Tennessee Attorney General’s Office Division of Consumer Affairs Notifies Public of New Law Impacting Recording of Service Contracts
NASHVILLE- The Tennessee Attorney General’s Office Division of Consumer Affairs (DCA) would like to notify the public of a new law impacting the recording of service contracts with a Register of Deeds.
This new law prohibits the recording of service agreements and makes a service contract void and unenforceable if the agreement:
- Purports to run with the land or be binding on future owners of interest in the real property;
- Allows for assignment of the right to provide services without notice to and the consent of the owner of the residential real estate; or
- Purports to create a lien, encumbrance, or other real property security interest.
If you are contacted by a company offering you a cash payment in exchange for agreeing to use their services at some point in the future (such as using the company to serve as your real estate agent in the event you decide to sell your home), please review the contract carefully and look for provisions that may violate this new law or for any requirements that the agreement (or a memorandum of the agreement) be recorded.
The companies offering these types of agreements tend to target senior adults, so senior adults and their caregivers are especially advised to be on alert.
Consumers should also be watchful for other types of long-term contracts that may fall outside the new law such as those that give a small loan in exchange for a percentage of the profits when the person eventually sells their home.
DCA offers the following tips to help consumers steer clear of illegal and/or predatory service agreements:
Try to avoid answering calls from an unknown number. Unscrupulous business practices may start out with an unsolicited phone call. Allow the caller an opportunity to leave a voice message so that you can review and determine the validity of the call without pressure.
Verify the real estate license of someone seeking to conduct a real estate-related transaction with you. Visit www.verify.tn.gov or contact the Tennessee Real Estate Commission to confirm that the entity or individual holds the proper real estate license required by the state.
Beware of high-pressure sales tactics. Legitimate businesses will allow you an opportunity to thoroughly review contract terms before signing.
Read the contract/agreement carefully to identify and understand your obligations. If possible, enlist the help of a trusted friend, family member, or better yet, a licensed attorney to help you review the document. Look for things such as:
- The length of time that the agreement is valid.
- How to cancel the agreement.
- What fees or penalties (if any) are involved if you want to cancel the agreement.
- What authority your signature gives to the business. Look for important terms that may be buried in the fine print such as “lien” or “loan.”
- Whether the agreement assesses interest on any financial obligation, and whether the interest rate is excessive.
In the event you do sign a service agreement, keep a copy of what you signed for your records.
While the quick payout may be helpful now, try to think of the long-term effects:
- How would this agreement limit my ability to refinance or take out home equity lines of credit in the future if needed?
- What happens under this agreement if the property faces foreclosure later, or a transfer of ownership occurs due to an unforeseen move, divorce, or death?
Consumers may report a complaint involving service agreements to DCA at www.tn.gov/consumer.