Friday, September 28, 2012


The notice can be simple:

"This is to confirm that the Purchaser (or Seller) is exercising the attorney contingency clause. I am presently in negotiations with the Seller's (or Purchaser's) attorney and we are negotiating a final contract."

Of course, the notice should be sent to all parties and counsel who are identified on the broker's contract.

Thursday, September 27, 2012


Before any notice is sent out, I suggest that the attorney for the Seller be contacted immediately and be advised that the contigency clause is being exercised.

Tuesday, September 25, 2012


There are many reasons why a broker's "binder/contract" will be signed before an attorney is retained - whether it is at the insistence of an anxious buyer, nervous seller, aggressive broker, etc.

In any event, if I am made aware of this, I advise the client immediately of the effect of this. And that if certain items need to be negotiated, notice should be sent out immediately.

Monday, September 24, 2012


So when does a binding contract exist when the parties sign a brokers' binder ? A key case to examine is JAMES J. MORAN et al., Respondents, v. MEHMET ERK et al., Appellants 11 N.Y.3d 452 (2008):

"Read J.

On December 13, 1995, defendants Mehmet and Susan Erk signed a real estate contract to purchase the home of plaintiffs James J. and Kathleen D. Moran, a 5,000-square-foot ranchstyle house located in Clarence, New York. The contract, which was executed by the Morans on December 22, 1995, provided for a purchase price of $505,000, and contained a rider with an "ATTORNEY APPROVAL CONTINGENCY" stating as follows:
"This Contract is contingent upon approval by attorneys for Seller and Purchaser by the third business day following each party's attorney's receipt of a copy of the fully executed Contract (the `Approval Period'). . . . If either party's attorney disapproves this Contract before the end of the Approval Period, it is void and the entire deposit shall be returned."
Both the contract and the rider were form documents copyrighted and approved by the Greater Buffalo Association of Realtors, Inc. and the Bar Association of Erie County.[*]

After signing the contract, the Erks developed qualms about purchasing the Morans' house. They discussed their misgivings with each other and with friends and family, and ultimately decided to buy a different residence. As a result, they instructed their attorney to disapprove the contract, and she did so on December 28, 1995, which was within the three-day period for invoking the attorney approval contingency.

The Morans—who had moved out of their Clarence residence in September 1995—kept the house on the market until it was eventually sold for $385,000 in late 1998. Shortly thereafter, they sued the Erks in Supreme Court, alleging breach of contract. They sought to recover as damages the difference between the contract price of $505,000 and the eventual sale price of $385,000, as well as "carrying costs" for marketing the Clarence property for almost three years beyond the date of the 1995 contract with the Erks.

After a bench trial, Supreme Court found in the Morans' favor, and entered a judgment against the Erks for $234,065.75, which represented the difference between the contract price and the eventual sale price, plus statutory interest. Citing McKenna v Case (123 AD2d 517 [4th Dept 1986]) and Ulrich v Daly (225 AD2d 229 [3d Dept 1996]), Supreme Court opined that "[i]t is well settled law that where a Buyer acts in bad faith by instructing his attorney to disapprove a real estate contract, the condition that the contract be approved by an attorney is deemed waived and a contract is formed" (21 Misc 3d 1137[A], 2006 NY Slip Op 52668[U], *5). Likewise relying on McKenna, the Appellate Division affirmed in a short memorandum opinion (45 AD3d 1329 [2007]). We subsequently granted the Erks' motion for leave to appeal (10 NY3d 704 [2008]), and now reverse.

Attorney approval contingencies are routinely included in real estate contracts in upstate New York (see e.g. Dorothy H. Ferguson, Subject to the Approval of My Attorney Clauses, 35 NY Real Prop LJ 35 [spring/summer 2007]; Alice M. Noble-Allgire, Attorney Approval Clauses in Residential Real Estate Contracts—Is Half a Loaf Better than None?, 48 U Kan L Rev 339, 342 [2000]). Requiring a real estate contract to be "subject to" or "contingent upon" the approval of attorneys for both contracting parties ensures that real estate brokers avoid the unauthorized practice of law (see Matter of Duncan & Hill Realty v Department of State of State of N.Y., 62 AD2d 690, 701 [4th Dept 1978], lv denied 45 NY2d 709, 821 [1978]; 1996 Ops Atty Gen No. 96F11), and allows both contracting parties to have agents representing their respective legal interests (see generally Real Property Law § 443 et seq.; Rivkin v Century 21 Teran Realty LLC, 10 NY3d 344, 352-356 [2008] [discussing brokers' agency relationships and duties in real estate transactions, and emphasizing that, absent express disclosure to the contrary, a real estate broker does not represent the interests of both parties to a transaction]). Where a real estate contract states that it is "subject to" or "contingent upon" the approval of each party's attorney, this language means what is says: no vested rights are created by the contract prior to the expiration of the contingency period (see Black's Law Dictionary 828 [8th ed 2004], contingent interest ["An interest that the holder may enjoy only upon the occurrence of a condition precedent" (emphasis added)]).

Here, as previously noted, the contract between the Erks and the Morans explicitly stated that "[t]his Contract is contingent upon approval by attorneys for Seller and Purchaser by the third business day following each party's attorney's receipt of a copy of the fully executed Contract," and further provided that "[i]f either party's attorney disapproves this Contract before the end of the Approval Period, it is void" (emphases added). The Morans argue that the contract nonetheless created an implied limitation upon an attorney's discretion to approve or disapprove the contract. We do not ordinarily read implied limitations into unambiguously worded contractual provisions designed to protect contracting parties. The Morans, however, contend—and the lower courts apparently agreed—that the implied covenant of good faith and fair dealing implicitly limits an attorney's ability to approve or disapprove a real estate contract pursuant to an attorney approval contingency. This argument misconstrues the implied covenant of good faith and fair dealing under New York law.

The implied covenant of good faith and fair dealing between parties to a contract embraces a pledge that "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract" (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002], quoting Dalton v Educational Testing 457*457 Serv., 87 NY2d 384, 389 [1995] [additional citation omitted]). Yet the plain language of the contract in this case makes clear that any "fruits" of the contract were contingent on attorney approval, as any reasonable person in the Morans' position should have understood (see 511 W. 232nd Owners Corp., 98 NY2d at 153 [implied covenant of good faith and fair dealing encompasses "promises which a reasonable person in the position of the promisee would be justified in understanding were included" (citations omitted)]).

Further, considerations of clarity, predictability, and professional responsibility weigh against reading an implied limitation into the attorney approval contingency. Clarity and predictability are particularly important in the interpretation of contracts (see Maxton Bldrs. v Lo Galbo, 68 NY2d 373, 381 [1986] ["when contractual rights are at issue, where it can reasonably be assumed that settled rules are necessary and necessarily relied upon, stability and adherence to precedent are generally more important than a better or even a `correct' rule of law" (some internal quotation marks and citation omitted)]), and "[t]his is perhaps true in real property more than any other area of the law" (Holy Props. v Cole Prods., 87 NY2d 130, 134 [1995] [citation omitted]). But the bad faith rule advocated by the Morans, which derives from the McKenna decision, advances none of those objectives.

In McKenna, a short memorandum opinion, the Appellate Division held that an attorney's disapproval pursuant to an attorney approval contingency "would terminate plaintiff's rights under the contract, unless said disapproval is occasioned by bad faith" (123 AD2d 517, 517 [1986] [citations omitted and emphasis added]). The court further stated,
"While the issue of `bad faith' usually raises a question of fact precluding summary judgment, the uncontradicted proof demonstrates conclusively that defendant acted in bad faith by instructing his attorney to disapprove the contract. Defendant, by interfering and preventing his attorney from considering the contract, acted in bad faith and, therefore, the condition that the contract be approved by seller's attorney must be deemed waived and the contract formed" (id. [citation omitted]).
Reading a bad faith exception into an attorney approval contingency would create—as the McKenna court itself recognized —a regime where "question[s] of fact precluding summary judgment" would "usually [be] raise[d]" by a disappointed would-be seller or buyer any time an attorney disapproved a real estate contract pursuant to an attorney approval contingency. In an area of law where clarity and predictability are particularly important, "this novel notion would be entirely dependent on the subjective equitable variations of different Judges and courts instead of the objective, reliable, predictable and relatively definitive rules" of plain-text contractual language (Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399, 403 [1993]).

The circumstances of this case illustrate the chanciness inherent in a bad faith rule. The Erks' attorney disapproved the contract for the sale of the Morans' Clarence house in late 1995. The Erks soon bought a house in a different community, and continued on with their lives, relying on their attorney's disapproval of a contract that declared that such disapproval rendered it "void." Some three years after their last contact with the Morans, the Erks were served with the complaint in this breach-ofcontract lawsuit. Now—10 years after their attorney disapproved the contract within a three-day disapproval period—the Erks are fighting a six-figure judgment for putatively breaching an unwritten covenant because of something Mrs. Erk may have said or neglected to say in a single conversation with her attorney.
ndeed, any inquiry into whether a particular attorney disapproval was motivated by bad faith will likely require factual examination of communications between the disapproving attorney and that attorney's client (see e.g. McKenna, 123 AD2d at 517 ["defendant acted in bad faith by instructing his attorney to disapprove the contract" (emphasis added)]; Moran v Erk, 45 AD3d 1329 [2007] ["the evidence supports the court's determination that defendants acted in bad faith by instructing their attorney to disapprove the contract" (emphasis added)]). That is, the disapproving attorney will be subpoenaed to testify about communications the disclosure of which might be detrimental to that attorney's client—a direct conflict with an attorney's duty to preserve a client's confidences and secrets (see 22 NYCRR 1200.19 [a] [defining "secret" as "information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client"]). This is precisely what occurred here, where the lower courts' findings of bad faith were expressly grounded in the deposition testimony of the Erks' attorney. Moreover, the threat to attorney-client confidentiality under a bad faith regime could harm the attorney-client relationship itself in the context of real estate transactions. A diligent attorney, cognizant of the risk of being subpoenaed to testify as to the basis for a disapproval, would face a perverse incentive to avoid candid communications with his or her client regarding a transaction in which the attorney is supposed to represent the client's legal interest.

All these potential problems vanish when an attorney approval contingency is interpreted according to its plain meaning, as our sister state of New Jersey has long done (see New Jersey State Bar Assn. v New Jersey Assn. of Realtor Bds., 186 NJ Super 391, 395, 452 A2d 1323, 1325 [1982] [approving "broad construction" of attorney approval clause "enabling an attorney to disapprove a contract or lease for any reason or reasons which would not be subject to review"], mod on other grounds and affd 93 NJ 470, 461 A2d 1112 [1983]). We therefore hold that where a real estate contract contains an attorney approval contingency providing that the contract is "subject to" or "contingent upon" attorney approval within a specified time period and no further limitations on approval appear in the contract's language, an attorney for either party may timely disapprove the contract for any reason or for no stated reason. Since no explicit limitations were placed on the attorney approval contingency in the contract in this case, the Erks' attorney's timely disapproval was valid, and the contract is void by its express terms.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the complaint dismissed.

Chief Judge KAYE and Judges CIPARICK, GRAFFEO, SMITH, PIGOTT and JONES concur.

Order reversed, etc.
 [*] The form contract, which is available electronically on the Bar Association's Web site (see [last accessed Nov. 17, 2008]), contains the subject attorney approval contingency as paragraph "ATC1" (see id. at 9). A boldface header to paragraph ATC1 provides:
"ATTORNEY APPROVAL CONTINGENCY. CAUTION: The deletion or modification of Paragraph ATC1 (A) or Paragraph ATC1 (B), unless such modification extends the Attorney Approval Period or Addendum Approval Period, shall result in the automatic withdrawal of any bar association approval of this form" (id. at 9)."

Friday, September 21, 2012


Some brokers utilize contracts of sale which state as follows:

"This Contract is contingent upon approval by attorneys for Seller and Purchaser by the third business day following each party's attorney's receipt of a copy of the fully executed Contract (the "Approval Period"). . . . If either party's attorney disapproves this Contract before the end of the Approval Period, it is void and the entire deposit shall be returned."

Thursday, September 20, 2012


According to Gerard Bell (July 1967), "The Automobile Buyer after the Purchase", Journal of Marketing, and Wikipedia:

"Buyer's remorse is the sense of regret after having made a purchase. It is frequently associated with the purchase of an expensive item such as a car or house. It may stem from fear of making the wrong choice, guilt over extravagance, or a suspicion of having been overly influenced by the seller."

In my view, it is a natural consequence of "moving quickly".

Wednesday, September 19, 2012


And as recently as June, Fox Business also posted an article and noted this tip:

"Tip No. 3: Move Quickly

A sure way to stand apart from multiple offers is to move quickly.

Read more:"

Friday, September 14, 2012


During the housing boom (or housing pre-bubble depending on your view), bidding wars were always mentioned in the press. An article was written in 2000 by Marcie Geffner, a reporter, entitled "How to Win the Bidding Wars".

This article still appears today on the website of the National Association of REALTORS®.

Are these theories still practical today?

Thursday, September 13, 2012


What is a bidding war?

A quick google search will find the following definition (from Investopedia):

"Definition of 'Bidding War'

A situation where two or more buyers are so interested in an item (such as a house or a business) that they make increasingly higher offers of the price they are willing to pay to try to become the new owner of the item. The bidding usually occurs at a fast pace, requiring potential buyers to make less thought-out decisions than they normally might. While a bidding war is a seller's dream come true, it may cause buyer's remorse.

Read more:"

Wednesday, September 12, 2012


Today in Newsday, a headline reads:

Nassau home sales soar; Suffolk's rise, too

The article, at one point, states: "A few homes have even prompted bidding wars, for the first time in more than three years....."

I just experienced one.

Monday, September 10, 2012


I will be there as a volunteer lawyer from 4 -6:

"Nassau residents caught in the growing mortgage foreclosure crisis can have their questions answered by attorneys at a free clinic sponsored by the Nassau County Bar Association at the NCBA headquarters, 15th and West Streets, Mineola, NY. Attorneys have volunteered to provide one-on-one guidance, advice and direction to any Nassau County homeowner who is concerned about foreclosure matters or is already in the foreclosure process involving property in Nassau County.

Attorneys have volunteered to review individual foreclosure issues with Nassau homeowners, help them sort things out, and give advice or refer them to agencies and programs, right in the same room, that may be able to help. This is not legal representation. The attorneys will help the homeowner find out if indeed, they need a credit counselor or a lawyer, and get them in touch with available resources.

In addition to meeting one-on-one with a volunteer attorney, housing counselors, bankruptcy attorneys and representatives from Nassau/Suffolk Law Services -- which provides free legal services for those who meet certain income guidelines -- are on hand to provide assistance.

→ Reservations are required by calling the Bar Association at 516-747-4070. Please bring your mortgage documents. Attorneys fluent in other languages are available upon request when reserving.

All clinics are 3-6 p.m. and are held at the Nassau County Bar Association in Mineola."

Friday, September 7, 2012


The exemption of an unimproved property certainly requires exclusion - there is no property on the land to make a disclosure about. But the other exclusions: co-ops, condos and property in a home owners’ association not owned in fee simple does raise some questions as some of the disclusres on the Property Condition Disclosure Statement may still be within the knowledge of the Seller.

Thursday, September 6, 2012


But then we find there are certain exclusions from the definition of a home contract:

"(a) unimproved real property upon which such dwellings are to be constructed, or (b) condominium units or cooperative apartments, or (c) property in a homeowners' association that is not owned in fee simple by the seller.

Wednesday, September 5, 2012


So by looking at the definition section 461 of the RPL, I first note that the definition of a binding contract of sale is quite broad and that the property disclosure statement will be required in most home sales.

Tuesday, September 4, 2012


And with a reminder to all claimants seeking my assistance on Unemployment Insurance matters:

I do operate on a fee basis in accordance with the NYS Appeal Board rules. In a nutshell, no fee can be charged upfront(except, in limited circumstances, for appeals to the Appellate Division). Attorney fees can only be claimed if the attorney is successful in either obtaining or maintaining your claim for benefits and then only in an amount approved by the Appeal Board after time records are submitted. If you have paid any one an upfront fee, you should notify the Appeal Board right away.