Bulletin: AZ2024003

Dear Associates:

The Arizona Legislature passed SB1218 in the 2024 legislative session to address Exclusive Property Engagement Agreements, also known as NTRAPS or Non-Title Record Agreements for Personal Service. These agreements were most notably entered into and recorded by MV Realty PBC, LLC and affiliated entities.

Legislation affecting these agreements is chaptered in Title 44, Arizona Revised Statutes as sections 44-501 – 44-503. Effective September 14, 2024, this legislation in part makes it unlawful for an exclusive property engagement agreement to:

• Last longer than twelve months;
• Be a covenant that runs with the land;
• Bind a future owner, subject to certain exceptions;
• Be recorded in the office of a county recorder;
• Authorize a person to place a security interest, lien, or otherwise encumber residential real estate;
• Allow for the assignment of the exclusive property engagement agreement, subject to exceptions.

Other relevant provisions of 44-503 include:

• Courts may not enforce agreements made or recorded in violation of the law;
• A contract or agreement made or recorded in violation of the law is void and unenforceable;
• Consideration paid to a homeowner is forfeited;
• A contract or agreement that violates the law and was recorded prior to September 14, 2024 is void. This requires the Real Estate Commissioner to take steps prior to this provision taking effect.
• Allows for enforcement of the law by private action or by the attorney general.

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 was 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.

Due to the various exceptions and the uncertainty of any legal challenges to SB1218, 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.