Unfair Real Estate Service Agreements and an Update on NC DOJ v. MV Realty

QUESTION: I recently saw a news article that some listing agreements have been banned by the General Assembly. The article got me wondering: Are our standard form agency agreements in compliance? Do I need to make any adjustments to how I fill out the Exclusive Right to Sell Listing Agreement (Form 101) with seller clients? What should I do if I encounter a potential seller who has signed an unfair real estate service agreement?

ANSWER: NC REALTORS®’s standard agency agreements are in full compliance with the new law, and it is unlikely that you need to make any adjustments to the way you fill out Form 101 with your sellers.

The General Assembly passed “An Act to Prohibit Unfair Real Estate Service Agreements for Residential Real Estate” (the “Act”) on August 24, 2023. You can read the new statutes here. In the Act, a “real estate service agreement” is specifically defined in N.C.G.S. § 93A-85.1 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.” A real estate service agreement that is “unfair” under N.C.G.S. § 93A-85.2 is one that meets the definition of section 93A-85.1 and further does any one of the following: (1) runs with the land; (2) allows for assignment without the consent of the consumer; or (3) attempts to create a lien, encumbrance, or other property interest.

Stated differently, the Act says that if a real estate service agreement concerns residential real estate, meets the definition of 93A-85.1, and contains one of the three prohibited aims of section 93A-85.2, then the agreement is an “unfair real estate service agreement.” Such agreements are void and of no legal effect. Form 101 contains none of the three aims prohibited in section 93A-85.2, so even if a broker creates a residential listing agreement on Form 101 to provide services for longer than a year, it will not violate the Act.

It must be noted that the Act only applies to real estate service agreements signed on or after August 24, 2023. If you encounter a prospective seller who signed an alleged unfair real estate service agreement prior to August 24th, then you will need to recommend they seek legal counsel. The North Carolina Department of Justice filed a civil lawsuit against a firm named MV Realty. On August 30, 2023, the judge in that case entered an order potentially affecting that firm’s ability to enforce alleged unfair real estate service agreements executed prior to August 24th of this year. You can read the court’s order and opinion here. Though the case is in early stages, a seller may be able to use legal counsel and the court’s order to seek relief from an alleged unfair real estate service agreement.