Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• INTERSTATE LAND SALES FULL DISCLOSURE ACT
  
  A federal law, enacted in 1968, that regulates interstate land sales by requiring registration of real property with the Office of Interstate Land Sales Registration (OILSR) of the U.S. Department of Housing and Urban Development (HUD). The main purpose of the act is to require disclosure of full and accurate information regarding the property to prospective buyers before they decide to buy. To comply with the act, the developer must prepare a statement of record and register the subdivision with HUD. After the registration is effective, the developer must deliver to the purchaser (and obtain a receipt for) the property report before execution of the purchase agreement. The developer must give prospective buyers a cooling-off period of seven calendar days to consider the material contained in the property report. Many large subdivisions are registered with HUD because HUD regulations apply if the developer uses the mails or any other means of interstate commerce in the sale of lots. There is an intrastate exemption to the regulations of the act that is limited in scope and very narrowly construed. If the subdivision contains fewer than 300 lots that are sold or leased to residents of the same standard metropolitan statistical area (SMSA) in which the subdivision is located (leeway is given so that 5 percent or less of sales in any one year may be made to residents of another state), the subdivider may apply for the exemption. Some of the more common exemptions from HUD filing requirements are: Subdivisions in which there are fewer than 100 lots. If there are fewer than 25 lots, there is a total exemption from the act, not just from the registration and disclosure requirements. Subdivisions in which all the lots are 20 acres or larger (inclusive of easements). Subdivisions in which the land is improved by a building or in which there is a contract obligating the seller to erect such a building within a period of two years. Bulk sales of lots to another developer. Sale to a contiguous owner. Fewer than 12 sales per year. Sales to a governmental agency. Sales of a single-family residential subdivision when the subdivision meets local code standards, title passes within 180 days after the contract and the seller refrains from promotional techniques such as gifts and dinner programs. Note that condominium units are considered by HUD to be lots "in the sky," and thus the developer may have to register a condominium with HUD as well as the local regulatory agency. The risk of noncompliance is greatest in those larger projects in which the developer is building in separate increments but promotes the use of common facilities that may not be completed for more than two years (such as a golf course). A developer need not register with HUD a condominium in which each unit has been completed before sale. In this regard, the term completed means habitable and ready for occupancy. The developer can also avoid registration (and thus not be required to furnish buyers with a property report) if the unit is sold under a contract that obligates the seller to complete construction of the development within two years following the sale, as long as construction is not delayed by conditions beyond the developer's control. Also, the developer need not give a prospective buyer a HUD property report before the buyer signs a reservation, only before he or she signs a contract to buy. A registered subdivider who sells on an installment contract must refund any payments over 15 percent of the purchase price (excluding interest owed) if the purchaser defaults on the contract. This requirement can be avoided if the contract requires the subdivider to deliver legal title within 180 days after the execution of the contract. The three-year statute of limitations for fraud does not begin to run until discovery of the fraud is made or should have been made. Note that even though a particular subdivider or subdivision may be exempt from registration under the law (e.g., a 60-lot subdivision), it is still unlawful to make false statements regarding such sales by means of interstate commerce. However, if there are fewer than 25 lots, then the subdivider is not subject to any provision of the act.
  
  Back