COLORADO SPRINGS, Colo. — Jonathan Mead was already growing suspicious of a contract he signed in 2022 – but grew even more suspicious after a letter arrived in the mail last month.
The letter was full of legalese about a bankruptcy proceeding involving MV Realty, the Florida-based company behind the Homeowner Benefit Agreement.
A Steve On Your Side investigation found more than 900 Colorado homeowners signed MV Realty’s Homeowner Benefit Agreement, which promises a small amount of cash up front in exchange for a listing agreement that lasts 40 years.
State lawmakers banned such listing contracts earlier this year, calling them predatory at the time. With the announcement of a lawsuit in California last week, attorneys general in eight other states filed suit against the company arguing the same.
“Being in a desperate situation of my own, trying to just keep my head above water, I jumped on it because it sounded good,” Mead told 9NEWS in the living room of his Colorado Springs home. “I wasn't at my highest and best and thinking clearly and I was acting out of desperation. I needed to pay my bills. I needed to feed my animals.”
MV Realty paid Mead $1,245 when he signed the Homeowner Benefit Agreement in January of last year. The agreement requires homeowners like Mead to use MV Realty as the listing agent on their homes. If they don’t and are found in violation of the agreement, they could have to pay the company 3% of the home’s value at the time of sale.
“I was just such a down and out time in my life,” he said. “And I think like no matter who we were during COVID, everyone was having a struggle personally.”
After seeing the story on 9NEWS, Mead began researching the company and the contract on his own. He said it was only then he realized the contract lasted for 40 years and was bound to the property like a covenant – requiring heirs to the property to abide by the terms if the homeowner passes away.
Then after doing his research, he got a letter in the mail about the bankruptcy.
“I got the notice in the mail for the bankruptcy filing,” he said. “And I thought, well, maybe this is a way for me to void this contract.”
“My first reaction was like, hallelujah, this fraudulent company is going to be held accountable by the United States of America.”
Under threat of mounting lawsuits, MV Realty filed for Chapter 11 bankruptcy protection in September. In that filing, MV Realty lists all active Homeowner Benefit Agreements as its assets – including more than 750 contracts in Colorado.
“Bankruptcy exists basically to figure out what debts could be paid and what debts can't be paid,” said Conrad Ciccotello, director of the Reiman School of Finance in the Daniels College of Business at the University of Denver.
Ciccotello said the letters received by homeowners who have contracts are odd, as homeowners have already been paid by the company and aren’t technically creditors or debtors to MV Realty. The US Trustee Program announced in a news release Monday that the court had extended a deadline for creditors to file claims against the company.
“The U.S. Trustee Program does not represent consumers directly, but it is committed to ensuring that they have a fair chance to access the bankruptcy courts, whether as creditors or debtors,” Director Tara Twomey of the Executive Office for U.S. Trustees said in the statement.
The court also ordered MV Realty to send notices to nearly 3,000 people who had already been forced to pay damages after they terminated their agreements.
But Ciccotello said the bankruptcy proceeding likely won’t get the more than 750 homeowners in Colorado out of their contracts, which have prevented some from refinancing their homes. He said a bankruptcy court won’t sort out whether the contract should be voided, but a judge in one of the other lawsuits against the company could.
“You would need something more like a judicial solution that says, yes, all of these contracts, including the ones that were previously executed, are now null and void,” he said.
His best advice to consumers is to wait the situation out.
Have a tip for Steve On Your Side? E-mail Consumer Investigator Steve Staeger at SteveOnYourSide@9news.com.
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