The North Carolina General Assembly passed legislation prohibiting unfair real estate service agreements for residential real estate.
The bill, HB 2023-117, states, “This article is intended to prohibit the use of real estate service agreements that are unfair to an owner of residential real estate or to other persons who may become owners of that real estate in the future. This article also prohibits the recording of such residential real estate service agreements so that the public records will not be clouded by them and provides remedies for owners who are inconvenienced or damaged by the recording of such agreements.”
It defines a real estate service agreement as “a written contract between a service provider and the owner or potential buyer of residential real estate to provide services, current or future, in connection with the maintenance, purchase, or sale of residential real estate.”
Real estate service agreements are considered unfair, void, and in violation of the law if the agreement is to be in effect for more than one year and either expressly or implicitly aims to do any of the following:
- Run with the land or bind future owners of residential real estate identified in the real estate service agreement.
- Allow for assignment of the right to provide services without notice or consent of the owner or buyer.
- Create a lien, encumbrance, or other real property security interest.
Service providers will have no right to a refund of the consideration paid to the owner or buyer in connection with an unfair real estate service agreement.
The bill’s provisions don’t apply to:
- A home warranty or similar product.
- An insurance contract.
- A transaction governed by Chapter 47G (Option to purchase contracts executed with lease agreements) or Chapter 47H (contracts for deeds) of the General Statues.
- A declaration pursuant to Chapter 47A (Unit Ownership), Chapter 47C (North Carolina Condominium Act), or Chapter 47F (North Carolina Planned Community Act) of the General Statutes.
- A maintenance or repair agreement entered into by a homeowners’ association in a common interest community.
- A security agreement under the Uniform Commercial Code relating to the sale or rental of the personal property or fixtures.
- Provision of water, sewer, electrical, telephone, cable, natural gas, propane, fuel oil, or other regulated utility service.
- A property management contract.
- An action arising from Part 2 of Article 2 of Chapter 44A of the General Statutes regarding mechanics’, laborers’, and materialmen’s liens, or Part 4 of Article 2 of Chapter 44A of the GeneralStatutes regarding commercial real estate broker liens.
The recording of unfair real estate service agreements is prohibited. If an unfair real estate service agreement is recorded, it is void. The following apply to a recording that is void:
- The recording shall not operate as a lien, encumbrance, or security interest.
- No owner or buyer shall be required to record any document voiding the recording.
- The recording shall not provide actual or constructive notice to any person interested in the residential real estate that is identified in the unfair real estate service agreement.
- The recording violates G.S. 14-118.6(a).
The bill states, “In addition to any other rights provided by law, any person with an interest in residential real estate identified by a recording that is void under subsection (a) of this section may recover damages, costs, and attorney’s fees that may be proved against the service provider named in the unfair real estate service agreement. Any actual damages, costs, and attorney’s fees that are proved against the service provider will not be offset by the consideration paid by the service provider to the owner or buyer of the residential real estate.”
It continues, “A violation of any provision of this article constitutes an unfair or deceptive trade practice under G.S. 75-1.1. Any party aggrieved by a violation of this article may bring a cause of action against the service provider and is entitled to the relief available in Chapter 75 of the General Statutes. Any recoveries available under Chapter 75 of the General Statutes against the service provider will not be offset by the consideration paid by the service provider to the owner or buyer in connection with the unfair real estate service agreement. The attorney general is hereby empowered to enforce this article as allowed by Chapter 75 of the General Statutes”