Real Estate Law

The Three Day Attorney Review Clause

The New Jersey Attorney Review Clause in Real Estate Transactions

In New Jersey, a licensed real estate broker and sales people are permitted to prepare contracts for the sale of residential real estate containing one to four dwelling units and for the sale of vacant one-family lots, as long as the real estate broker had a commission interest or ownership interest in the property and only if there exists a three-day attorney review clause which is prominently displayed.

The history of the three day attorney review clause dates back to 1970, when a New Jersey real estate broker was convicted of disorderly conduct for the preparation of a real estate contract. The real estate brokers argued that they were doing more than filling in facts of a preprinted form. There were many attorneys that were concerned that their realtors were engaged in the practice of law and no matter how well drafted the realtor-prepared contract was, that the form did not reduce the danger to the public to be bound to a legal agreement which was not prepared by a person licensed to practice law.

In 1972, a compromise resolution was worked out between the New Jersey State Bar Association and the Board of Realtors and the law has permitted the real estate broker to prepare a real estate contract subject to the requirements as noted above and the insertion of a three day attorney review period.

The standard attorney review clause as approved by the New Jersey Supreme Court is as follows:

1. Study by Attorney

The Buyer or the Seller may choose to have an attorney study this contract. If an attorney is consulted, the attorney must complete his or her review of the contract within a three-day period. This contract will be legally binding at the end of this three-day period unless an attorney for the Buyer or the Seller reviews and disapproves of the contract.

2. Counting the Time

You count the three days from the date of delivery of the signed contract to the Buyer and the Seller, You do not count Saturdays, Sundays or legal holidays. The Buyer and the Seller may agree in writing to extend the three-day period for attorney review.

3. Notice of Disapproval

If an attorney for the Buyer or the Seller reviews and disapproves of this contract, the attorney must notify the REALTOR(S) and the other party named in this contract within the three-day period. Otherwise, this contract will be legally binding as written. The attorney must send the notice of disapproval to the REALTOR(S) by certified mail, by telegram, or by delivering it personally. The telegram or certified letter will be effective upon sending. The personal deliver will be effective upon delivery to the REALTOR(S) office. The attorney may also, but need not, inform the REALTOR(S) of any suggested revision(s) in the contract that would make it satisfactory.

The requirements for the attorney review are also set forth in the New Jersey Administrative Code 11:5-6.2.

“Counting Time and Options Under the Attorney Review Clause”

All realtor prepared contracts must contain a three-day attorney review period. Under this clause, the Buyer or Seller may choose to have an attorney review their contract. The contract will be legally binding at the expiration of the three-day period unless an attorney for either party reviews and disapproves of the terms of the contract.

In terms of counting time or calculating the expiration of the three-day attorney review period, you do not count the date of delivery of the fully executed agreement to all parties and you do not count Saturdays, Sundays or legal holidays.

If an attorney for the Buyer or the Seller reviews and disapproves of the terms of the contract, the attorney must notify the realtors and the other party named in the contract within the three-day time period, otherwise, the contract will become legally binding as written. The notice of disapproval must be sent by certified mail, by telegram or by delivering it personally. The telegram or certified letter is effective upon the date that the telegram or letter was sent. Personal delivery is, of course, effective upon the date of the deliver to the realtor’s office. If the attorney disapproves of the contract, the contract becomes null and void and the parties have no further obligation to each other with regard to the sale or purchase of the property. In the alternative, the attorney may inform the realtor of suggested changes to the contract that will make the contract satisfactory and the contract will become binding only if the other party agrees to the suggested changes.

Please note that the attorney review clause is only applicable to real estate broker prepared contracts and is not applicable and does not have to be included in the contract that is prepared by an attorney.

For more information, please contact Blair C. Lane, Sr., at 856-354-7700. Initial consultations are free.