THE REGULATION OF LAND SALES IN NEVADA With the enactment of Chapter 119 of the NRS in 1971, Nevada joined most of her sister states and the federal government in efforts to protect consumers from disreputable subdivision developers. Nevada has long been à target for dishonest land sale tactics because of our state's ability to attract vacationers from every part of the country. Visitors to Nevada arrive with cash and are usually in a "gambling mood". In addition, such visitors rarely have time to even look at any property they purchase much less to fully investigate the persons with whom they are dealing or to understand the contractual terms which they are agreeing to. Indeed, it was as much to protect the state's reputation for fair play as to protect victimized consumers that motivated the enactment of Ch. 119 into law. Although Ch. 119 has been on the books for the last five years, there has been a dearth of resulting case law interpreting its provisions. The Nevada Real Estate Division (NRED), which is charged with enforcing Ch. 119, has recently won an important case against Landex, Inc., in the Second Judicial District. However, that case will soon be appealed to the Nevada Supreme Court. Because the present writer foresees a sharp increase in litigation pursuant to the enforcement of Nevada's attempt to regulate land sales practices, the following article is offered as a basic introduction to the scope of Ch. 119. It is also the purpose of this article to pinpoint several unresolved legal issues contained within Ch. 119 and to offer aids which should facilitate research in this area. Background Governmental attempts to regulate land sales can be categorized into one of three levels. At the first level is found "mandatory disclosure". Here the developer is required to submit certain information to a potential purchaser, usually in the form of a "property report". Misrepresentation of the material within the property report or the failure to show it to the buyer before he signs a contract would usually be grounds for recision via private civil suit. California had such a statute as early as 1959 and it is still in effect.2/ At the second level of regulation is the "permit" type of statute. Permit Here a developer must comply with certain specific requirements, usually involving his ability to convey title, before he receives a "license", without which he cannot commence selling. type statutes also invariably contain the mandatory disclosure requirements described above, in addition to requiring a 3/ The third, and most stringent level of land sales regulation is the "license". California reached this level in 1963. 1/25 Stanford, L. R. 605 (April, 1973), "Regulation of Land Sales". This article offers a good overview of the subject. 2/ California Business and Professions Code (Ca. B. & P.) 311018.1. 3/ Ca. B. & P. 11018. "fair, just and equitable" level. Here there are no specific grounds for the denial of a subdivision license, rather the legislative body delegates to an administrative body the duty to determine whether or not a potential offering of subdivided land is "fair, just and equitable". California arrived at this level, as concerns subdivisions located outside of that State, also in 1963. The usual method of accomplishing this third level of regulation is simply to define the sales of land, located out-of-state, as being a "security" and subject to له security regulations.5/ . During the 1960's many states, and the federal government, expressed an interest in enacting legislation to protect consumers from the alleged deceitful sales practices taking place in the land sales business. In 1966 the Uniform Land Sales Practices Act (henceforth Uniform Act) was suggested by the 6/ National Conference of Commissioners on Uniform State Laws. The Uniform Act has since been enacted by eight states and can be categorized within the second, or "permit" level of regulation. In 1968 the United States Congress enacted the Interstate Land Sales Act (ILSA) which is the least ambitious of any recent attempt to regulate land sales activities. The 4/ Ca. B. & P. 10249.1, 10238.4. In addition to California, see Tenn. Code Annotated §§ 1602 (5 Uniform Laws Annotated, vol. 7, p. 604. See also footnote See the comment following § 7, on p. 616 of the Uniform Act. only effective requirement contained in the ILSA is that of demanding that a property report be shown to purchasers before completion of the contract. As such the ILSA should be placed on the first, or "mandatory disclosure", level of regulation. It should be noted that during committee debates on the ILSA in Congress, there was expressed a recognition that mere disclosure would be insufficient protection for consumers. However, it was felt that additional regulation would be best accomplished by the states on an individual basis. Since 1968 the Office of Interstate Land Sales Regulation (OILSR), a subordinate agency of the Department of Housing and Urban Development (HUD), has been continuously criticized for failing to fully enforce the requirements of the ILSA. 10/ In fact, the Federal Trade Also, Commission (FTC) has probably taken a more active role to protect 11/ consumers from dishonest subdividers than has OILSR. interviews by the present writer with California and NRED officials indicate their continued dissatisfaction with OILSR's efforts. It was at this point in the history of land sales regulation (1971) that Nevada enacted Ch. 119. The Nevada Legislature had a number of alternatives, such as determining which level of regulation it desired to effectuate and from which, 9/ "Hearings on 2672." Before the Subcommittee on Securities of the Senate Committee on Banking and Currency, 90th Congress, First Session, (1967). See also 6 Univ. of Michigan Journal of Law Reform 511, (Winter, 1973). 10/7 Urban Lawyer 215, 222 (September, 1975), and 6 Univ. of Michigan Journal of Law Reform 511, 515, (Winter, 1973). 11 12 luston, L. R. 708 (March, 1975). 33-716 - 78 - 12 if any, carlier foreign statutes to draw from. Basically, it chose the second level or the "permit" type of regulation, rejecting the more ambitious "fair, just and equitable" level. It also, at least by implication, rejected the Uniform Act, preferring to fashion a unique statutory scheme by relying on portions of all the sources mentioned above. So while Ch. 119 may be unique as a whole, most of its language can be traced to prior foreign legislation, 12/ Scope of Ch. 119 What follows is an overview of Ch. 119 which is meant to serve as an introduction to Nevada's statutory scheme of land sales regulation. Definitions NRS 119.140 defines a "developer" as an owner of subdivided land who offers it for sale. Also, NRS 119.175 states . 12/ The following cross-referencing chart has been prepared in order to make researching efforts more efficient. In the first column at the far left is that NRS Section of Ch. 119 which is to be cross-indexed. The second column contains corresponding section numbers of the Interstate Land Sales Act (15 USC § The third column contains corresponding section numbers of California's Subdivided Lands Act (California Business and Professional Code §. The fourth column contains corresponding section numbers of the 1966 Uniform Land Sales Practices Act as published in Uniform Laws Annotated, vol. 7, p. 604. This fourth column is particularly helpful because each section of the Uniform Act is followed by an explanatory comment, references to any "source" statutes used in the preparation of the Uniform Act, and references to statutes of those states which have adopted |