed plaintiffs’ complaint by granting defendants’ motion for summary judgment. The plaintiffs appealed, and the Appellate Division affirmed the trial court’s decision.
The New Jersey Supreme Court granted plaintiffs’ petition for certification and held that, in this case, because the Plaintiffs received actual notice of disapproval within the three-day attorney review period by a method of communication commonly used in the industry, the notice of disapproval was valid.
The New Jersey Supreme Court also exercised its constitutional authority over the practice of law and found that (1) an attorney’s notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery, (2) notice by overnight mail will be effective upon mailing, and (3) the attorney-review period within which this notice must be sent remains three business days.
Please contact MICHAEL J. RANKIN if you have any questions or need any assistance in connection with this subject.