Longtime followers of this blog will recall that Attorney Joseph Karp alerted the Florida Attorney General that it needed to act when he learned that MV Realty swindled his elderly client. There are new developments in this case. But first, some background to bring newer readers up to speed.
Background
Ms. Dorothy Sayah was an elderly client of Attorney Joseph Karp. She had no immediate family. For many years he served as her agent under her power of attorney, her successor trustee, and personal representative under her will. In 2021 she had become cognitively impaired. To protect her from predators as well as her own poor judgment, a guardianship/incompetency proceeding was brought. The court found Mrs. Sayah to be incapacitated and no longer authorized to manage her financial affairs. However, because her estate planning documents authorized Mr. Karp to act on her behalf, no guardianship was established.
While reviewing Ms. Sayah’s finances and public records as part of the guardianship proceeding, Mr. Karp discovered that a Memorandum of MVR Homeowner Benefit had been filed in St. Lucie County on Mrs. Sayah’s property. He learned that MV Realty had paid her $800 in return for her signing a 40-year listing agreement, effectively a lien on her home. The contract specified that if the home was sold within the next 40 years by her, her heirs or her estate, MV Realty would be the listing agent. MV Realty would be entitled to a 6% commission of the sales price, or 3% if a different real estate agent was used.
MV Realty was contacted, and Mr. Karp documented that Mrs. Sayah had no need for the $800, and had been declared incompetent and passed away shortly after signing the agreement. Mr. Karp got the contract rescinded, without the need for a lawsuit. As trustee of her trust, Mr. Karp subsequently sold her home without MV Realty receiving anything.
As it turns out, Mrs. Sayah was just one of many victims. As he examined the public record, Mr. Karp discovered that MV Realty had filed thousands of these unconscionable memoranda in many Florida counties, as well as in other states. Mr. Karp alerted the Florida Attorney General to the rampant scam and urged them to take action. Based on Mr. Karp’s information and subsequent investigations, the Attorney General filed a lawsuit against MV Realty. Read the Palm Beach Post article about the Attorney General’s action against MV Realty here.
The state legislature also took swift action, passing statute 475.279 prohibiting anyone from using the homeowners agreement to place a lien on or otherwise encumber any residential real property, and prohibiting the courts from enforcing such liens. The law went into effect on July 1, 2023. However, the law did not invalidate homeowner benefits contracts signed prior to the law’s passage, nor did it provide restitution for homeowners who had already paid the 3% to get out of the contract, lift the lien and clear the title on their homes.
Judge Rules MV Realty’s Homeowners Benefit Program “Unconscionable”
The Attorney General’s lawsuit against MV Realty was scheduled for jury trial on October 11. Attorney Joseph Karp was scheduled to testify. However, the trial did not materialize. The court granted the state’s motion for summary judgment, concluding that a jury, viewing all facts and any reasonable inferences in the light most favorable to the defendants could not reasonably return a verdict in the defendants’ favor. Put in plain English: MV Realty’s alleged actions were so evident and egregious that a jury trial would be a waste of time and resources. Instead, the case was decided by a judge based on the facts and the law, without the need for a trial.
The judge, Hillsborough County Judge Darren Farfante, ruled against MV Realty in September. He called the company’s Homeowner Benefits Agreement “unconscionable” and noted it relied on aggressive, deceptive marketing. The ruling found that the contracts violated both the Florida Deceptive and Unfair Trade Practices Act, and the Telemarketing Sales Rule. Papers examined by the court showed that the company brought in $18.4 million from early termination fees – in other words, under its deceptive practices, the company had made money by not selling homes, rather than by selling them.
Although MV Realty has filed for bankruptcy, the judge found that three individual defendants are still personally liable. They are Anthony Mitchell, the Chief Executive Officer, who promoted the program and secured capital to launch it; David Manchester, the Chief Operating Officer who designed the marketing efforts for the program; and Amanda Zachman, the head real estate broker for the company in Florida and several other states, who directly oversaw the brokers who interacted with homeowners.
Below are excerpts from Judge Farfante’s order:
Defendants preyed on homeowners with carefully constructed marketing materials…
Defendants hid, downplayed – or altogether omitted the burdensome terms that made the HBA a virtually inescapable obligation to ultimately pay MV Realty at least 3% of the property’s value knowing homeowners would be ‘held over a barrel’ at closing…
Defendants told consumers that in exchange for an immediate, up-front payment that would never need to be repaid, consumers were merely giving MV Realty an opportunity to act as their real estate broker if they ever decided to sell their homes…
The HBA severely restricted and hampered how consumers could tap or utilize the equity in their property…and was designed to guarantee – one way or another – that MV Realty would harvest 3% of the property’s value…
Affording consumers insufficient time to review the written HBA and Memoranda prior to execution further evidence procedural unconscionability.
The HBA’s terms are substantively unconscionable. The term of the agreement is forty (40) years, as opposed to a typical real estate broker agreement with a much shorter duration…
The recorded Memoranda precludes homeowners from accessing their home equity or closing transactions absent MV Realty’s consent.
Read the judge’s order in its entirety here.
Here is a video of the judge’s ruling:
If You Were Scammed by MV Realty
As noted above, homeowners who signed contracts with MV Realty prior to enactment of statute 475.279 on July 1, 2023, still have liens on file against their homes. Homeowners who paid an early termination fee to MV Realty are still out the money.
The Attorney General has asked the court to order restitution for victims and wants all the outstanding liens removed from public record. That is still in process, with hearings ongoing.
If you have paid an early termination fee or signed an agreement before July 1, 2023, you should file a complaint with the Florida Attorney General’s office. Click here to file a complaint.
We will continue to report any further developments in the MV Realty case.
