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NJ Supreme Court Updates Real Estate Contract Cancellation Rules

On Monday, April 3, 2017, the New Jersey Supreme Court ruled to update a 1983 ruling that said real estate contracts had to be voided by certified mail, telegram or personal delivery. The new ruling states that an attorney may void a real estate contract on behalf of a client by fax or email. It was decided that the method of delivery was of minimal importance, as long as the affected party receives actual notice.

The decision was made because email and fax have become the predominant forms of communication for industry professionals. In 1983 when the law was passed, forms of communication like email and fax were virtually unheard of.

The decision also stems from a recent case in New Jersey where potential homebuyers contract of sale was canceled when the seller received a better offer. Shortly after the contract was signed, the seller received other offers and a bidding war for the property commenced.

The original homebuyers were notified verbally by the seller’s attorney during the attorney review period. They wrote a handwritten letter acknowledging receipt of the notice. Their lawyer and realtor were also notified via fax and email.

After the original buyers found out that the seller had signed a contract with another party, they filed a suit against the seller. Both parties moved for summary judgment after the plaintiff’s motion for a temporary injunction against the sale was denied.

Somerset County Superior Court Judge Edward Coleman said the purpose of the attorney review period is to protect parties’ interests from being bound by broker prepared contracts. It was determined that this purpose was served in this particular case.  

The Supreme Court agreed, saying;

“We conclude that, because the 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,”

Real estate lawyers have been waiting for this law to change for years as technology and industry standards continue to evolve. This case ended up being the perfect catalyst for change.

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