Sullivan v. Max Spann Real Estate & Auction Co., 251 N.J. 45 (2022). In an opinion reported at 465 N.J. Super. 243 (App. Div. 2020), and discussed here, the Appellate Division, by a 2-1 vote, held that the three-day attorney review clause that the Supreme Court required for conventional sales of residential real estate in New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards, 93 N.J. 470, modified, 94 N.J. 449 (1983), did not apply to absolute auction sales of residential real estate. That case arose when attorneys asserted that the preparation of contracts for sale of real estate by real estate brokers or salespeople constituted the unauthorized practice of law. The Supreme Court created the three-day attorney review clause to address that concern.
Due to the dissent in the Appellate Division, defendant, the successful bidder at an auction sale, was able to appeal this case to the Supreme Court as of right. Today, in a 5-0 decision, the Supreme Court affirmed the Appellate Division’s ruling. Justice Patterson wrote the Court’s opinion. Justice Albin did not participate, and since Judge Fuentes, who has been temporarily assigned to the Supreme Court, was part of the Appellate Division panel that had ruled in this case, he was replaced by Judge Fisher, who was brought up from the Appellate Division for this matter.
Justice Patterson’s opinion went through the background of this case and the history of the three-day attorney review clause in great detail. At bottom, however, was the nature of an absolute auction. Justice Patterson cited Black’s Law Dictionary for its definition of an absolute auction as one where property “will be sold to the highest bidder, no minimum price will limit bidding, the owner may not withdraw property after the first bid is received, the owner may not reject any bids, and the owner may not nullify the bidding by outbidding all other bidders,” with “the highest bid creating an enforceable agreement.” Consistent with that, in a document presented to all bidders for signature before the auction began, bidders were expressly told (among other things) that “this is an auction sale and is not subject to an attorney review period.”
Thus, Justice Patterson said, an absolute auction “stands in stark contrast to the traditional real estate transaction that was the focus of this Court’s opinion in State Bar Ass’n,” where the buyer and seller negotiate terms and a contract is then prepared. The three-day attorney review period “is incompatible with the sale of residential real estate by absolute auction. Were we to permit counsel to cancel contracts for any reason after an auction as in a traditional real estate transaction, buyers would be deprived of the opportunity to purchase property at a bargain price, and sellers would lose the benefit of an accelerated and final sale.”
Nor did the Court consider “the role of the licensed real estate salesperson in this case — filling in the spaces left blank on the Contract for Sale of Real Estate for the name and address of the buyer, the bid price, the buyer’s premium, and the total purchase price — to constitute the unauthorized practice of law.” Those terms were fixed once the bidding concluded, so that the salesperson “did nothing more than memorialize terms that were already part of a contract formed at the auction’s conclusion. The salesperson’s minimal role does not raise the concerns that our jurisprudence on the unauthorized practice of law is intended to address.”