The state of Utah has taken action against firms who employ right to list agreements as part of their business models, but unlike Florida, Massachusetts, Pennsylvania, and Ohio, this isn’t just a lawsuit.
On Thursday, state legislators in Utah passed H.B. 211, which bans right to list agreements, like those used by MV Realty, SellWhenever and HomeOptions. The bill was sponsored by State Representative Calvin R. Musselman, a republican representing the 9th district.
According to the law, after May 3, 2023, real estate service providers “may not allow the services to be provided under the agreement to begin more than one year after the day on which the residential property service agreement is signed by all parties” and the agreements may not be binding “on a future owner of an interest in the residential real estate,” create “a lien encumbrance, or other real property security interest or allow for the assignment of the right to provide the services without notice to and agreement by the owner of the residential real estate that is the subject” of the agreement.
In addition, the law makes right to list agreements unenforceable by law, restricts and prohibits the recording of these agreements in property record, creates penalties if agreements of this nature are recorded in property records and provides for the removal of existing agreements from property record and recovery of damages.
According to the American Land Title Association (ALTA), the bill follows a model bill the trade group helped draft with the input of national stakeholders.
“Today, the Utah legislature has affirmed that they are committed to protecting homeowners and their largest financial investment,” Diane Tomb, the CEO of ALTA said in a statement posted on the trade group’s website. “NTRAPS [Non-Title Record Agreements for Personal Service] is a deceitful, predatory practice, and homeowners in Utah can now breathe a sigh of relief that real estate brokerage firms can no longer continue these schemes, which impact homeowners’ future ability to sell or refinance property.”
Steve Murray, the co-founder of RealTrends Consulting, shares a different view.
“My thought is, does the Utah state legislature think that their citizens are stupid?” Murray posited. “Do they think their citizens don’t understand when they sign the agreement that they are getting money today in exchange for a future promise to the source of that money? I know the argument is that it is to protect consumers, but do they think they can’t figure this out?”
In Murray’s view, the cash payments these firms use to ensure future business are comparable to the hundreds or even thousands of dollars a real estate agent might spend on potential or past clients they are hoping to work with again in the future or receive referrals from.
Despite his misgivings about the Utah law, Murray does understand why legislators feel the need for regulation on this.
“What if someone signs and agreement and decides to sell, but the service provider isn’t putting the property on the MLS or holding open houses or marketing the home, but the owner had to use that firm because they were under an agreement?” Murray asked. “I can see the problems, but rather than just ban them all together, why don’t they just better regulate these practices?”
Ken Trepeta, the executive director of the Real Estate Services Providers Council, did not share Murray’s disdain for the Utah law, but he was not surprised a state had taken action in this way.
“It is not clear whether right to list agreements run afoul of any current laws or rule so it is not surprising a legislature is not leaving the matter to chance and taking action to address the long term consumer protection concerns raised by these agreements,” Trepeta wrote in an email. “I wouldn’t be surprised if other states followed suit.”
And Trepeta is right. Similar bills have been introduced in California, Colorado, Florida, Georgia, Iowa, Idaho, North Dakota, Tennessee and Washington. In addition, ALTA said it expects bills addressing right to list agreements in five more states later this year.
Earlier this week, MV Realty, which faces lawsuits from four states attorneys general alleging that it misleads and confuses homeowners through its Homeowner Benefit Program, announced that it was pausing the signing of new Homeowner Benefit Agreements.
“MV Realty has voluntarily temporarily suspended entering into new customers contracts as we work to address the concerns raised by regulators and legislators,” a company spokesperson wrote in an email.
Requests for comment sent to SellWhenever and HomeOptions were not returned by the time of publication.
