Amends TCA Title 47, Chapter 18 and Title 66.

This bill enacts the "Prohibition of Unfair Service Agreements Act," which deems a contract under which a person agrees to provide services in connection with the maintenance of, or purchase or sale of, residential real estate ("service agreement") to be deemed unfair, and thereby unenforceable, if any part of the service is not to be performed within one year after the time the agreement is entered into and the service agreement has at least one of the following characteristics:<br /> <br /> (1) It purports to run with the land or to be binding on future owners of interests in the real property; <br /> <br /> (2) It allows for assignment of the right to provide service without notice to, and consent of, the owner; or<br /> <br /> (3) It purports to create a lien, encumbrance, or other real property security interest. <br /> <br /> APPLICABILITY<br /> <br /> This bill does not apply to the following:<br /> <br /> (1) A home warranty or similar product that covers the cost of maintenance of a major home system, including plumbing, HVAC, and electrical, for a fixed period; <br /> <br /> (2) An insurance contract; <br /> <br /> (3) An option or right of refusal to purchase the residential real estate; <br /> <br /> (4) A declaration created in the formation of a common interest community or an amendment to the declaration; <br /> <br /> (5) A maintenance or repair agreement entered by a homeowners' association in a common interest community; <br /> <br /> (6) A mortgage loan or a commitment to make or receive a mortgage loan; <br /> <br /> (7) A security agreement under the Uniform Commercial Code, relating to the sale or rental of personal property or fixtures; or<br /> <br /> (8) Water, sewer, electrical, telephone, cable, or other regulated utility service providers.<br /> <br /> Additionally, this bill does not impair the rights granted or applied to mechanics' and materialmen's liens.<br /> <br /> RECORDING<br /> <br /> This bill prohibits a service provider from recording, or causing to be recorded, an unfair service agreement, or notice or memorandum of the agreement. A provider who violates this provision is liable to an affected party for $10,000 in statutory damages. Additionally, this bill clarifies that a recorded unfair service agreement does not provide actual or constructive notice against an otherwise bona fide purchaser or creditor.<br /> <br /> This bill authorizes a register in this state to refuse to accept for recordation an unfair service agreement and provides that the register is not liable for mistakenly recording such an agreement.<br /> <br /> REMEDIES<br /> <br /> If an unfair service agreement, or a notice or memorandum, is recorded, then this bill authorizes a person with an interest in the real property that is the subject of that agreement to do the following:<br /> <br /> (1) Apply to a court of competent jurisdiction in the county where the recording exists to record a court order declaring the agreement unenforceable; and<br /> <br /> (2) Recover, in addition to certain statutory damages, actual damages, court costs, and attorney's fees. The person also has all rights and remedies as those found in the Consumer Protection Act of 1977.<br /> <br /> Additionally, this bill authorizes the attorney general to enforce its provisions.<br /> <br /> ON MARCH 30, 2023, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 368, AS AMENDED.<br /> <br /> AMENDMENT #1 replaces this bill's prohibitions against unfair service agreements with a prohibition against recording certain service agreements and enforcing such service agreements. Specifically, this amendment:<br /> <br /> (1) Renames this bill the “Real Property Records Integrity Act”;<br /> <br /> (2) Redefines “recording” to mean presenting a document to a county register in this state for official placement in the public land records, rather than presenting it to a county recorder. This amendment also redefines “service agreement” to encompass a contract pursuant to which a person agrees to provide services in connection with the sale of residential real estate or the sale of any product or the performance of any personal service on or for the maintenance of residential real estate, rather than just the maintenance or sale of the residential real estate and updates the definition of a “service provider” to include a person who provides products to a consumer as well as services;<br /> <br /> (3) Removes the list of characteristics for which a service agreement would be deemed unfair, and instead provides that a recorded service agreement is void and unenforceable under this bill if the agreement:<br /> <br /> (A) Purports to run with the land or to be binding on future owners of interests in the real property;<br /> <br /> (B) Allows for assignment of the right to provide services without notice to and the consent of the owner of residential real estate; or<br /> <br /> (C) Purports to create a lien, encumbrance, or other real property security interest;<br /> <br /> (4) Clarifies that this bill does not impair:<br /> <br /> (A) The furnishing of a loan or other thing of value to be secured by real property as otherwise provided by law;<br /> <br /> (B) An agreement entered into by a nonprofit, mandatory membership organization comprised of owners of homes, condominiums, cooperatives, or manufactured homes; or <br /> <br /> (C) Any interest in real property created pursuant to a declaration, covenant, or other applicable law, pertaining to the oversight or management of real property; and<br /> <br /> (5) Prohibits a service provider from recording or causing to be recorded a service agreement or notice or memorandum of the agreement in this state. <br />