The Kentucky General Assembly passed a law on Monday making Non-Title Recorded Agreements for Personal Services (NTRAPS) unenforceable by law. The provisions outlined in H.B. 88 are intended to protect homeowners from the predatory practice of filing unfair real estate fee agreements in property records, according to a press release put out by the American Land Title Association (ALTA), which backed the bill.
“The property rights of American homebuyers must be protected,” said ALTA Vice President of Government Affairs Elizabeth Blosser. “A home often is a consumer’s largest investment, and the best way to support the certainty of land ownership is through public policy. We have to ensure that there are no unreasonable restraints on a homebuyer’s future ability to sell or refinance their property due to unwarranted transactional costs.”
NTRAPS were first identified in Florida in 2017 and the majority of the 25,000 cases in 32 states currently on record happened in 2022, according to the title agents and consumer protection advocates investigating this elusive scam. According to ALTA, submitting NTRAPS for inclusion in property records characterized as liens, covenants, encumbrances, or security interests in exchange for money creates impediments and increases the cost and complexity of transferring or financing real estate in the future.
Scammers use NTRAPS to prey upon homeowners by offering cash gifts sometimes as small as $300 in exchange for decades-long contracts for the exclusive rights to sell their properties. What they fail to mention is that such contracts create a lien on the property, which can land homeowners in court owing thousands of dollars if they default on the agreement, such as by refinancing, sometime down the road.
In addition to making NTRAPS unenforceable, the new law restricts and prohibits the recording of NTRAPS in property records, creates penalties if NTRAPS are recorded in property records, and provides for the removal of NTRAPS from property records and recovery of damages.
These contracts frequently target seniors and low-income borrowers who may fall victim to quick-cash offers more easily or lack access to legal counsel. However, anyone who owns a home can be a target, and the agreements have been known to bind both current homeowners and future heirs, who likely have no knowledge of the agreement's existence.
AARP also backed the bill. “The passage of H.B. 88 is a continuation of AARP’s advocacy efforts, undertaken in collaboration with ALTA in other states, to put an end to this harmful practice,” said AARP Government Affairs Director Samar Jha. “We expect and hope to work on similar legislative solutions in other states to help protect homeowners against such predatory housing practices.”
Kentucky Gov. Andy Beshear is expected to sign H.B. 88 into law in the coming weeks, which would make Kentucky the 17th state to enact anti-NTRAPS legislation.
