Real Estate Law Blog

Recent Amendment to the Kentucky Consumer Protection Act Impacts Real Estate Listing Agreements

This past April, Governor Beshear signed into law 2024 Kentucky House Bill No. 88, which amended the Kentucky Consumer Protection Act (the “KCPA”) to impose new restrictions on residential real estate “service agreement[s].” Under the new law (codified as KRS § 367.354), the term “service agreement” is defined as “an agreement under which an owner of residential real property is required, in connection with the purchase or sale of the property, to . . . [p]ay a real estate sales commission to a specified [real estate broker or agent].” The new law unequivocally applies to residential real estate listing agreements. Kentucky real estate brokers and agents must, therefore, be familiar with the new law and ensure any prohibited provisions are removed from their listing agreements to avoid the potentially significant consequences of a violation.

Under the new law, a residential real estate listing agreement must not contain any of the following provisions:

• A protection clause that is enforceable more than two (2) years after the agreement's effective date (the protection clause in a 1-year listing agreement, for example, must be enforceable for no more than 1 year after the listing period expires).
• A mandatory mediation or arbitration clause to the extent such a provision may be prohibited under federal law.
• A waiver clause that prohibits the owner from filing or joining a class action lawsuit.  
• A provision purporting to bind future owners to pay the broker’s commission.
• A provision purporting to create a lien or a right to a lien on the property for an unpaid commission.
• A provision that allows the broker to record the listing agreement in the county records.
• A provision that permits the broker to assign his or her right to the listing, or the right to the commission, “without notice to, and written agreement of” the owner.

Any prohibited provision in a listing agreement is void and unenforceable. Further, a violation of the new law is deemed to be “an unfair, false, misleading, or deceptive act or practice in the conduct of trade or commerce” and, therefore, subject to other remedies under the KCPA.

Notably, while listing agreements cannot purport to create a contractual lien to secure any unpaid commission, the new law does not affect a broker’s statutory right to a broker’s lien that arises under KRS § 376.075 if the procedures for implementing the lien are strictly followed. Strict compliance with the KRS § 376.075 cannot be overstated. Under the new law, a broker’s attempt to enforce a lien for unpaid commissions in a manner other than as permitted by KRS § 376.075 “shall be guilty of a Class B misdemeanor, unless the conduct prohibited by this subsection constitutes another crime that provides for greater punishment.” In such a case, the new law also provides the owner, subsequent owner, or anyone else “with an interest” in the property that is the subject of the listing agreement with a private right of action for damages caused by the violation plus attorney’s fees and costs.

While the new law clearly applies to residential real estate listing agreements, its application in broader contexts is less clear and will ultimately be determined by the courts. With the importance of buyer-broker and broker-to-broker agreements increasing in the wake of the recent NAR class action settlement, Kentucky real estate brokers and agents should also consider the application of the new law to those agreements as well.

For assistance in determining if your agreements are a problem under the new law, contact McBrayer today.

Zachary Webster is an Associate of McBrayer Law. He works in the firm's Lexington office as part of the real estate and litigation practices. He can be reached at 859.231.8780, ext. 1228, or by email at zwebster@mcbrayerfirm.com

Services may be performed by others. This article does not constitute legal advice.