Attorney Approval Clause

What is an attorney approval clause in real estate sales?

An attorney approval clause enables buyers to sign a sales and purchase agreement and to conduct the trade in consultation with an attorney. The clause dictates that fulfillment of the deal will not take place until it is approved by the attorney. In other words, the signature is contingent on the approval of the attorney. If you wish to use an attorney approval clause, your legal adviser must be an accredited lawyer.

Attorney approval clauses are most widely used in the purchase of a property and real estate. The attorney will review the local development plans, economic conditions and the state of the property as described in a surveyors report. They will then advise their client on whether or not changes are needed in the sales and purchase agreement.

How is an attorney approval clause correctly formulated?

There are no formal requirements as to how attorney approval clauses in the contract must be formulated. 

There are however two main common ways of formulating it:

• “The purchase is contingent on the approval of the attorney before a given date.”
  In this way, the attorney approval clause is valid until the specific date, after which the deal goes through.
  
  
• “The purchaser’s lawyer can cancel the contract due to a number of outlined reasons.”
  This clause may be valid for a longer period of time, but it can only be exercised under certain situations.

Benefits of an attorney approval clause

As the purchasing party, attorney approval clauses provides multiple benefits. First and foremost, it allows your attorney to thoroughly review the contract after you have signed the purchase agreement. This means, you will not suffer any monetary loss in the case of any inconsistencies or deficiencies which result in cancellation of the agreement.

It may also be beneficial for the seller to include an attorney approval clause. With the clause, the seller can then ensure solvency of the purchasing party and that the purchase price will be paid as agreed upon. This can help avoid breaches of contract and ultimately a dispute.

Right of cancellation

Attorney approval clauses are different from the right of cancellation/withdrawal. The right of cancellation allows for withdrawal from a large trade with the period of validity depending on the nature of the purchased good(s).

It is possible to withdraw from the purchase of a property if the purchaser’s right of cancellation is guaranteed by the law. The right of withdrawal must, however, be exercised within six working days, and a fee amounting to 1% of the purchase price must be paid to the seller. With the clause, the fee of 1% of the purchase price is waived.