The New Jersey Supreme Court is slated to hear arguments on whether the three-day attorney review clause and notice regarding the risks associated with not seeking an attorney review are mandated in realtor-prepared residential real estate contracts in bidding auctions. The New Jersey State Bar Association (NJSBA) argued that they are mandated, in Sullivan v. Max Spann Real Estate & Auction Co., Docket No. 085225.
“In light of the importance of the protection of the public interest, the NJSBA urges the Supreme Court to reverse the Appellate Division decision, reaffirm and acknowledge that an Attorney Review Clause and the Opinion 26 notice requirements must be included in every realtor-prepared residential real estate contract in the state, and consider adoption, after careful study, of tailored requirements for residential real estate contracts offered at a residential real estate action,” wrote the NJSBA in its amicus curiae brief. The brief was penned by F. Bradford Batcha, of Batcha & Batcha, PC, and Martin Liberman, of The Law Office of Martin Liberman.
The case brings back before the Supreme Court the settlement following New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards, 93 N.J. 470, modified, 94 N.J. 449 (1983), and In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law, 139 N.J. 323 (1995). The former resulted in a mandate that all realtor-prepared real estate contracts contain an attorney review clause cautioning the parties that they had the right to seek advice of counsel within three days of signing the contract. The latter resulted in mandating language in these contracts advising the parties of the risks associated with not seeking attorney review. This notice was later codified in N.J.A.C. 11:5-6.2(g).
In Sullivan, the bidder registration form stated that the auction sale was “not subject to an attorney review period,” and that the prospective bidder agreed to “review the contract of the sale prepared by the seller’s counsel prior to the auction.” The bidder was a person who spoke limited English and claimed to be pressured into bidding on the property. The contract for sale was apparently prepared by a salesperson on a pre-printed template, which the bidder completed. The bidder was ultimately unable to obtain a mortgage and was declared in breach of the contract.
In a majority opinion affirming the trial court, the Appellate Division held that the Supreme Court did not intend for the attorney review clause to apply to private residential real estate auction sales. It upheld the chancery court’s carve out exception to the attorney review clause. The NJSBA argued that the lower courts do not have the authority to abrogate the Supreme Court’s mandate in NJ State Bar Ass’n or In re Opinion 26. In his dissenting opinion, Judge Jose L. Fuentes noted that the New Jersey Constitution does not bestow such power on the lower courts, relying on N.J. Const. Art. VI, s. 2, p. 3 (regarding the Supreme Court’s authority to regulate the practice of law in New Jersey).
The NJSBA acknowledged that the application of the attorney review clause may not be practical in residential real estate auctions and urged the Supreme Court to use its authority under the New Jersey Constitution to consider defining the parameters of residential real estate auctions versus bidding wars on residential real estate.
“The NJSBA suggests that the Court consider whether it should permit real estate brokers to draft residential real estate auction contracts under certain defined parameters, as it did in the NJ State Bar Ass’n and Opinion 26 cases,” wrote the NJSBA in its brief. “If the Supreme Court creates an auction exemption, the NJSBA recommends consideration be given to appointing a special master or creating a special committee to evaluate and prepare a report of what consumer protections could be implemented that protect the public, but do not impede the auction process.”
Oral arguments have not yet been scheduled in this matter.
This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.