Category Archives: real estate law

Which state has jurisdiction when the sale of New Jersey real estate is handled by a New York law firm?

The Appellate Division of the New Jersey Superior Court  has refortified the commitment to holding persons responsible for actions they take in one state but knowing it will or might have a tendency to have an effect in another. Lee v. Rah, 2011 WL 2802794 (N.J.Super.A.D.,2011).

This case is about Rah, a New York attorney, who did not practice in New Jersey, but drafted documents for his clients regarding the ownership and sale of a piece of real estate in New Jersey. Rah performed all the work in his New York office. He also claimed that at all times the deed for the real estate was held in escrow in New York, and it was never recorded in New Jersey. Also, the fees for his services were paid by a New York Corporation. When the Lees tried to sell their real estate, the transaction went sour because the documents Rah drafted had not been recorded and, even if they had been, were improper because they were drafted on a New York form. Thereafter, the Lees sued Rah in New Jersey for malpractice.

Rah moved to dismiss the action on the grounds that he was not subject to the Court’s jurisdiction in New Jersey. The lower court agreed and dismissed the complaint on the grounds of lack of in personam (personal) jurisdiction. The Appellate Division disagreed and reinstituted the lawsuit. The Court held that Rah provided legal services for the transfer and sale of a New Jersey property. Although all of Rah’s activities occurred in New York, he was handling a New Jersey transaction for New Jersey residents. Therefore, even though Rah had no presence in the state of New Jersey, he “was well aware that his legal activities ‘would have direct consequences in New Jersey’”. Id. at 5.  This meant that Rah could not avoid a New Jersey lawsuit by remaining in New York to do work related to New Jersey real estate. Any malpractice attributed to him regarding the real estate would have a predictable impact in New Jersey and, thus, New Jersey was well within its rights to exercise its judicial authority over Rah.

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