NY High Court OKs Lawyers’ Right to Nix Property Contracts

The New York Court of Appeals ruled today that lawyers can disapprove of a client's real estate contract for any reason within the three-day attorney review period.

And the court ruled that it's not bad faith, even if the lawyer simply nixes the deal because a client wanted to back out, Newsday reports.

The 10-page ruling (PDF) protects lawyer-client confidentiality, which would be threatened the court reasoned if lawyers were forced to testify about why they nixed the contract.

"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," the court opined. "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."

The ruling overturns a trial court, which had ordered Mehmet and Susan Erk to pay $234,000 to James and Kathleen Moran after the Erk's decided in 1995 not to buy the home and their lawyer disapproved their $505,000 offer. The property later sold for $385,000.