15 U.S.C. § 1702 — Exemptions

Page 1668 TITLE 15—COMMERCE AND TRADE § 1702 Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the des- ignated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 1979 AMENDMENT Pub. L. 96–153, title IV, § 410, Dec. 21, 1979, 93 Stat. 1132, provided that: ‘‘The amendments made by this title [enacting section 1719a of this title and amending this section and sections 1702, 1703, 1708, 1709, 1711, 1715, and 1717 of this title] shall become effective on the ef- fective date of regulations implementing such amend- ments, but in no case later than six months following the date of enactment of this Act [Dec. 21, 1979], except that section 1403(b)(7) of the Interstate Land Sales Full Disclosure Act [section 1702(b)(7) of this title], con- tained in the amendment made by section 402, shall be- come effective on the date of enactment.’’ EFFECTIVE DATE Pub. L. 90–448, title XIV, § 1423, formerly § 1422, Aug. 1, 1968, 82 Stat. 599, as renumbered by Pub. L. 96–153, title IV, § 409, Dec. 21, 1979, 93 Stat. 1132, provided that: ‘‘This title [enacting this chapter] shall take effect upon the expiration of two hundred and seventy days after the date of its enactment [Aug. 1, 1968].’’ SHORT TITLE Pub. L. 90–448, title XIV, § 1401, Aug. 1, 1968, 82 Stat. 590, provided that: ‘‘This title [enacting this chapter] may be cited as the ‘Interstate Land Sales Full Disclo- sure Act’.’’ § 1702. Exemptions (a) Sale or lease of lots generally Unless the method of disposition is adopted for the purpose of evasion of this chapter, the provi- sions of this chapter shall not apply to— (1) the sale or lease of lots in a subdivision containing less than twenty-five lots; (2) the sale or lease of any improved land on which there is a residential, commercial, con- dominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years; (3) the sale of evidence of indebtedness se- cured by a mortgage or deed of trust on real estate; (4) the sale of securities issued by a real es- tate investment trust; (5) the sale or lease of real estate by any government or government agency; (6) the sale or lease of cemetery lots; (7) the sale or lease of lots to any person who acquires such lots for the purpose of engaging in the business of constructing residential, commercial, or industrial buildings or for the purpose of resale or lease of such lots to per- sons engaged in such business; or (8) the sale or lease of real estate which is zoned by the appropriate governmental au- thority for industrial or commercial develop- ment or which is restricted to such use by a declaration of covenants, conditions, and re- strictions which has been recorded in the offi- cial records of the city or county in which such real estate is located, when— (A) local authorities have approved access from such real estate to a public street or highway; (B) the purchaser or lessee of such real es- tate is a duly organized corporation, part- nership, trust, or business entity engaged in commercial or industrial business; (C) the purchaser or lessee of such real es- tate is represented in the transaction of sale or lease by a representative of its own selec- tion; (D) the purchaser or lessee of such real es- tate affirms in writing to the seller or lessor that it either (i) is purchasing or leasing such real estate substantially for its own use, or (ii) has a binding commitment to sell, lease, or sublease such real estate to an entity which meets the requirements of sub- paragraph (B), is engaged in commercial or industrial business, and is not affiliated with the seller, lessor, or agent thereof; and (E) a policy of title insurance or a title opinion is issued in connection with the transaction showing that title to the real es- tate purchased or leased is vested in the sell- er or lessor, subject only to such exceptions as may be approved in writing by such pur- chaser or the lessee prior to recordation of the instrument of conveyance or execution of the lease, but (i) nothing herein shall be construed as requiring the recordation of a lease, and (ii) any purchaser or lessee may waive, in writing in a separate document, the requirement of this subparagraph that a policy of title insurance or title opinion be issued in connection with the transaction. (b) Sale or lease of lots subject to other statutory registration and disclosure requirements Unless the method of disposition is adopted for the purpose of evasion of this chapter, the provi- sions requiring registration and disclosure (as specified in section 1703(a)(1) of this title and sections 1704 through 1707 of this title) shall not apply to— (1) the sale or lease of lots in a subdivision containing fewer than one hundred lots which are not exempt under subsection (a); (2) the sale or lease of lots in a subdivision if, within the twelve-month period com- mencing on the date of the first sale or lease of a lot in such subdivision after the effective date of this subsection, or on such other date within that twelve-month period as the Direc- tor may prescribe, not more than twelve lots are sold or leased, and the sale or lease of the first twelve lots in such subdivision in any subsequent twelve-month period, if not more than twelve lots have been sold or leased in any preceding twelve-month period after the effective date of this subsection; (3) the sale or lease of lots in a subdivision if each noncontiguous part of such subdivision contains not more than twenty lots, and if the purchaser or lessee (or spouse thereof) has made a personal, on-the-lot inspection of the lot purchased or leased, prior to signing of the contract or agreement to purchase or lease; (4) the sale or lease of lots in a subdivision in which each of the lots is at least twenty acres (inclusive of easements for ingress and egress or public utilities); (5) the sale or lease of a lot which is located within a municipality or county where a unit Page 1669 TITLE 15—COMMERCE AND TRADE § 1702 of local government specifies minimum stand- ards for the development of subdivision lots taking place within its boundaries, when— (A)(i) the subdivision meets all local codes and standards, and (ii) each lot is either zoned for single family residences or, in the absence of a zoning ordinance, is limited ex- clusively to single family residences; (B)(i) the lot is situated on a paved street or highway which has been built to stand- ards applicable to streets and highways maintained by the unit of local government in which the subdivision is located and is ac- ceptable to such unit, or, where such street or highway is not complete, a bond or other surety acceptable to the municipality or county in the full amount of the cost of completing such street or highway has been posted to assure completion to such stand- ards, and (ii) the unit of local government or a homeowners association has accepted or is obligated to accept the responsibility of maintaining such street or highway, except that, in any case in which a homeowners as- sociation has accepted or is obligated to ac- cept such responsibility, a good faith writ- ten estimate of the cost of carrying out such responsibility over the first ten years of ownership or lease is provided to the pur- chaser or lessee prior to the signing of the contract or agreement to purchase or lease; (C) at the time of closing, potable water, sanitary sewage disposal, and electricity have been extended to the lot or the unit of local government is obligated to install such facilities within one hundred and eighty days, and, for subdivisions which do not have a central water or sewage disposal system, rather than installation of water or sewer fa- cilities, there must be assurances that an adequate potable water supply is available year-round and that the lot is approved for the installation of a septic tank; (D) the contract of sale requires delivery of a warranty deed (or, where such deed is not commonly used in the jurisdiction where the lot is located, a deed or grant which war- rants that the grantor has not conveyed the lot to another person and that the lot is free from encumbrances made by the grantor or any other person claiming by, through, or under him) to the purchaser within one hun- dred and eighty days after the signing of the sales contract; (E) at the time of closing, a title insurance binder or a title opinion reflecting the condi- tion of the title shall be in existence and issued or presented to the purchaser or les- see showing that, subject only to such excep- tions as may be approved in writing by the purchaser or lessee at the time of closing, marketable title to the lot is vested in the seller or lessor; (F) the purchaser or lessee (or spouse thereof) has made a personal, on-the-lot in- spection of the lot purchased or leased, prior to signing of the contract or agreement to purchase or lease; and (G) there are no offers, by direct mail or telephone solicitation, of gifts, trips, din- ners, or other such promotional techniques to induce prospective purchasers or lessees to visit the subdivision or to purchase or lease a lot; (6) the sale or lease of a lot, if a mobile home is to be erected or placed thereon as a resi- dence, where the lot is sold as a homesite by one party and the home by another, under con- tracts that obligate such sellers to perform, contingent upon the other seller carrying out its obligations so that a completed mobile home will be erected or placed on the com- pleted homesite within a period of two years, and provide for all funds received by the sell- ers to be deposited in escrow accounts (con- trolled by parties independent of the sellers) until the transactions are completed, and fur- ther provide that such funds shall be released to the buyer on demand without prejudice if the land with the mobile home erected or placed thereon is not conveyed within such two-year period. Such homesite must conform to all local codes and standards for mobile home subdivisions, if any, must provide pota- ble water, sanitary sewage disposal, elec- tricity, access by roads, the purchaser must receive marketable title to the lot, and where common facilities are to be provided, they must be completed or fully funded; (7)(A) the sale or lease of real estate by a de- veloper who is engaged in a sales operation which is intrastate in nature. For purposes of this exemption, a lot may be sold only if— (i) the lot is free and clear of all liens, en- cumbrances, and adverse claims; (ii) the purchaser or lessee (or spouse thereof) has made a personal on-the-lot in- spection of the lot to be purchased or leased; (iii) each purchase or lease agreement con- tains— (I) a clear and specific statement de- scribing a good faith estimate of the year of completion of, and the party responsible for, providing and maintaining the roads, water facilities, sewer facilities and any existing or promised amenities; and (II) a nonwaivable provision specifying that the contract or agreement may be re- voked at the option of the purchaser or lessee until midnight of the seventh day following the signing of such contract or agreement or until such later time as may be required pursuant to applicable State laws; and (iv) the purchaser or lessee has, prior to the time the contract or lease is entered into, acknowledged in writing the receipt of a written statement by the developer con- taining good faith estimates of the cost of providing electric, water, sewer, gas, and telephone service to such lot. (B) As used in subparagraph (A)(i) of this paragraph, the terms ‘‘liens’’, ‘‘encum- brances’’, and ‘‘adverse claims’’ do not include United States land patents and similar Fed- eral grants or reservations, property reserva- tions which land developers commonly convey or dedicate to local bodies or public utilities for the purpose of bringing public services to the land being developed, taxes and assess- ments imposed by a State, by any other public Page 1670 TITLE 15—COMMERCE AND TRADE § 1702 body having authority to assess and tax prop- erty, or by a property owners’ association, which, under applicable State or local law, constitute liens on the property before they are due and payable or beneficial property re- strictions which would be enforceable by other lot owners or lessees in the subdivision, if— (i) the developer, prior to the time the con- tract of sale or lease is entered into, has fur- nished each purchaser or lessee with a state- ment setting forth in descriptive and concise terms all such liens, reservations, taxes, as- sessments and restrictions which are appli- cable to the lot to be purchased or leased; and (ii) receipt of such statement has been ac- knowledged in writing by the purchaser or lessee. (C) For the purpose of this paragraph, a sales operation is ‘‘intrastate in nature’’ if the de- veloper is subject to the laws of the State in which the land is located, and each lot in the subdivision, other than those which are ex- empt under subsection (a), (b)(6), or (b)(8), is sold or leased to residents of the State in which the land is located; (8) the sale or lease of a lot in a subdivision containing fewer than three hundred lots if— (A) the principal residence of the pur- chaser or lessee is within the same standard metropolitan statistical area, as defined by the Office of Management and Budget, as the lot purchased or leased; (B) the lot is free and clear of liens (such as mortgages, deeds of trust, tax liens, me- chanics liens, or judgments) at the time of the signing of the contract or agreement and until a deed is delivered to the purchaser or the lease expires. As used in this subpara- graph, the term ‘‘liens’’ does not include (i) United States land patents and similar Fed- eral grants or reservations, (ii) property res- ervations which land developers commonly convey or dedicate to local bodies or public utilities for the purpose of bringing public services to the land being developed, (iii) taxes and assessments imposed by a State, by any other public body having authority to assess and tax property, or by a property owners’ association, which, under applicable State or local law, constitute liens on the property before they are due and payable or beneficial property restrictions which would be enforceable by other lot owners or lessees in the subdivision, or (iv) other interests de- scribed in regulations prescribed by the Di- rector; (C) the purchaser or lessee (or spouse thereof) has made a personal on-the-lot in- spection of the lot to be purchased or leased; (D) each purchase or lease agreement con- tains (i) a clear and specific statement de- scribing a good faith estimate of the year of completion of and the party responsible for providing and maintaining the roads, water facilities, sewer facilities and any existing or promised amenities; and (ii) a nonwaivable provision specifying that the contract or agreement may be revoked at the option of the purchaser or lessee until midnight of the seventh day following the signing of such contract or agreement or until such later time as may be required pursuant to applicable State laws; (E) the purchaser or lessee has, prior to the time the contract or lease is entered into, acknowledged in writing receipt of a written statement by the developer setting forth (i) in descriptive and concise terms all liens, reservations, taxes, assessments, bene- ficial property restrictions which would be enforceable by other lot owners or lessees in the subdivision, and adverse claims which are applicable to the lot to be purchased or leased, and (ii) good faith estimates of the cost of providing electric, water, sewer, gas, and telephone service to such lot; (F) the developer executes and supplies to the purchaser a written instrument desig- nating a person within the State of resi- dence of the purchaser as his agent for serv- ice of process and acknowledging that the developer submits to the legal jurisdiction of the State in which the purchaser or lessee resides; and (G) the developer executes a written affir- mation to the effect that he has complied with the provisions of this paragraph, such affirmation to be given on a form provided by the Director, which shall include the fol- lowing: the name and address of the devel- oper; the name and address of the purchaser or lessee; a legal description of the lot; an affirmation that the provisions of this para- graph have been complied with; a statement that the developer submits to the jurisdic- tion of this title with regard to the sale or lease; and the signature of the developer; or (9) the sale or lease of a condominium unit that is not exempt under subsection (a). (c) Rules and regulations The Director may from time to time, pursuant to rules and regulations issued by him, exempt from any of the provisions of this chapter any subdivision or any lots in a subdivision, if he finds that the enforcement of this chapter with respect to such subdivision or lots is not nec- essary in the public interest and for the protec- tion of purchasers by reason or the small amount involved or the limited character of the public offering. (d) ‘‘Condominium unit’’ defined For purposes of subsection (b), the term ‘‘con- dominium unit’’ means a unit of residential or commercial property to be designated for sepa- rate ownership pursuant to a condominium plan or declaration provided that upon conveyance— (1) the owner of such unit will have sole own- ership of the unit and an undivided interest in the common elements appurtenant to the unit; and (2) the unit will be an improved lot. (Pub. L. 90–448, title XIV, § 1403, Aug. 1, 1968, 82 Stat. 590; Pub. L. 91–152, title IV, § 411, Dec. 24, 1969, 83 Stat. 398; Pub. L. 93–383, title VIII, § 812(b), Aug. 22, 1974, 88 Stat. 736; Pub. L. 95–557, title IX, § 907, Oct. 31, 1978, 92 Stat. 2127; Pub. L. 96–153, title IV, § 402, Dec. 21, 1979, 93 Stat. 1123; Pub. L. 111–203, title X, § 1098A(1), July 21, 2010, 124 Stat. 2105; Pub. L. 113–167, § 1(a), Sept. 26, 2014, 128 Stat. 1882.) Page 1671 TITLE 15—COMMERCE AND TRADE § 1703 Editorial Notes REFERENCES IN TEXT The effective date of this subsection, referred to in subsec. (b)(2), probably means the effective date of title IV of Pub. L. 96–153, section 402 of which amended sub- sec. (b) of this section generally. For the effective date of title IV, see section 410 of Pub. L. 96–153, set out as an Effective Date of 1979 Amendment note under sec- tion 1701 of this title. AMENDMENTS 2014—Subsec. (b)(9). Pub. L. 113–167, § 1(a)(1), added par. (9). Subsec. (d). Pub. L. 113–167, § 1(a)(2), added subsec. (d). 2010—Subsecs. (b)(2), (8)(B), (G), (c). Pub. L. 111–203 substituted ‘‘Director’’ for ‘‘Secretary’’. 1979—Subsec. (a). Pub. L. 96–153 revised existing pro- visions formerly set out as pars. (1) to (11) into pars. (1) to (8) and, as so revised, substituted provisions relating to sale or lease of lots in a subdivision containing less than twenty-five lots, etc., for provisions relating to sale or lease of real estate not pursuant to a common promotional plan to offer or sell fifty or more lots in a subdivision, etc. Subsec. (b). Pub. L. 96–153 revised existing provisions formerly set out as pars. (1) to (7) into pars. (1) to (8) and, as so revised, substituted provisions setting forth criteria respecting sale or lease of lots subject to other statutory registration and disclosure requirements, for provisions setting forth criteria respecting sale or lease of lots in municipality or county with minimum stand- ards. 1978—Subsec. (a)(3). Pub. L. 95–557, § 907(a)(1), inserted ‘‘condominium’’ after ‘‘commercial’’. Subsec. (a)(10). Pub. L. 95–557, § 907(a)(2), inserted ‘‘United States land patents or Federal grants and res- ervations similar to United States land patents, nor to’’ after ‘‘do not refer to’’. Subsec. (a)(11). Pub. L. 95–557, § 907(a)(3), inserted ‘‘or which is restricted to such use by a declaration of cov- enants, conditions, and restrictions which has been re- corded in the official records of the city or county in which such real estate is located’’ before ‘‘when’’. Subsecs. (b), (c). Pub. L. 95–557, § 907(b)(1), (2), added subsec. (b) and redesignated former subsec. (b) as (c). 1974—Subsec. (a)(11). Pub. L. 93–383 added par. (11). 1969—Subsec. (a)(10). Pub. L. 91–152 substituted provi- sions requiring a personal on-the-lot inspection of the real estate for provisions requiring a personal inspec- tion of the lot and restricted definition of terms ‘‘liens’’, ‘‘encumbrances’’, and ‘‘adverse claims’’ so as not to include taxes and assessments imposed by a State, a public body having authority to assess and tax property, or a property owners’ association, which, under the applicable law, constitute liens before they are due and payable, and so as not to include beneficial property restrictions enforceable by other lot owners or lessees in the subdivision under the specified condi- tions. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Pub. L. 113–167, § 2, Sept. 26, 2014, 128 Stat. 1882, pro- vided that: ‘‘The amendments made by this Act [amending this section] shall take effect 180 days after the date of the enactment of this Act [Sept. 26, 2014].’’ EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the des- ignated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 1979 AMENDMENT Amendment by Pub. L. 96–153 effective on effective date of regulations implementing such amendment, but in no case later than six months following Dec. 21, 1979, except that subsec. (b)(7) shall be effective on Dec. 21, 1979, see section 410 of Pub. L. 96–153, set out as a note under section 1701 of this title. EFFECTIVE DATE Section effective upon the expiration of two hundred and seventy days after Aug. 1, 1968, see section 1423 of Pub. L. 90–448, set out as a note under section 1701 of this title. § 1703. Requirements respecting sale or lease of lots (a) Prohibited activities It shall be unlawful for any developer or agent, directly or indirectly, to make use of any means or instruments of transportation or com- munication in interstate commerce, or of the mails— (1) with respect to the sale or lease of any lot not exempt under section 1702 of this title— (A) to sell or lease any lot unless a state- ment of record with respect to such lot is in effect in accordance with section 1706 of this title; (B) to sell or lease any lot unless a printed property report, meeting the requirements of section 1707 of this title, has been fur- nished to the purchaser or lessee in advance of the signing of any contract or agreement by such purchaser or lessee; (C) to sell or lease any lot where any part of the statement of record or the property report contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein pursuant to sections 1704 through 1707 of this title or any regulations thereunder; or (D) to display or deliver to prospective purchasers or lessees advertising and pro- motional material which is inconsistent with information required to be disclosed in the property report; or (2) with respect to the sale or lease, or offer to sell or lease, any lot not exempt under sec- tion 1702(a) of this title— (A) to employ any device, scheme, or arti- fice to defraud; (B) to obtain money or property by means of any untrue statement of a material fact, or any omission to state a material fact nec- essary in order to make the statements made (in light of the circumstances in which they were made and within the context of the overall offer and sale or lease) not mis- leading, with respect to any information pertinent to the lot or subdivision; (C) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a purchaser; or (D) to represent that roads, sewers, water, gas, or electric service, or recreational amenities will be provided or completed by the developer without stipulating in the con- tract of sale or lease that such services or amenities will be provided or completed.