A California court has granted a preliminary injunction against MV Realty, and the company has filed an appeal in a case lodged against it over
Los Angeles' Superior Court noted MV Realty's concerns that the preliminary injunction would hurt its business in the state, but Judge Kenneth Freeman determined "harm of the public should not outweigh the harm to defendants if the injunction is issued."
The preliminary injunction and appeal highlight a broader legal and regulatory conflict over the contracts, in which real estate firms make a single payment for property-sales rights that can persist for 40 years, potentially hampering home sales and loan servicing.
"While our legal battle is not yet over, we will continue fighting to hold MV Realty accountable," Attorney General Rob Bonta said in a press release.
John Savrnoch, Santa Barbara County's District Attorney; and Napa County District Attorney Allison Haley also had called for the preliminary injunction.
The AG's suit alleges that MV Realty's Homeowner Benefit Agreement and its marketing are out of compliance with the state's California False Advertising, Unfair Competition, Do Not Call laws.
The plaintiff alleges MV Realty used "deceptive and unlawful online advertising and telemarketing to hundreds of thousands of Californians on the Do Not Call Registry" offering "a few hundred to a few thousand dollars" for a "chance" to sell their home later.
"In the vast majority of cases, homeowners will be forced to pay back MV Realty's initial cash offer, typically set at around 0.27% of the value of the homeowner's home, at least tenfold," the California's AG alleged in court documents.
The company allegedly "refuses to allow homeowners to cancel the agreement without paying an illegal penalty — which MV Realty calls an 'early termination fee' — set at 3% of the home's value."
California's AG also alleges in court documents that even though MV Realty markets its contract as "not a loan," it is a "disguised" one and therefore violates the Truth in Lending Act by not fulfilling requirements that include disclosure and rescission requirements.
Thirty states, including California, have passed legislation aimed at banning these types of real estate contracts, according to the American Land Title Association. ALTA refers to the contracts as non-title recorded agreements for personal services [NTRAPS].
California's new Residential Exclusive Listing Agreements Act makes NTRAPS on single-family properties longer than 24 months unlawful and sets several other restrictions on such contracts. It did not go into effect until Jan. 1, after the 2023 litigation began.
Other states with similar laws are Alabama, Arizona,
ALTA has found the real estate contracts these states seek to ban can complicate and delay mortgage transactions.
"If an NTRAP shows up in the title search, the title company will work to get it released before closing. It is usually not covered under the seller's existing policy but the buyer's lender will insist on it being released before issuing the mortgage,"
