Has anyone else dealt with this issue?  Have you researched the legal authority as to whether such a document could be a valid restrictive covenant?

A member asks the following: A couple realty companies have been entering into agreements with homeowners locally. For a payment of $1000-5000, depending on the value of the real property, the agreement gives the realty company exclusive right to sell the property for an extended period of time. The realty company then tries to record a document called a Memorandum of Exclusive Right to List and Sell or a Memorandum of Beneficial Agreement. Our Recorder notes, and we agree, that under state law, the Memorandum is not a recordable document. We believe that as simply a private sales/listing contract, the underlying agreement does not affect title to or possession of real property. Counsel for the realty company pushed back and asserted to the Recorder that the agreement establishes a restrictive covenant that runs with the land. However, we question whether this is a proper restrictive covenant as it has nothing to do with the use of the property. The terms are onerous: usually a forty year term that is binding on all successors and heirs. There are penalty charges for transactions in "default" of the agreement, which can include a refinance, transfer of property to a child or relative, etc., without paying the realty company. These transactions are charged 3% of the sales price. With some counties recording the memorandum, title is immediately clouded and the property owner or successor in interest is often surprised finding out that he/she has to pay upon "default" at a future point. The realty company seems to target the elderly and those who are in financial distress. I've also read articles online and found that these property owners generally do not know what they are signing. This practice seems predatory to us. Has anyone else dealt with this issue? Have you researched the legal authority as to whether such a document could be a valid restrictive covenant? If you've dealt with this issue and would be willing to speak with the member or pass along your experience, please email me at akarras@imla.org<mailto:akarras@imla.org> and I will connect you. Amanda Kellar Karras Executive Director / General Counsel Direct Phone: (202) 742-1018 IMLA Main: (202) 466-5424 Email: akarras@imla.org [facebook icon]<https://www.facebook.com/InternationalMunicipalLawyersAssociation/>[twitter icon]<https://twitter.com/imlalegal>[linkedin icon]<https://www.linkedin.com/company/international-municipal-lawyers-association-inc./> [logo]<https://imla.org/> 51 Monroe St. Suite 404 Rockville, MD, 20850 www.imla.org<http://www.imla.org/> Plan Ahead! Take a look at all of IMLA's upcoming events<https://imla.org/events/>! IMLA's 2022 Annual<https://imla.org/annual-conference/> Conference, October 19-23, 2022 in Portland, OR! Check out our On-Demand webinar library<https://netforum.avectra.com/eweb/shopping/shopping.aspx?site=imla&webcode=shopping&cart=0&shopsearchCat=Merchandise&productCat=Webinar> with 100+ webinars at your fingertips!