State wins summary judgment on deceptive real estate brokerage practices

The North Carolina Business Court granted the plaintiff summary judgment on key unfair or deceptive trade practices claims arising from a real estate brokerage scheme that the court found unlawfully clouded homeowners’ property titles.

Beginning in 2020, the defendants operated a business enterprise in North Carolina that induced homeowners to sign Homeowner Brokerage Agreements (HBAs) requiring the use of the defendants’ agents as exclusive real estate brokers for up to forty years. The agreements purported to authorize monetary penalties if homeowners sold through other brokers. Beyond those contractual provisions, the defendants engaged in a pattern of conduct that placed recorded documents against participating properties, creating a cloud on title and encumbering homeowners’ real estate rights.

The plaintiff, acting through the Attorney General’s Office, brought suit alleging that the defendants’ conduct constituted unfair or deceptive trade practices and violated several North Carolina statutes. On summary judgment, the plaintiff targeted multiple aspects of the scheme, including the recording of memoranda that claimed to impose covenants running with the land, the filing of lis pendens against properties of homeowners alleged to have breached the HBAs, and the collection of early termination fees that the plaintiff contended were unlawful penalties. The plaintiff also sought summary judgment on claims under the Telephone Solicitation Act.

Central to the court’s ruling was the conclusion that the memoranda falsely represented the HBAs as creating covenants that ran with the land. The court explained that the HBAs were contracts for personal services, akin to listing agreements, and did not “touch and concern” the land as required for enforceable real property covenants binding future owners. As a result, the recorded memoranda were legally false.

The court further noted the defendants’ concession that recording the memoranda did, in fact, cloud homeowners’ titles. Given that concession and the undisputed legal framework, the court held that no genuine issue of material fact existed as to whether the defendants committed an unfair or deceptive trade practice each time they filed a memorandum falsely claiming to contain covenants running with the land.

The court granted summary judgment in part and denied it in part, allowing the case to proceed on remaining issues.

The 49-page opinion is State of North Carolina v. MV Realty PBC LLC, Lawyers Weekly No. 020-002-26.