Prohibits unfair residential real estate service agreements which are certain service agreements which are not to be performed within two years following the time such agreement is entered into.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5886C
SPONSOR: Cruz TITLE OF BILL:
An act to amend the general business law, in relation to prohibiting
unfair residential real estate service agreements
PURPOSE:
To protect homeowners from deceptive or unfair real estate service
agreements that create unnecessary liens, encumbrances, or binding obli-
gations on residential real property.
SUMMARY OF PROVISIONS:
*Section 1: Provides the short title of the bill as the "Prohibition of
Unfair Real Estate Service Agreements Act."
*Section 2: States legislative intent to prohibit the use and recording
of unfair residential real'estate service agreements to prevent fraud
and consumer harm.
*Section 3: Adds a new Article 36-E to the General Business Law:
*Defines terms such as "unfair real estate service agreements," "record-
ing," and "residential real estate."
*Prohibits agreements that bind future property owners, allow assignment
without owner consent, or create invalid liens or encumbrances.
*Declares that unfair agreements cannot be enforced or recorded, and
allows affected parties to seek court orders declaring such agreements
void.
*Designates such agreements as deceptive acts under § 349 of the General
Business Law.
*Grants enforcement authority to the attorney general and municipal
Officials.
*Section 4: Includes a severability clause to ensure remaining
provisions remain valid if parts of the act are deemed invalid.
*Section 5: Establishes the act's effective date as 90 days after becom-
ing law.
JUSTIFICATION:
Homeowners are increasingly targeted by predatory service providers who
use deceptive agreements to impose burdensome and hidden obligations on
residential properties. These agreements often:
*Purport to run with the land, unfairly binding future owners. *Create
invalid liens or encumbrances that cloud property titles.
'*Allow assignment without homeowner consent, further complicating
resolution.
This legislation protects consumers by prohibiting these practices and
ensuring that any improperly recorded agreements are deemed unenforcea-
ble. it also provides legal remedies for affected parties and enforce-
ment mechanisms to deter such predatory actions.
LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPLICATIONS:
Minimal administrative costs anticipated for implementation and enforce-
ment.
EFFECTIVE DATE:
This act shall take effect on the 90th day after it becomes law.
STATE OF NEW YORK
________________________________________________________________________
5886--C
2025-2026 Regular Sessions
IN ASSEMBLY
February 24, 2025
___________
Introduced by M. of A. CRUZ, LEE -- read once and referred to the
Committee on Consumer Affairs and Protection -- committee discharged,
bill amended, ordered reprinted as amended and recommitted to said
committee -- again reported from said committee with amendments,
ordered reprinted as amended and recommitted to said committee --
committee discharged, bill amended, ordered reprinted as amended and
recommitted to said committee -- reported and referred to the Commit-
tee on Codes
AN ACT to amend the general business law, in relation to prohibiting
unfair residential real estate service agreements
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "prohibition of unfair real estate service agreements act".
3 § 2. Legislative intent. In an effort to protect consumers from fraud
4 and abuse by unscrupulous actors, this act prohibits the use of real
5 estate service agreements that are unfair to an owner of residential
6 real estate or to other persons who may become owners of that real
7 estate in the future, and further prohibits the recording of such resi-
8 dential real estate service agreements so that the public records will
9 not be clouded by them and provides remedies for owners who are incon-
10 venienced or damaged by the recording of such agreements.
11 § 3. The general business law is amended by adding a new article 36-E
12 to read as follows:
13 ARTICLE 36-E
14 PROHIBITION OF UNFAIR REAL ESTATE SERVICE AGREEMENTS
15 Section 778-aaa. Definitions.
16 778-bbb. Prohibition against unfair service agreements; record-
17 ing thereof.
18 778-ccc. Deceptive acts and practices.
19 778-ddd. Enforcement; action by the attorney general.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05484-06-5
A. 5886--C 2
1 778-eee. Severability.
2 § 778-aaa. Definitions. As used in this article, the following terms,
3 unless the context requires otherwise, shall have the following mean-
4 ings:
5 1. "Person" means a natural person, partnership, association, cooper-
6 ative, corporation, trust, or other legal entity.
7 2. "Real estate service agreement" means a written contract under
8 which a person agrees to provide services in connection with the mainte-
9 nance of or purchase or sale of residential real estate.
10 3. "Recording" means presenting a document to a recording officer,
11 whether the county clerk of the county or the register of the county,
12 consistent with the real property law.
13 4. "Residential real estate" means real property located in this state
14 which is used primarily for personal, family, or household purposes and
15 is improved by one to four dwelling units, including condominium units.
16 5. "Service provider" means an individual or entity that provides
17 services to a person.
18 6. (a) "Unfair real estate service agreement" means any real estate
19 service agreement that is not to be performed within two years after the
20 time it is entered into and either:
21 (i) purports to run with the land or to be binding on future owners of
22 interests in the real property; or
23 (ii) allows for assignment of the right to provide service without
24 notice to and consent of the owner of residential real estate; or
25 (iii) purports to create a lien, encumbrance, or other real property
26 security interest, other than a mechanics lien properly issued pursuant
27 to the provisions of the lien law; or
28 (iv) is a real estate listing agreement as defined in paragraph e of
29 subdivision one of section four hundred forty-three of the real property
30 law.
31 (b) Notwithstanding the foregoing, an agreement shall not be consid-
32 ered an unfair real estate service agreement if it is a valid:
33 (i) home warranty or similar product that covers the cost of mainte-
34 nance of a major home system for a fixed period;
35 (ii) insurance contract;
36 (iii) option or right of refusal to purchase the residential real
37 estate;
38 (iv) declaration created in the formation of a common interest commu-
39 nity or an amendment thereto;
40 (v) maintenance or repair agreement entered by a homeowners' associ-
41 ation in a common interest community;
42 (vi) mortgage loan or a commitment to make or receive a mortgage loan;
43 (vii) security agreement under the uniform commercial code relating to
44 the sale or rental of personal property or fixtures; or
45 (viii) contract with a water, sewer, electrical, telephone, cable, or
46 other regulated utility service provider.
47 § 778-bbb. Prohibition against unfair service agreements; recording
48 thereof. 1. No unfair real estate service agreement shall be enforceable
49 in the state.
50 2.(a) No person shall record or cause to be recorded an unfair real
51 estate service agreement or notice or memorandum thereof.
52 (b) If an unfair real estate service agreement is recorded in this
53 state, it shall not provide actual or constructive notice against an
54 otherwise bona fide purchaser or creditor.
55 (c) If an unfair service agreement or a notice or memorandum thereof
56 is recorded, any person with an interest in the real property that is
A. 5886--C 3
1 the subject of that agreement may apply to a court in the county where
2 the recording exists to record a court order declaring the agreement
3 unenforceable.
4 § 778-ccc. Deceptive acts and practices. Any person in this state who
5 enters into or causes a consumer to enter into an unfair real estate
6 service agreement shall be considered to have violated section three
7 hundred forty-nine of this chapter.
8 § 778-ddd. Enforcement; action by the attorney general. Where the
9 attorney general shall have reason to believe that there is an alleged
10 violation of this article based upon, among other things, a consumer
11 report of an alleged violation, the attorney general, in the name of the
12 people of the state of New York, shall dispatch a cease and desist
13 letter to the entity at issue, specifying the alleged violation or
14 violations and the remedies to cure such violation or violations
15 within a designated timeline. Where, after receipt of the cease and
16 desist letter and the expiration of such designated timeline, the entity
17 continues to violate the provisions of this article, an application may
18 be made by the attorney general in the name of the people of the state
19 of New York to a court or justice having jurisdiction by a special
20 proceeding to issue an injunction, and upon notice to the respondent of
21 not less than five days, to enjoin and restrain the continuance of
22 such violation or violations; and if it shall appear to the satisfaction
23 of the court or justice that the respondent has, in fact, violated
24 this article, an injunction may be issued by such court or justice,
25 enjoining and restraining any further violation, without requiring proof
26 that any person has, in fact, been injured or damaged thereby. Whenever
27 the court shall determine that a violation of this article has occurred,
28 the court may impose a civil penalty of not more than one thousand
29 dollars for each violation. This section shall not be construed to limit
30 any other criminal or civil liability such entity may be subject to
31 under law.
32 § 778-eee. Severability. If any provision of this article is, for any
33 reason, declared unconstitutional or invalid, in whole or in part, by
34 any court of competent jurisdiction, such portion shall be deemed sever-
35 able, and such unconstitutionality or invalidity shall not affect the
36 validity of the remaining portions of this article, which remaining
37 portions shall continue in full force and effect.
38 § 4. This act shall take effect on the ninetieth day after it shall
39 have become a law.
