Wednesday, March 10, 2010

Developer-created CC&R requiring listing with particular broker

Just ran across this interesting issue on DIRT-L. I took out the names to protect the privacy of the attorneys who were discussing it:


Do any states prohibit by statute or case law the practice of a developer (or HOA) requiring subdivision owners to list any future re-sale of their property with the developer's preferred real estate listing brokerage?

In SC, developers put listing with the preferred brokerage into their CCRs (covenants conditions restrictions) that owners must list for a period of time with the preferred brokerage (aka the brokerage of record or the on-site brokerage).

A member of the public called and said that NC, Ga, and California have prohibited this practice.

In SC, many developers use this strategy.

In Connecticut, such a covenant has been held to violate the state Anti-Trust Act. See State v. Hossan-Maxwell, Inc., 181 Conn. 655 (1980)

It is also my understanding that this practice is prohibited by statute or regulation. In any event, under the conventional test, the covenant would not "run with the land" and would bind only the first purchaser.

So there you have it. I haven't researched the issue myself and I'm just passing it along FYI to check out if you are interested.


1 comment:

Anonymous said...

In the recent past, I am aware of associations in North Carolina that have required (by execuitive board vote,I assume)properties for sale/resale in the community could only be sold/listed via one real estate company (they said this was decided so all the real estate signs would match.) Another association REQUIRED all re-sales had to be sold through the Homeowner Association's real estate company.
I am not sure if this is still the practice within these groups. I have not followed what has transpired.