Bulletin: CA2024003

Dear Associates:

Several states, including California, enacted legislation protecting homeowners from the predatory provisions in, and recording of, real estate listing agreements, known as Non-Title Record Agreements for Personal Service (NTRAPS). When executed and recorded in public records, the NTRAPS provide constructive notice that an owner has accepted up-front monetary compensation for a future real property listing service. NTRAPS, however, do not constitute a real property interest.

Specifically in California, on October 2023, the Residential Exclusive Listing Agreement Act (the “Act”) was enacted as Chapter 577 (AB 1345), effective on January 1, 2024. The Act makes it unlawful for an exclusive listing agreement, as defined, to:

• be written for more than 24 months from the date the agreement was made unless the owner is a corporation, limited liability company, or partnership.
• renew automatically; any renewal must be in writing and be dated and signed by all parties to the agreement. No renewal may last longer than 12 months from the date entered into.
• be recorded or filed or otherwise attempted to be recorded or filed with a county recorder, regardless of the duration, including any memoranda or notice of such an agreement.
• be enforced or attempt to be enforced if it was made or presented for recording in violation of the Act (even those created and/or recorded prior to the effective date of this law).

NTRAPS in violation of the Act are void and unenforceable and a homeowner who entered into any such agreement may retain any consideration received thereunder. A violation of the provisions of the Act by a licensed person, will constitute a violation of that person’s licensing law, and also constitutes a violation under Civil Code Section 1770 [Deceptive Practices].

The Act was chaptered to prohibit the egregious and predatory nature of long-term listing agreements like the ones we have seen recorded in California involving MV Realty PBC, LLC a/k/a MV Realty, a real estate brokerage headquartered in Florida. For more information relating to MV Realty, refer to SLS2024011, SLS2023014, SLS2023012, and SLS2022007.

Underwriting Guidelines

Bulletin SLS2024011 supplements SLS2023014, which replaced bulletin SLS2023012, and confirms and reinstates the underwriting guidelines contained in SLS2022007. Specifically, bulletin SLS2022007, confirmed by SLS2024011, provides underwriting guidelines when your title search discloses the recording of any Memorandum of Agreement, Notice of Agreement, or a Deed of Trust securing performance of a Homeowner Benefit Agreement relating to the “Homeowner Benefit Program” (the “Agreement” or "Agreements”) or similar NTRAP arrangements by other entities. Additionally, bulletin SLS20230014, which replaced prior bulletin SLS20230012 and supplemented by SLS2024011, provides additional underwriting guidelines in connection with closing a sale or refinance transaction involving a property that is subject to one of these Agreements. This bulletin supplements SLS2022007, SLS2023014, and SLS2024011.

Any recorded Agreement or similar NTRAPS are unenforceable. However, neither the Act nor MV Realty’s joint bankruptcy, now dismissed, voids or cancels existing Agreements or similar NTRAPS recorded against residential property. As a result, if your title search discloses the recording of an Agreement or similar NTRAPS, including those involving MV Realty or any of its affiliated entities, the recorded document must be identified as an exception in Schedule B of the Preliminary Report or title commitment. In addition, the recorded Agreement or similar NTRAPS must be removed of record, i.e., secure a payoff statement and/or a full release, termination, discharge, or substitution of trustee and full reconveyance, as applicable, to be recorded in connection with closing and in order to comply with bulletins SLS2022007, SLS2023014, and SLS2024011.

The underwriting guidelines in this bulletin apply to both purchase and refinance transactions.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.