Alabama Joins List of States Banning Unfair Real Estate Fee Agreements
Alabama has joined a growing list of states to pass legislation protecting homeowners from the predatory practice of filing of unfair real estate fee agreements in property records, known as Non-Title Record Agreements for Personal Service (NTRAPS).
NTRAPS have been recorded in property records since 2018. The practice preys upon homeowners, offering small cash incentives in exchange for decades-long contracts for the exclusive rights to sell the property. Submitting NTRAPS for inclusion in property records characterized as liens, covenants, encumbrances, or security interests in exchange for money creates impediments and increases the cost and complexity of transferring or financing real estate in the future.
The legislation passed in Alabama follows a model bill that ALTA helped draft with input from AARP and national stakeholders. The model bill created a blueprint for states wishing to provide a remedy for existing NTRAPS while also discouraging future unfair and deceptive practices.
“The property rights of American homebuyers must be protected,” said Elizabeth Blosser, ALTA’s vice president of government affairs “A home often is a consumer’s largest investment, and the best way to support the certainty of landownership is through public policy. We have to ensure there are no unreasonable restraints on a homebuyer’s future ability to sell or refinance their property due to unwarranted transactional costs.”
Alabama’s SB 228 shares the objective of similar bills introduced across the country to provide a remedy for existing NTRAPS while also discouraging these types of unfair practices impacting homeowners.
“The Southeast Land Title Association applauds the passage of SB 228 protecting Alabama homeowners against harmful unfair service agreements,” said Price Evans, SLTA Alabama Governmental Affairs chair. “In collaboration with the Alabama Association of Realtors, we commend the legislature in prohibiting these deceptive and predatory practices.”
Alabama’s law goes into effect Aug. 1, 2023, and will:
- Make NTRAPS unenforceable by law.
- Restrict and prohibit the recording of NTRAPS in property records.
- Create penalties if NTRAPS are recorded in property records.
- Provide for the removal of NTRAPS from property records and recovery of damages.
