A Delray Beach real estate company has filed for bankruptcy protection from creditors following lawsuits by six states over what the Florida Attorney General called “deceptive, unfair and unconscionable business practices.”
MV Realty came under fire for its “Homeowner Benefit Program” in which homeowners are offered upfront cash, between $300 and $5,000 depending on their home’s value, with no interest or fees.
In exchange, the homeowner is required to sign a contract pledging to use MV Realty if they decide to sell their home at any time over the next 40 years.
If another real estate company is used, if the home is foreclosed upon, or if owners want to cancel the deal, the homeowner must pay MV Realty 3% of the home’s value, the contract requires. The 3% must also be paid if the owner dies and leaves the home to a beneficiary.
The company on Friday filed for bankruptcy protection in 33 states, following lawsuits by Florida, Ohio, Massachusetts, Pennsylvania, New Jersey and North Carolina.
The filing came less than a month after Florida Attorney General Ashley Moody asked the court to issue a temporary injunction that would freeze company assets, prohibit the company from new benefit agreements in the state, and require the company to terminate existing agreements.
Moody’s office sued the company in November 2022, alleging it carried out “a complex and deceptive scheme that attempts to skirt existing Florida law with the goal of swindling consumers out of their home equity.”
A news release from Ashley’s office accused MV Realty of engaging in “deceptive, unfair and unconscionable business practices.”
According to the complaint, MV Realty uses “deceptive and abusive telemarketing and advertising practices” to promote its program, which offers $300 to $5,000 with no obligation to return the cash.
Customers are told “they owe MV Realty nothing in return unless and until they sell their home,” Moody’s complaint states.
But in reality, the complaint says, MV Realty “encumber(s) the property for 40 years and extract(s) excessive and unconscionable fees from consumers if they try to cancel the (agreement) or if the home is transferred through foreclosure or other circumstances that are not commonly understood as a sale.”
To find customers, MV Realty used telemarketing calls, including to people who registered their phone numbers on the national Do-Not-Call Registry, the lawsuit said, adding that consumers who did not answer were bombarded with “millions of unwanted prerecorded voicemails.”
The complaint argues that what MV Realty files are liens that violate state law that prohibit real estate brokers from recording any “contract, assignment, deed, will, mortgage, affidavit, or other writing which purports to affect the title of, or encumber, any real property … for the purpose of collecting a commission or to coerce the payment of money to the broker or sales associate.”
MV Realty, the complaint says, records its “Memorandum of Homeowner Benefit Agreement” without obtaining “express permission” from a court or affected consumers to have a lien filed against their property.
Moody’s action seeks to void MV Realty’s contracts with consumers, return money “wrongfully taken from homeowners,” impose civil penalties on the company, and prevent violations of Florida’s Deceptive and Unfair Trade Practices Act.
MV Realty has been licensed in Florida since 2014. Three principals are listed in Moody’s suit as defendants: Amanda J. Zachman, manager and lead broker; Antony Mitchell, chief executive officer; and David Manchester, managing director and chief operating officer.
MV Realty did not immediately respond to questions about the bankruptcy on Monday. It was filed under Chapter 11 of the U.S. Bankruptcy Code, which is typically an effort to remain in business by reorganizing debt for the benefit of creditors.
In a motion to dismiss the state’s case, MV Realty in February wrote that it engages in “transparent, reasonable and lawful” activities and provides an “innovative way” for homeowners to procure a real estate company.
Homeowners sign and notarize Homeowner Benefit Agreements that acknowledge their agreement to either use MV Realty as their exclusive listing agents if they decide to sell, or pay MV Realty a 3% early termination fee if they breach the agreement, MV Realty’s motion states.
On its website, the company denied filing liens against its customers’ properties. “No, we file a memorandum,” it said. If a customer breaches their agreement, the company wrote, it has a right to file a lien against the home. “In some states, we filed a different instrument, such as a mortgage,” it said.
In May, a Hillsborough County circuit judge denied MV Realty’s motion to dismiss the case.
Since the company’s activities started drawing attention two years ago, 16 states, including Florida, enacted laws prohibiting long-term real estate contracts.
A federal lawsuit filed against the company in 2022 stated that more than 30,000 homeowners nationwide signed its Homeowner Benefit Agreement. Moody’s lawsuit said MV Realty has made more than 9,123 public record filings in Florida “that cloud homeowners’ titles.”
MV Realty has sued some homeowners, accusing them of violating agreements. In Broward County, the company filed more than 80 such lawsuits since 2020. One suit from June 2021 stated the homeowner was paid $750 but then listed his house for sale with another agent.
Despite the new Florida law enacted last spring prohibiting long-term real estate contracts, MV Realty continued to sign up new consumers and enforce previous contracts that the new law nullified, Moody said in her August request for a temporary injunction.
In January, the Federal Communications Commission announced it had ordered all major phone carriers to block robocalls from MV Realty.
Courts in North Carolina, Ohio and Massachusetts have granted preliminary injunctions stopping the company from writing new agreements.
A Hillsborough County circuit judge is scheduled on Tuesday to set a hearing date for Moody’s temporary injunction request.
The bankruptcy filing will pause all lawsuits and trigger appointment of a receiver to determine how creditors will be paid.
Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.