« AnteriorContinuar »
Mr. Chairman and members of the Subcommittee, my name is Bruce Belin.
I am president and owner of Belin and Associates in Houston, Texas, a real
estate development company currently developing five recreational, resort and
residential projects in Texas, including the Award-winning April Sound project
I am presently serving as president and chairman of the board of
the American Land Development Association (ALDA).
Accompanying me today are Gary A. Terry, our Association's executive vice
president; William B. Ingersoll, general counsel; and George G. Potts, director
of public affairs.
The American Land Development Association represents leading national and
international companies which develop recreational, resort and residential real
Our members build and sell vacation homes, condominiums, planned unit
developments, destination resorts, new and retirement communities, mobile home
parks and recreational vehicle parks and campgrounds.
While our membership in
cludes the real estate development subsidiaries of some of the nation's largest
corporations operating in interstate commerce, many of our member companies are family-owned or are limited partnerships and can be classified as small, intrastate
Some of our member firms, large and small, are considered builders
of primary residential homes, and a few operate as real estate agencies.
Nevertheless, the Interstate Land Sales Full Disclosure Act (ILSFD/Act) of
1968 affects directly most, if not all, of our members.
I hasten to point out,
however, that in our opinion the ILSFD/Act was not intended to regulate some of
namely those operating primarily on an intrastate basis or as
home builders or real estate brokers.
Background and Explanation of the Act
It would be appropriate at this point, Mr. Chairman, to provide the Subcommittee
with a brief background and explanation of the Act, its intended scope and how it
has been administered - from our point of view
for nearly ten years now by
the Department of Housing and Urban Development (HUD). However, in the interest
of time, we have attached this information as Exhibit A, and I respectfully request that it, as well as several other exhibits related to that information, be
included in the hearing record.
Since the enactment ten years ago of the Interstate Land Sales Full Disclosure
Act, we have seen HUD's Office of Interstate Land Sales Registration (OILSR) expand its regulatory authority over segments of our industry which we feel were not intended by Congress to be covered under the Act. In our opinion, the ILSFD/Act was intended, and should continue to be a disclosure rather than regulatory
Yet, through its ability to withhold effective registration and through various informal requirements, we believe OILSR has generated regulatory powers in aciministering the Act.
Moreover, the companies which the law was intended to cover are suffering
unduly today from what often seems to be uneven formal and informal rules and
procedures employed by OILSR. The agency's registration policies -- which we feel are too stringent and lack flexibility and predictability -- as well as the
sheer complexity of the rules themselves have resulted in a substantial regulatory
burden for all who have had to cope with the Act, especially for small developers.
We are aware that much of OILSR's expansion of its regulatory role, and
many of the attendant problems, were those inherent in administering a new program
with new people.
In fairness, we feel that the agency and the Act have in fact
stopped many abuses by a few unscrupulous developers and have likely prevented
others from occuring.
not our intention to hamper OILSR's efforts to help buyers inform
themselves and to protect themselves from the irresponsible element which exists in real estate as, unfortunately, in every other business. But we do not believe
such protection has to be at the expense of the honest, responsible developers who predominate in our industry. We therefore are compelled to speak out against
what we consider are perhaps well intended, but nevertheless overly restrictive,
attempts to legislate even more regulation of our industry.
I would like now to comment on the three major proposals which have been
put forth to amend the ILSFD/Act.
H.R. 12574, "Interstate Land Sales Reform Act of 1978"
This proposed legislation, introduced originally as H.R. 10999, would amend
the Act in several ways, with the apparent intent of strengthening the law to
provide greater protection for real estate buyers by increasing the regulation of land sales. Unfortunately, under many of its provisions, the measure would
not produce the desired results and would do considerable harm to developers
indeed perhaps forcing many of them out of business altogether.
The bill would extend the Act's coverage to include subdivisions of 40 or
more lots, replacing the threshold of 50 or more lots in the present Act. Adhnittedly.
smaller developers, often the very ones who least deserve regulation and can least
afford the additional burden, would be brought in under federal regulation.
short, this seems to be just another example of expanding the Act's jurisdiction
with little or no corresponding benefit to the consumer.
would it be 30 lots next
year? And 20 by 1980?
The Act's jurisdiction would also be expanded, under this proposal, to cover lots which are less than 40 acres in size, i.e. eliminate the present exemption
for lots five acres or larger. Proponents of this provision point out, perhaps
correctly, that the so-called "five acre exemption" often tempts irresponsible
developers to subdivide property into larger unusable lots in order to escape
regulation; attracts "fly-by-night" subdividers; and results in the subdividing
of marginally usable land.
Conversely, consumers purchasing lots in excess of
-- or the
five acres in size generally have the financial means and knowledge ability to hire an attorney with such expertise to buy such property without the need for the disclosure protection afforded under the Act. Also, as one
AIDA member points out, such extension of jurisdiction could hamper certain
developers' abilities to dispose of surplus property not a part of its common promotional plan. Moreover, since it is often a practical necessity that such large lots be offered with fewer improvements than is offered with smaller lots, the sale of such uncomplicated property (raw land in many cases) hardly requires the extensive disclosures required under the Act.
Under H.R. 12574, court-ordered sales of lots in connection with bankruptcy
proceedings would no longer be exempted, although presumably all other types of court-ordered sales would continue to be exempt. While ALDA agrees with the
apparent intent of this provision, to impose automatically a regulatory burden upon such a distressed situation may be unfair to the creditors. Moreover, such a provision may well be unconstitutional since the rights of bankruptcy are estab
lished in the Constitution.
One of the major provisions of the bill would give all purchasers and lessees an unconditional 30-day rescission period from the date of the consumation of the sales transaction. Apparently the purpose of this provision is to allow a buyer
a period to objectively reflect on the correctness of his purchase, especially
where he might have been subjected to a "high pressure" sales presentation.
Ever, we strongly feel that the present 72-hour (three business days) requirement
provides adequate and reasonable protection to any purchasers who might have acted
on impulse. While a number of states have rescission periods exceeding the
present three-day federal requirement, e.g. New Jersey seven days, New York ten days, Califomia 14 days, many of our member companies operating in those states
maintain that such lengthy rescission periods do little more than encourage
purchaser irresponsibility and permit over-zealous salespersons to close sales by reminding the customer that he has "nothing to lose since you can easily cancel this transaction if you change your mind."
Here are some additional undesirable results of lengthy rescission periods
based on the experiences of some of our members:
--it is very difficult for individual property owners
to obtain financing for home construction and other
--developers would find it very difficult to obtain
financing of the "paper" generated by the on-going
--the developer cannot recognize a "sale" for account
ing purposes until the rescission period is over,
--it requires the developer to invest in and carry
a substantially higher number of lots in inventory.
We must reflect that in no other type of "arm's length" real estate transaction
is there such a rescission period, and it seems grossly unfair to single out one
particular industry for such treatment, particularly when it goes beyond what would
be necessary for adequate buyer protection.
However, the automatic 30-day rescission period pales when one considers the
proposal for a three-year period of revocation for the buyer given under certain