The New Jersey Supreme Court will hear oral arguments this week on whether mandatory attorney review language in residential real estate contracts resulting from a real estate auction is mandated where the information is made available to potential parties in advance. The New Jersey State Bar Association (NJSBA) participated as amicus curiae in support of mandated language in Sullivan v. Max Spann Real Estate & Auction Co. F. Bradford Batcha, of Batcha and Batcha, and Martin Liberman, of the Law Office of Martin Liberman, wrote the brief. Batcha will appear on behalf of the NJSBA.
The NJSBA argued in its briefing that the policy behind the contractual nature of residential real estate contracts in N.J.A.C. 11:5-6.2(g) and the mandatory three-day attorney review requirement is “to protect the public” by advising consumers of the risks of proceeding with a transaction without an attorney. Those protections should be extended in this case, involving a private real property auction, said the NJSBA.
The underlying matter comes from a lack of the mandatory attorney review language in a bidder registration form provided at an auction sale. The 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 spoke limited English and claimed to be pressured into bidding on the property. A salesperson apparently prepared the contract for sale on a pre-printed template, which the bidder completed. Unable to obtain a mortgage, the bidder was declared in breach of the contract.
The Appellate Division affirmed the trial court’s decision, holding that the protections to the public, sellers and buyers in typical real estate transactions are not applicable to the “unique circumstances of private real property auction[s]. . .The seller has an interest to sell property in an expedient manner and liquidate their interest,” said the court in its opinion. “Potential buyers are encouraged to seek counsel before the auction is held and review their financial wherewithal.”
The NJSBA urges a reversal of the Appellate Division decision to mandate the three-day attorney review clause consistent with its position that led to the mandatory language in the first place. Over three decades ago, the NJSBA was a party to a challenge to require the three-day attorney review clause in New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards, 93 N.J. 470, modified, 94 N.J. 449 (1983); In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law, 139 N.J. 323 (1995). The Supreme Court approved a settlement agreement that resulted from the litigation “because it resolved the question of realtors’ unauthorized practice of law, and most importantly it served to protect the public interest by making the contract subject to prompt attorney review if either buyer or seller so desires.” The NJSBA argued the Appellate Division does not have the authority to change the terms of the settlement agreement; that authority rests solely with the Supreme Court.
In a dissent, Appellate Division Judge Jose L. Fuentes supported the NJSBA’s position, pointing out the history in sustaining the Supreme Court’s mandate to include this language. Reciting the litany of case law supporting the settlement mandating the language, Fuentes pointed out the Appellate Division’s limited jurisdiction to enforce the Supreme Court’s mandate.
“In carrying out its role as an intermediate appellate court, the Appellate Division has remained persistently wary of treading upon the Supreme Court’s sole authority to alter the N.J. State Bar Ass’n mandate when occasionally pressed to do so,” Fuentes wrote.
Declining to extend this language to private real estate auctions, the majority found “nothing repugnant about the auction process as conducted in the matter under review.” It did not find the matter to be against public policy, and instead found it consistent with “over thirty years of established real estate auction practice.”
Arguments can be viewed online Tuesday at njcourts.gov.
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.