California Draws the Line on Long-Term Listing Agreements

Every real estate professional understands the value of representation agreements. Whether it is a listing agreement with a seller or a buyer representation agreement, these contracts establish expectations, define responsibilities, and allow professionals to invest their time and expertise with confidence. Just as importantly, they help consumers understand who is representing them and what services they can expect throughout the transaction.

For decades, these agreements have generally been targeted to a single transaction and for a reasonable period of time. Most residential listing agreements last only a few months, and recent changes following the National Association of REALTORS® settlement have reinforced the importance of written buyer representation agreements that clearly define the scope and duration of the relationship. The emphasis has shifted toward transparency, informed consent, and representation that meets the client’s immediate needs rather than creating long-term contractual obligations.

That is why California took action when a company called MV Realty introduced a very different business model. Through what it called its “Homeowner Benefit Program,” the company offered homeowners immediate cash payments, often only a few hundred dollars, in exchange for signing an exclusive listing agreement that lasted up to 40 years. If the homeowner later sold the property through another broker or chose not to use MV Realty, substantial fees could be triggered. Even more concerning, the agreements were recorded against the property, creating title issues that many homeowners did not discover until years later when they attempted to refinance or sell.

The program drew the attention of California regulators, who argued that homeowners were receiving relatively small upfront payments in exchange for long-term contractual obligations that many did not fully understand. In response, the Legislature passed Assembly Bill 1345, which became effective on January 1, 2024. The law limits residential exclusive listing agreements to no more than two years and expressly prohibits those agreements from being recorded with the county recorder. The legislation was sponsored by Attorney General Rob Bonta and strongly supported by the California Land Title Association as a way to preserve legitimate brokerage relationships while protecting consumers from unfair contractual restrictions.

The Attorney General recently announced a major settlement with MV Realty that demonstrates the law has real consequences. Every California contract entered into under the program has been declared void. The company must terminate all recorded liens, pay more than $2.5 million in restitution and civil penalties, and both the company and its executives are prohibited from engaging in any business in California that requires a real estate license for five years.

For real estate professionals, the settlement reinforces the direction the industry has already been heading. Representation agreements remain an essential part of every successful transaction, but they should be tailored to the client’s needs, limited to a reasonable period of time, and fully understood before they are signed. California’s message is not that representation agreements are

the problem. Rather, the goal is to ensure consumers have the freedom to make informed decisions while continuing to benefit from the expertise that professional representation provides. As the industry continues to evolve, targeted representation and transparency remain the foundation of strong client relationships.