Strapped for cash and own a home that you are not ready to sell yet? What if a real estate agency offers you an advance of 0.3% the value of your home for the exclusive right to sell your home when you are ready to sell? Sounds like a good deal, right? Not if that contract is binding for 40 years, creates a lien on your home, and requires you to pay a 3% commission (10 times the amount initially paid to you) even if you don’t use that agency to sell your home or a 3% cancellation fee to get out of the contract. That would be more than $14,000 for the median home in Davis County now valued at $478,000.
Attorneys general from at least five states to include Florida, Pennsylvania, Massachusetts, Ohio, and North Carolina have sued MV Realty, alleging unfair and deceptive marketing for such 40-year exclusive listing contracts preying on vulnerable homeowners including senior citizens and those who speak English as a second language. The listing agreements charge an early termination fee that amounts to at least 10 time the amount initially paid to the homeowner. Further, the agreements are filed on property records characterized as liens, covenants, encumbrances, or security interests. Such filings create impediments and increases the cost and complexity of transferring or financing real estate in the future. According to the agreement, such encumbrance “runs with the land,” which means that the contract is binding to whomever might inherit your property should you die before ever selling the property.
On March 14, 2023, when Governor Spencer Cox signed H.B. 211, Utah became the first state to enact laws prohibiting and voiding such agreements. Specifically, H.B. 211 includes these type agreements within the definition of residential property service agreements and bans any such agreement that allows services to begin more than one year after the agreement is signed by all parties.
It also prohibits the agreements from creating a lien, encumbrance, or security interest and the ability of agencies to file the agreements on your property records. It prohibits such agreements from running with the land. Lastly, the statute provides remedies to the homeowner to recover damages, attorney fees, and costs. Several states, to include California, Colorado, Florida, Iowa, Idaho, North Dakota, Tennessee, and Washington, have introduced similar bills and it is expected that several more states will do the same. Unfortunately, Utah’s new statute applies only to agreements that were entered into after May 3, 2023.
Should you have any questions about listing agreements or your property rights, call 801-777-6626 to schedule an appointment with one of our legal assistance attorneys.