The Three Day Rule: Survival Tips for Residential Real Estate Transactions
In 1983 the New Jersey State Bar association entered into a consent judgment with the New Jersey Association of Realtor Boards. New Jersey State Bar Association v. New Jersey Association of Realtor® Boards, 93 N.J. 470 (1983). This consent judgment allowed licensed real estate brokers and sales persons to prepare contracts for the sale of real estate containing one to four dwellings, and for the sale of vacant one-family lots in cases which they have a fee interest, provided that each contract contains a clause making the contract subject to attorney review within three business days. Further the contract is required to contain language, which makes the contract’s language legally binding and final, unless one of the contracting party’s attorney’s disapproves of the contract’s language during that three day time period.
As a result of the aforementioned consent judgment, a basic understanding of New Jersey State Bar Association v. New Jersey Association of Realtor® Boards, 93 N.J. 470 (1983) is essential to any party looking to engage in a real estate transaction. As mentioned above, the consent judgment approved by the New Jersey Supreme Court now dictates that parties to a real estate transaction will now be bound by the language of the contract, unless their attorney disapproves of the language within three business days of the contract’s signing. This three-business day period, does not include weekend or legal holidays, and begins to run from the day the contract is signed by both the Buyer and Seller.
While a seemingly simple instruction, this step is often the most misconstrued part of a real estate transaction. All to often a party will deliver a signed real estate contract after three business days have passed due to the mistaken belief that his/her attorney has three business days to disapprove the contract from the time the contract is delivered to the attorney. This is simply not the case, misunderstanding will result in that party becoming legally abound to the terms of the signed contract.
Therefore, the important lesson to be learned from Bar Association v. New Jersey Association of Realtor® Boards 93 N.J. 470 (1983) is that any party engaging in a real estate transaction must take heed of the time frames specified by the court or run the risk of losing your ability to negotiate the terms of the contract.