California Accuses Real Estate Company of ‘Deceptive’ 40-Year Exclusive Contracts

A "sale pending" sign is displayed in front of a home for sale in San Rafael, Calif., on May 24, 2010. (Justin Sullivan/Getty Images)

Some Californians have fallen victim to alleged deceptive practices by a real estate brokerage that’s subject to investigations in several states, as unsuspecting victims were roped into confusing contracts and penalized hundreds of thousands of dollars to cancel, according to state officials.

Attorney General Rob Bonta announced Dec. 14 he filed suit against the agency, MV Realty, alleging that nearly 1,500 Californians entered into “unlawful agreements,” with the company.

“MV Realty is a financial predator. Through its one-sided agreements, the company lined its own pockets at the expense of vulnerable homeowners in California, holding their most valuable assets hostage. To this day, it refuses to release homeowners from those agreements,” he said in a statement. “MV Realty’s actions demand accountability. That’s why we have filed our lawsuit.”

The agency, which operates in 33 states, used “deceptive and unlawful online advertising and telemarketing” to lure customers by offering cash payments to enter into lengthy 40-year contracts, where homeowners were prevented from selling with other agencies without paying a large fee, according to the complaint.

California Gov. Gavin Newsom also signed Assembly Bill 1345 into law in October to prevent real estate agencies from offering such exclusive contracts to customers for longer than 24 months, starting Jan. 1.

According to Mr. Bonta’s office, MV Realty offered payments ranging from a couple hundred to couple thousand dollars to customers to sign contracts that then charged a fee of 3 percent of their home’s value if they chose to use another agency to sell their homes.

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Through the contracts, MV Realty also placed liens on the homes of its customers, which prevented them from obtaining or refinancing home loans, according to the attorney general’s office.

The lawsuit accused the company of targeting senior citizens, veterans, and others who had searched online for home repair grants, stimulus programs, or assistance with paying bills.

Customers who were targeted by such business practices were told they had no requirement to sell their home under the contract, but were not properly informed of their obligations, such as the penalty to cancel their contract or use a different agency, according to a September Assembly Floor analysis of the new law.

The recent California lawsuit results from an investigation by California’s Department of Justice and the Santa Barbara and Napa District Attorney’s Offices.

“Holding a home hostage using agreements that gloss over the pitfalls of doing business with this company is not only immoral, but illegal,” Napa County District Attorney Allison Haley said in a statement.

Officials also allege in their lawsuit the real estate agency signed some of its agreements through agents not licensed to practice real estate in California, rendering those agreements “void and unenforceable,” among other alleged illegal actions.

Other states investigating the agency include Georgia, Florida, Massachusetts, North Carolina, and Maryland, according to legislators.