You should never buy or sell a house before consulting with a real estate attorney. In fact, many real estate sales contracts contain what is known an “attorney approval contingency.” This means each side's attorney may review and disapprove the contract without penalty to either side. Typically, an attorney approval contingency sets a time limit for an attorney to express disapproval in writing.
It should be noted an attorney's “approval” need not be confined to reviewing the terms of the contract itself. In many cases, an attorney disapproves a contract simply because the client has received a better offer for the property or simply had a change of heart. Unless the contract itself limits the scope of an attorney approval contingency, New York courts are not inclined to restrict their application. As the Appellate Division, Third Department, hasexplained, “When an agreement is subject to attorney approval, it is not binding and enforceable until it is approved, and expiration of the specified period without approval by the attorney renders the agreement nonbinding and unenforceable.”
Is Two Months too Long to Wait for an Attorney's Approval?
But there may be cases where the parties dispute whether attorney approval has been properly given. The Third Department recently addressed such asituation. In this case, a buyer entered into an agreement to purchase two parcels in Columbia County, New York from the seller. The agreement had an attorney approval contingency which did not specify a time limit, only that disapproval be made in writing.
Two months after making the agreement—and two weeks before the scheduled closing—the seller's attorney disapproved of the contract. The buyer then filed suit in Columbia County Supreme Court, arguing the contract was legally binding. The seller moved to dismiss, citing the attorney approval contingency.
The Supreme Court denied the motion to dismiss and the Third Department affirmed. The appeals court said at this stage of the litigation, the buyer alleged sufficient facts to support the conclusion there was an enforceable contract. The buyer's attorney testified the seller's attorney “orally approved the agreement prior to disapproving it in writing.” If that is the case, the Third Department said, “an unequivocal approval of the agreement would make it 'binding and enforceable' against the seller, notwithstanding the seller's attorney's subsequent written disapproval.”
The court also said in the absence of a time limit for attorney approval, “a reasonable time for cancellation” must be implied. As noted above, the seller's attorney waited two months before disapproving the contract in writing. This may still be considered “reasonable,” but it will require further inquiry by the Supreme Court, making dismissal at this time inappropriate, according to the Third Department.
Need Help Buying or Selling Real Estate?Real estate transactions are rarely simple matters. There are many types of legal complications that can arise even over a seemingly simple house sale. That is why it important to work with an experienced New York real estate attorney who understands the law and can help protect your interests. Contact the offices of Waldhauser & Nisar, LLP, in New York City or Long Island if you need to speak with someone today.