South Carolina Senate advances legislation targeting ‘predatory’ real estate agreements

COLUMBIA, S.C. (WCBD)- South Carolina lawmakers are taking steps to protect property owners from so-called “unfair” real estate service agreements.  

State senators unanimously approved a bill Thursday that prohibits the use of real estate 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.”

A violation of this law would constitute an unfair trade practice and would allow property owners to bring a civil lawsuit against the service provider.

“It will protect homeowners from these unscrupulous companies who, really, without your knowledge, or at least your full knowledge and understanding, basically bind you for the entire time that you own the home, for up to 40 years, to an agreement where they are the only ones who can ‘sell your home’,” said Sen. Michael Johnson (R-York), who sponsored the bill.

Johnson, who is also a real estate attorney, said the need for this legislation arose from complaints against several companies operating in South Carolina, including a Florida-based real estate agency.

The company, MV Realty, is accused of taking advantage of homeowners during the COVID-19 pandemic by using cash incentives to lock them into 40-year listing agreements through its Homeowner Benefit Agreement (HBA) program.

“These are companies that are preying on people who quite honestly just didn’t know better,” Johnson said.

Under Johnson’s proposal, any listing agreement that runs for more than one year would be outlawed.

“I don’t want to hamper legitimate real estate agents and people who want to sell their homes,” Johnson said. “What I do want to stop is this nonsense of ‘I’m now bound to you for the next 40 years and I’m going to pay you this exuberant price tag on the back end for you having done nothing.’”

The bill further prohibits agreements that “run with the land or bind future owners of residential real estate identified in the real estate service agreement; allow for the assignment of the right to provide services without notice or consent of the owner or buyer; or create a lien, encumbrance, or other real property security interest.”

In a statement to News 2 in September, MV Realty said its HBA program does not put liens on a customer’s property.

“Consistent with the law, MV files a memorandum that informs third parties of the existence of the agreement between the property owner and MV Realty,” the statement read in part.

The company “voluntarily and temporarily” paused entering into any new agreements in September and has since filed for Chapter 11 bankruptcy protection, which Johnson said created problems.  

“Now that they’re in bankruptcy, it has really made it extremely difficult to even negotiate to get out of this contract,” he said.

If passed, Johnson said the law would apply to previously signed agreements as well as future agreements.  

“If you’ve ever signed one of these…it’s gonna be invalid the day that this bill becomes a law,” he said.

The bill does include exceptions for certain agreements such as home warranties, insurance, and several other types of real estate contracts.

It will now be sent to the House for consideration.