The New Jersey Supreme Court ruled that residential real estate transactions are distinct from absolute auctions, and imposing a three-day attorney review on an auction “fundamentally undermines the manner in which buyers and sellers choose to conduct such sales.” effectively hinder it,” he said.
According to the Supreme Court’s June 9 opinion, Mengxi Liu was the highest bidder at a real estate auction for a Bernersville home in 2016. Max Spann Real Estate conducted an auction of the property then owned by Sylvester L. Sullivan. Grantor Retained Income Trust with John C. Sullivan as Trustee. Sullivan signed a real estate auction contract with Max Span.
According to the memorandum, Mr. Liu claimed to be an experienced property buyer and had completed a pre-auction form confirming receipt of the property information package, which included a sales contract template and accompanying notices. It is unclear whether Liu herself or her husband, Liang Wang, actually signed the bidder registration form.
Liu bid for the property at $1.1 million, according to the opinion. A contract and notice was signed and Liu paid his $121,000 security deposit. Max Spann deposited the money in an escrow account.
Mr. Liu was unable to secure a mortgage and ultimately did not purchase the property. She also traveled to China to retrieve her needed funds, but Chinese law prohibited wire transfers of the money to the United States. After Liu failed to complete the purchase of the property, Max Spann conducted his second auction, which he sold for $825,000, the memorandum said.
According to the opinion, Sullivan filed this lawsuit against Max Spann. This is due to Liu’s alleged failure to qualify as a buyer with sufficient funds to close the ownership, and failure to release the $121,000 escrow bond to the Trust, which is related to good faith and fair dealings. for violating an implied covenant. .
Sullivan filed an amended complaint against Liu after the trial court held that Liu was an integral party. Max Spann filed a counterclaim against Sullivan for half of the funds held in escrow and a counterclaim against Liu for breach of contract. According to the opinion, the court of first instance directed the three parties to submit their opinions on whether the sale of the residential property at auction was valid without an attorney review clause.
The court of first instance ultimately ruled that the contract was enforceable because the three-day attorney review clause was not required and the bidders were offered a contract prior to the auction and agreed to review it before bidding. Did. According to the opinion, Max Spann and the Trust were ordered to divide the $121,000 deposit equally.
In his appeal, Liu cited the state Supreme Court decision. New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards, The real estate agent preparing the contract does not participate in unauthorized legal practice and is allowed a three-day attorney review period during which either party’s attorney may cancel the contract. Appeals Division Majority upheld the judgment of the first instance. The dissenting opinion questioned the court’s jurisdiction and was the basis for Liu’s appeal to the Supreme Court on its rights under Rule 2:2-1(a)(2).
Liu asked the court to reverse the Court of Appeals decision, stating: State Bar Assen Her bid of $1.1 million was grossly overstated and it was not her fault that the property was not purchased because Max Spann was involved in an unauthorized legal act. Sullivan argued to uphold the ruling, saying the three-day legal review period does not apply to residential property auctions. Max Spann argued to uphold the ruling, saying allowing parties to cancel auction contracts would disrupt the practice of selling real estate at auction.
Amicus curiae The New Jersey Bar Association recommended a mandatory review of real estate agent-prepared auction sales contracts. Opposing this, the amicus curiae New Jersey Realtors affirmed the judgment, stating that “the attorney’s review order State Bar Assen Not applicable to real estate auctions. ”
Judge Anne M. Patterson, in her unanimous opinion for the Court, concurred with the Court of Appeals’ decision that: State Bar Assen “We do not control the absolute auction setting of this appeal.”
“Like a traditional real estate transaction, if an attorney allows the contract to be canceled for any reason after the auction, the buyer will be deprived of the opportunity to purchase the property at a bargain price, and the seller will lose that profit,” Patterson said. Accelerated final sale.
“Furthermore, this case does not take into account the role of a licensed real estate salesperson. Filling in the blanks on the real estate sales contract, the buyer’s name and address, the bid price, the buyer’s premium, Mr. Patterson said, to constitute the total purchase price.
Patterson said the importance of legal representation and attorney consideration was clearly communicated to the buyer prior to the auction, so the court’s purpose was to State Bar Assen achieved here.
In conclusion, Patterson concluded that Liu had no defense against the breach-of-contract allegations asserted by Sullivan and Max Span, that the three-day provision was not required, and that no unauthorized juristic act had taken place. Said there wasn’t.
Chief Justice Stuart Ravner, Justice Lee Solomon, Justice Fabiana Pierre-Louis, and Justice Clarkson Fisher Jr. joined Patterson’s opinion.
Peter G. Verniero of Sills Cummis & Gross, attorney for Max Spann, said:
“I am also pleased that the court found that the bidding materials used by my client served the consumer protection objectives outlined in previous case law,” Verniero added.
Discussing the cause, attorney F. Bradford Butcher, who prepared the New Jersey Bar Association Trial Brief, said: For transactions that are absolute auctions without reservations where adequate consumer protection is generally provided prior to the auction. ”
Sullivan’s attorney, Pierre Chan of Wirentz, Goldman & Spitzer, said: A client of mine who just put their house up for sale can finally get a closure. ”