Attorney Review

2006-02-18T14:02:00.000-08:00

Contracts are legally binding documents that regulate each party to that contract's conduct throughout the life of the contract. Often times in a residential real estate transaction, the first contact a buyer or seller has with their legal representation is after this legally binding document has been signed. Why is this practice promoted as acceptable?

In New Jersey State Bar Association v. New Jersey Association of Realtor Boards, et. al., 186 N.J. Super. 391 (Chan. Div. 1982), a settlement requiring an "attorney review" provision to all realtor prepared contracts was approved by the Court. This provision would prevent realtors who negotiated and prepared legally binding documents from the "unauthorized practice of law."

In today's market the vast majority of contracts are prepared by realtors, executed by Buyers and Sellers, and then submitted to the parties' attorneys for review. The provision simply requires Buyers and Sellers to acknowledge their right to have an attorney review the contract within three business days (or longer, if agreed to by the parties prior to signature). Legal holidays, and weekends do not count as the 'three business days.' The counting of the three business days begins with day 0 being the day all parties have received copies of their fully executed contracts. For example, if both a Buyer signs the contract on Sunday, delivers the contract to the Seller who signs the contract on Monday and immediately returns the fully executed contract to the Buyer, Monday is day 0 (zero) and Tuesday is the first day of attorney review.

Initiation of the Review Period (Cancellation)

In order to initiate attorney review, the attorney must formally cancel the contract. A typical attorney review letter will state language such as, "Pursuant to the attorney review clause of the subject contract, this contract is hereby declared void." This is simply procedural, but has important ramifications; during the attorney review period, there is no formal contract. Either side has the opportunity to end the transaction for any reason or no reason at all. The agreement to end attorney review also reinstates the contract and all of its binding terms.

What happens during Review?

The purpose of the review period is to allow an attorney the opportunity to be sure that a client's interests are adequately protected during the process. Frequent topics of an attorney review period can be fine-tuning inspection contingencies, clarifying inclusions and exclusions and the drafting of specific terms that suit the client's unique needs. The form contracts most often prepared by realtors and signed by parties are written by realtors, most often with realtor interests in mind. The review period allows a legal professional to examine the contract with the parties' interests in mind; to place the party in a legally protected position in moving forward with the transaction.

Conclusion of Attorney Review (Reinstatement)

While it is true that attorney review must begin within three business days, it is important to note that it may continue indefinitely. Once begun, there is no requirement or limit on the length of the review process. Generally, attorney review only lasts a few days and concludes with both attorneys affixing their signature (with their client's authorization) to a rider or addendum of contractual terms.

The conclusion of attorney review is simply the "end of the beginning" of the transaction. The contract, the document that will control the transaction, is now complete and often contains contingencies to be satisfied that will allow the transaction to continue. Common contingencies include financing and inspections. It is the satisfaction of those contingencies that allow the parties to move forward and eventually close title.

New Jersey Real Estate Law

Attorney Review