15 U.S.C. § 3603 — Definitions

Page 2020 TITLE 15—COMMERCE AND TRADE § 3603 (Pub. L. 96–399, title VI, § 603, Oct. 8, 1980, 94 Stat. 1673.) § 3603. Definitions For the purpose of this chapter— (1) ‘‘affiliate of a developer’’ means any per- son who controls, is controlled by, or is under common control with a developer. A person ‘‘controls’’ a developer if the person (A) is a general partner, officer, director, or employer of the developer, (B) directly or indirectly or acting in concert with one or more other per- sons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more then 20 per centum of the voting interests of the devel- oper, (C) controls in any manner the election of a majority of the directors of the developer, or (D) has contributed more than 20 per cen- tum of the capital of the developer. A person ‘‘is controlled by’’ a developer if the developer (i) is a general partner, officer, director or em- ployer of the person, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 20 per centum of the voting interests of the person, (iii) controls in any manner the election of a majority of the directors, or (iv) has contrib- uted more than 20 per centum of the capital of the person; (2) ‘‘automatic rent increase clause’’ means a provision in a lease permitting periodic in- creases in the fee under the lease which is ef- fective automatically or at the sole option of the lessor, and which provides that the fee shall increase at the rate of an economic, com- modity, or consumer price index or at a per- centage rate such that the actual increases in the rental payment over the lease term cannot be established with specificity at the time the lease is entered into; (3) ‘‘common elements’’ means all portions of the cooperative or condominium project, other than the units designated for separate ownership or for exclusive possession or use; (4) ‘‘condominium association’’ means the organization, whose membership consists ex- clusively of all the unit owners in the condo- minium project, which is, or will be respon- sible for the operation, administration, and management of the condominium project; (5) ‘‘condominium project’’ means real es- tate (A) which has five or more residential condominium units, in each residential struc- ture, and the remaining portions of the real estate are designated for common ownership solely by the owners of those units, each owner having an undivided interest in the common elements, and (B) where such units are or have been offered for sale or sold, di- rectly or indirectly, through the use of any means or instruments of transportation or communication of interstate commerce, or the mails; (6) ‘‘condominium unit’’ means a portion of a condominium project designated for separate ownership; (7) ‘‘conversion project’’ means a project, which has five or more residential units, which was used primarily for residential rent- al purposes immediately prior to being con- verted to a condominium or cooperative project; (8) ‘‘convey or conveyance’’ means (A) a transfer to a purchaser of legal title in a unit at settlement, other than as security for an obligation, or (B) the acquisition by a pur- chaser of a leasehold interest for more than five years; (9) ‘‘cooperative association’’ means an orga- nization that owns the record interest in the residential cooperative property; or a lease- hold of the residential property of a coopera- tive project and that is responsible for the op- eration of the cooperative project; (10) ‘‘cooperative project’’ means real estate (A) which has five or more residential coopera- tive units, in each residential structure, sub- ject to separate use and possession by one or more individual cooperative unit owners whose interest in such units and in the undi- vided assets of the cooperative association which are appurtenant to the unit are evi- denced by a membership or share interest in a cooperative association and a lease or other muniment of title or possession granted by the cooperative association as the owner of all the cooperative property, and (B) an interest in which is or has been offered for sale or lease or sold, or leased directly or indirectly, through use of any means or instruments of transpor- tation or communication in interstate com- merce or of the mails; (11) ‘‘cooperative property’’ means the real estate and personal property subject to coop- erative ownership and all other property owned by the cooperative association; (12) ‘‘cooperative unit’’ means a part of the cooperative property which is subject to exclu- sive use and possession by a cooperative unit owner. A unit may be improvements, land, or land and improvements together, as specified in the cooperative documents; (13) ‘‘cooperative unit owner’’ means the per- son having a membership or share interest in the cooperative association and holding a lease, or other muniment of title or posses- sion, of a cooperative unit that is granted by the cooperative association as the owner of the cooperative property; (14) ‘‘developer’’ means (A) any person who offers to sell or sells his interest in a coopera- tive or condominium unit not previously con- veyed, or (B) any successor of such person who offers to sell or sells his interests in units in a cooperative or condominium project and who has the authority to exercise special developer control in the project including the right to: add, convert, or withdraw real estate from the cooperative or condominium project, and maintain sales offices, management offices and rental units; exercise easements through common elements for the purpose of making improvements within the cooperative or con- dominium; or exercise control of the owners’ association; (15) ‘‘interstate commerce’’ means trade, traffic, transportation, communication, or ex- change among the States, or between any for- eign country and a State, or any transaction Page 2021 TITLE 15—COMMERCE AND TRADE § 3607 which affects such trade, traffic, transpor- tation, communication, or exchange; (16) ‘‘lease’’ includes any agreement or ar- rangement containing a condominium or coop- erative unit owner’s obligation, individually, collectively, or through an association to make payments for a leasehold interest or for other rights to use or possess real estate, or personal property (which rights may include the right to receive services with respect to such real estate or personal property), except a lease does not include mortgages or other such agreements for the purchase of real es- tate; (17) ‘‘person’’ means a natural person, cor- poration, partnership, association, trust or other entity, or any combination thereof; (18) ‘‘purchaser’’ means any person, other than a developer, who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than (A) a leasehold interest (including renewal options) of less than five years, or (B) as security for an obligation; (19) ‘‘real estate’’ means any leasehold or other estate or interest in, over or under land, including structures, fixtures, and other im- provements and interests which by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. ‘‘Real estate’’ in- cludes parcels with or without upper or lower boundaries, and spaces that may be filled with air or water; (20) ‘‘residential’’ means used as a dwelling; (21) ‘‘sale’’, ‘‘sale of a cooperative unit’’ or ‘‘sale of a condominium unit’’ means any obli- gation or arrangement for consideration for conveyance to a purchaser of a cooperative or condominium unit, excluding options or res- ervations not binding on the purchaser; (22) ‘‘special developer control’’ means any right arising under State law, cooperative or condominium instruments, the association’s bylaws, charter or articles of association or incorporation, or power of attorney or similar agreement, through which the developer may control or direct the unit owners’ association or its executive board. A developer’s right to exercise the voting share allocated to any con- dominium or cooperative unit which he owns is not deemed a right of special developer con- trol if the voting share allocated to that con- dominium or cooperative unit is the same vot- ing share as would be allocated to the same condominium or cooperative unit were that unit owned by any other unit owner at that time; (23) ‘‘State’’ includes the several States, the District of Columbia, the Commonwealth of Puerto Rico, and the territories and posses- sions of the United States; and (24) ‘‘tenants’ organization’’ means a bona fide organization of tenants who represent a majority of the occupied rental units in a rental housing project. (Pub. L. 96–399, title VI, § 604, Oct. 8, 1980, 94 Stat. 1673.) § 3604. Exemptions The provisions of this chapter shall not apply to— (1) a cooperative or condominium unit sold or offered for sale by the Federal Government, by any State or local government, by any cor- porate instrumentality of the United States, or by any agency thereof; (2) a cooperative or condominium project in which all units are restricted to nonresiden- tial purposes or uses; or (3) any lease or portion thereof— (A) which establishes any leasehold or other estate or interest in, over or under land on or in which one or more residential condominium or cooperative units are lo- cated, the termination of which will termi- nate the condominium or cooperative project, or reduce the number of units in such project, or (B) which establishes a leasehold interest in, or other rights to use, possess, or gain ac- cess to, a condominium or cooperative unit. (Pub. L. 96–399, title VI, § 605, Oct. 8, 1980, 94 Stat. 1675.) § 3605. Notice of conversion and opportunity to purchase; responsibility of State and local governments It is the sense of the Congress that, when mul- tifamily rental housing projects are converted to condominium or cooperative use, tenants in those projects are entitled to adequate notice of the pending conversion and to receive the first opportunity to purchase units in the converted projects and that State and local governments which have not already provided for such notice and opportunity for purchase should move to- ward that end. The Congress believes it is the re- sponsibility of State and local governments to provide for such notice and opportunity to pur- chase in a prompt manner. The Congress has de- cided not to intervene and therefore leaves this responsibility to State and local governments to be carried out. (Pub. L. 96–399, title VI, § 606, Oct. 8, 1980, 94 Stat. 1676.) § 3606. Federal Housing Administration mortgage or loan insurance; expedition of application process and decision Where an application for mortgage or loan in- surance in connection with a conversion or pur- chase of a rental housing project being under- taken by a tenants’ organization is submitted, the Secretary of Housing and Urban Develop- ment shall expedite the processing of the appli- cation in every way and shall make a final deci- sion on such application at the earliest prac- ticable time. (Pub. L. 96–399, title VI, § 607, Oct. 8, 1980, 94 Stat. 1676.) § 3607. Termination of self-dealing contracts (a) Operation, maintenance, and management contracts; penalty Any contract or portion thereof which is en- tered into after October 8, 1980, and which— (1) provides for operation, maintenance, or management of a condominium or cooperative association in a conversion project, or of prop-