New Jersey Supreme Court Updates Standards For Communicating Rejection of Real Estate Contract After Attorney Review

Picture of a contract

On April 3, 2017 the New Jersey Supreme Court published its decision in Michael Conley, Jr. v. Mona Guerrero (A-65-15) (076928) dealing with the requirement of notice of rejection under the attorney review provisions of a standard form real estate contract. The Plaintiffs entered into a standard form real estate contract which included an attorney-review clause, mandated by the Court in New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards (Bar Ass’n), 93 N.J. 470, 476-77, modified, 94 N.J. 449 (1983), and N.J.A.C. 11:5-6.2(g)(2), 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 same day that the attorney-review period commenced, and Seller accepted a higher bid than the contract with the original buyer, Michael Conley, Jr., called for. The Seller’s attorney delivered a letter by e-mail and fax to Conley’s attorney and to the broker rejecting the contract one day before the three day notice period expired. He did not use certified mail, telegram or personal delivery. Seeking to enforce the strict terms of the contract after being overbid and losing the house, Conley sued and sought to enjoin the sale. The lower courts granted the seller’s and new buyers’ motion to dismiss and Conley exhausted his appellate review options – pursuing it all the way to the Supreme Court.

The Supreme Court held that in this case, because Buyers 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 Court also exercises its constitutional authority over the practice of law and finds that 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. Notice by overnight mail will be effective upon mailing. The attorney-review period within which this notice must be sent remains three business days.

Read your standard real estate contract carefully, and make sure the notice of rejection after attorney review is communicated in accord with this opinion. Real estate brokers should consider revising the standard agreement to update the notice requirements to those expressed by the Supreme Court which are more in keeping with current communication methods. The New Jersey State Bar Association advocated this update as a friend of the court in the Supreme Court’s consideration of the case.

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