Homeowner Benefit Agreement
This week we wanted to draw your attention to a recent trend that has come to our attention whereby a Real Estate Broker and Homeowner enter into a Homeowner Benefit Agreement (HBA) related to the future listing and sale of a particular Property. The basic concept of the HBA is that the Broker would provide an up-front cash payment to the homeowner in return for a future exclusive right to act as the listing agent when the owner decides to sell their property.
In consideration for the up-front cash payment, the typical HBA will generally provide that if the homeowner decides to sell their property at any point during the next 40 years, they must use the Broker as the listing agent and sets forth a minimum amount of commission due. To secure the performance of the HBA, the Broker may record a Memorandum of the Agreement or a Mortgage/Deed of Trust (the “Collateral Lien Documents”) in the land evidence records where the property is located. These Collateral Lien Documents will appear as an Exception in Schedule B of your Title Reports and will have to be released/terminated prior to or at Closing. Additional documentation evidencing the authority of the person executing the release documents on behalf of the Broker may also be required. Our underwriters believe this type of program is currently being offered in at least 33 states, including New York.
If you have a client who is a party to an HBA and you have questions about the likely Title Underwriting requirements that will be raised, please feel free to contact any of our Team Members to discuss your particular situation.
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