 |
|
6/16/2025
|
Bill enacted to protect homeowners from predatory real estate schemes
|
STATE HOUSE – Legislation sponsored by Rep. Susan R. Donovan and Sen. Matthew L. LaMountain has been signed into law to prohibit an unfair real estate practice that is often targeted at older homeowners, sometimes resulting in a lien against their property or other problems.
The legislation (2025-H 5185A, 2025-S 0133A), which was approved by lawmakers June 10 and signed by Gov. Daniel McKee June 13, targets a scheme referred to as Non-Title Recorded Agreements for Personal Services (NTRAPS) in which a real estate broker offers money to a homeowner upfront in exchange for the rights to later sell their home. The agreement obligates the homeowner or their heirs to use that real estate broker or face financial penalties of up to 3% of the property’s value, and can stand in the way if the homeowner wishes to get a home equity loan, transfer the property to an heir, convey it in a divorce, and more.
“This stops real estate companies from offering a small cash payment to homeowners in exchange for the exclusive rights to list their home in a set period, sometimes up to 40 years, sometimes putting a lien on their property for that time, often with a penalty on the agreement that amounts to 3 percent of the total property value,” said Senator LaMountain (D-Dist. 31, Warwick, Cranston), who chairs the Senate Judiciary Committee. “It leads to homeowners being trapped in binding contracts that they may not fully comprehend. This bill stops a horrible predatory real estate practice.”
Said Representative Donovan (D-Dist. 69, Bristol, Portsmouth), who chairs the House Health and Human Services Committee, “Unfortunately, there are agents who will offer older homeowners as little as a few hundred dollars and tell them all they have to do is list the home with them if they ever choose to sell it. But the agreement isn’t that simple. It usually includes stiff financial penalties and potentially a lien if the homeowner wants to transfer the house another way, and it can be a roadblock to refinancing or applying for a home equity loan. These predatory agreements don’t benefit homeowners. I’m happy that Rhode Island is now among the growing number of states that prohibit them.”
The new law, which took effect immediately upon enactment, now prohibits as an unfair service agreement any contract under which a person agrees to provide services in connection with the maintenance or purchase of residential real estate if the service is not to be performed within one year and either purports to be attached to the property and binding on future owners, allows for assignment of the right to provide service without notice to or consent from the property owner or purports to create a lien, encumbrance or other security interest.
Under the new law, if such an agreement is recorded, the homeowner or other person with an interest in the property can apply to the superior court to have the agreement declared unenforceable.
The law is based on model legislation that has been adopted in 30 other states. It was backed by AARP, the American Land Title Association and the National Association of Realtors.
For more information, contact:
Meredyth R. Whitty, Publicist
State House Room 20
Providence, RI 02903
(401) 222-1923
|
|