Most residential real estate sales contracts in NJ have a provision for a 3-day right of attorney review and disapproval, which gives the parties additional time to negotiate terms.  The standard realtor contract provides for such notice to be given by certified mail, telegram, or personal service.  In the case of Michael Conley, Jr. v. Mona Guerrero, the NJ Supreme Court was asked to decide whether notice of disapproval given by email is valid.

The background on this case goes back to 1982.  The NJ State Bar Association (NJSBA) sued REALTORS alleging that licensed real estate agents and brokers were unlawfully practicing law by preparing the sales contracts.  The parties settled that case with the Supreme Court certifying a settlement.  In 1987, the Real Estate Commission added language to the NJ Administrative Code that required sales contracts to contain the following text: “The attorney must send the notice of disapproval to the Broker(s) by certified mail, by telegram, or by delivering it personally.”  Since then, the court has not ruled directly on a case like this.

The decision in the current case gives the general facts:

Plaintiffs Michael Conley, Jr., and Katie M. Maurer (Buyers) made an offer to purchase a condominium from defendant Mona Guerrero (Seller), and, a few days later, Seller signed and executed the contract. Before the three-day attorney-review period expired, Seller’s attorney sent Buyers’ attorney and their realtor notice of disapproval by e-mail and fax, rather than by the methods approved under our 1983 holding and prescribed in the parties’ contract — certified mail, telegram, or personal service.

A bidding war began on the same day that the attorney review period commenced, and Buyers were informed that higher offers were submitted for the property. In response, Buyers increased their offer amount and implored Seller to agree to the sale. The next day, however, Seller accepted a higher bid from defendants Michele Tanzi and Brian Kraminitz (Tanzi).

Buyers sued for specific performance, claiming the contract was enforceable because Seller’s notification of disapproval was sent improperly.

In essence, this case boiled down to the “spirit of the law” v. “letter of the law”.  The trial court and appellate division refused to enforce the contract.  Tanzi and Kraminitz have now been living in the house for about 2 years.The NJSBA and REALTORS both filed amicus (friend of the court) briefs in support of the defendant and recommending modifying their original agreement to allow for email and fax notice of disapproval.

The court ruled:

We conclude that, 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. We also exercise our constitutional authority over the practice of law and find 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.

The court also referred the matter to the Real Estate Commission to modify the administrative code to be in compliance with this ruling.

I presume that the plaintiffs got a great deal on the house (at least from their perspective) and wanted to protect that deal.  In the years since housing prices have continued to escalate.  Unfortunately for the plaintiffs, this case did not go their way.  The risk they undertook cost them (presumably) legal fees and the opportunity cost of a cheaper house.

To summarize, the court enters the 21st century by allowing notice in real estate disavowal via email and fax.