Government. (The annual appropriation pending in August 1975 for the Office of Interstate Land Sales is $2,700,000.00). We read repeatedly what the registration cost is in money, not to mention paper work, sweat and tears (believe ma!).

To quote a few sources:

*....Registration proved to be both expensive (about $20,000$35,000) and time-consuming (three to nine months to complete). These expenses increase our risk and exposure: the capable developer must pass these costs on to the end user." William B. Hare, Jr., Regional Vice President of the National Association of Industrial Parks in July 1975 Real Estate Atlanta.

Another developer wrote us:

"Our initial fee to the attorneys in Washington is $5,000; and if we have to go to a complete registration, it is our opinion that the fee will go to $25,000. If we are able to get an exemption, we estimate our total fees in Washington at $15,000. In addition to this, I have personally had to spend $2,800 with my own attorney advising me as to how to deal not only with my principal but with Washington." He Contime.

"In the first part of July, we received from our Washington counsel a 150-page document which is the outline which we are supposed to use in developing our registration which we have been asked to fill out just in case that's the direction we intend to go. I have one person full-time on our staff doing nothing but this work. So, even though we are a completely urban subdivision, having sold 98.8% of our lots to town residents, our cost will be considerable to prove ourselves 'innocent' or not needing to be under the jurisdiction of the act." End Quota

Incidentally, the local HUD office led this developer to believe he also was not covered. When HUD can't keep up with their own activities what chance do local people have?

new a circuit juckyż And our own local attomey, Mr. Marvin Cherner says registration will cost us a minimum of $15,000 and must be brought up to date everytime a road is paved on the way to the nearby schools, or the nearest MD moves, or the hospital changes the breadth of its services.

Finally, we reluctantly decided that we could not afford to pay even $20,000., or $2000 per lot, to sell 10 lots a year. Thus we "bit the bullet" and went into Federal Court on June 30, 1975 at which time. we filed an injunctive proceeding.

Having already been delayed in making any sales for 8 months zbep it is of little consequence except to show why only a fool would try to deal with HUD without good lawyers since HUD lawyers will use every technicality or means to delay a decision to put financial pressure on the developer, The action was filed June 30,1975 requesting service on HUD. The hearing was set for July 18, 1975. On July 17, 1975 HUD's lawyers asked for a resetting of the hearing to a later date on the grounds that HUD had not been served. The hearing was postponed until July 29,1975. At the hearing we learned that HUD had in fact been served on July 12, 1975, five days before lack of service was used as grounds for delay. And it would seen that a July 12,1975 service of a paper filed June 30th was itself strangely late.

of course the 3 Washington Lawyers who defended the Government in Judge Sam Pointer's Court, as well as John R. McDowell the administrator of the OLS, try to make little of the cost and technical problems of registration..

In their brief Mr. McDowell stated that many developers make the filings themselves, and the lawyers in verbal argument belittled our lawyers' recommendation that we also associate specialists in this field, the Washington law. firm of Hogan and Hartson whom they labeled the "most expensive law firm in Washington."

Mr. Cherner wasn't trying to hire us the "most expensive" but these people who he had never heard of were recommended by other lawyers as the best in this field. And it's pretty obvious I think that we needed the best.

Thus the very HUD lawyers who get so voluminous and super technical in their writing of the implementing regulations that people dealing with them must hire $60-an-hour lawyers to try to decipher, then try to tell you that anyone can handle their own registrations. But doesn't their record so far and their maze of technical records and maneuvers warn anyone with normal intelligence that they better get the best legal advice every step of the way?

And don't forget that these same Governmental lawyers will in court, as in our case, use every comma in their own regulation to trap you.

Too late to help us perhaps, but it does appear that the Congress is becoming aware of this problem in the tendency of the bureau's to attempt to expand their power far beyond the intent of Congress. Several recent laws have provided for future review of rules and regulations promulgated under the act to "insure the intent of Congress is not exceeded."

A quote from Senator Dominick is interesting, "There are already enough governmental regulations for them (small business) to contend with. They shouldn't have to hire a lawyer just to know what their rights are."

Thomas Ehrlich Dean of the law school of Stanford University when asked the question, "It's not only the number of laws that people complain about. They also complain about the way the laws are writtenthat they are very difficult to understand. This same feeling applies to opinions by courts. Wouldn't it help if the legal language were clarified so the average person could understand what it means?"

"A. You're right that this is a problem, and it's one that is widely criticized. . I think law schools should put a high premium on the simple declarative sentence-which seems to get lost all too frequently."

And he further commented, "....Congress to, contibutes to this glut (of court fights and laws) which I call legal polution. We see the effects in our university. To prove our compliance with all the federal rules and regulations requires a huge staff, an enormous amount of paper work, and thousands of hours of expensive lawyer work."

In closing, we would like to comment that all this excess regulation (U.S. News & World Report, June 30,1975) is estimated to cost consumers $130,000,000,000 in added cost to what they buy.

And to quote President Ford who describes it as "excessive Government regulations that stifle productivity, eliminate competition, increase consumer costs and contribute to inflation."

Says the President: "I want small business released from the shackles of federal red tape. I want to end unnecessary, unfair and unclear regulations-and needless paper work."

Mr. Ford places the annual cost to consumers wasteful regulatory policies at $2000 per family.

of unnecessary and

Obviously, the intent of Congress in stating the secretary could exempt "any subdivision....if he finds enforcement....not necessary in the public interest and for the protection of purchasers by reason of the small amount involved or the limited nature of the public offering" was to encourage the exemption of lot sales of a different character from the massive high pressure sale by mail.

And to our method of operation the only real substantive objection HUD could find was that one lot sale of doubtful intrastate character put us in violation of HUD's arbitrary "5% in any one year" rule, and that a year in which BUD cut off our sales leaving us less than the one year in which to overcome the 5%.

We think their entire position full of the ridiculous and absurd technicalities for which Washington bureaus are now becoming notorious.

To quote Walter E. Grinder, Professor of Economics of Rutgers University, "It is not until the people begin to catch on to the nature of the systematic plunder (by the state) and until the people begin to challenge this colossal con game that the state does in fact turn brutish."

In view of the many quotes above, the people and President Ford are beginning to "catch on that the state is turning brutish.

To put it another way, our firm has certainly been the victim of what Professor Helmut Schoek, the Austrian sociologist, in his study of social behavior calls "the pleasure felt by the powerful man in the power that enables him to be unjust."

To also quote Senator William J. Fulbright on the Interstate Land Sales Act, The burdens of this legislation fall equally on the good as well as the bad operators and this is what inevitably happens when Government seeks to single out an industry and subject it to a kind of prophylactic method of regulation, instead of defining and punishing certain illegal acts."

Representative Philip Crane has pointed out that many federal agencies are all in one combination of prosecutor, judge and jury and that contesting their rulings can be more expensive than it is worth. Even if a businessman wins his case in court, he must pay attorney's fees and litigation costs, expenses often far in excess of the fine he would have paid for pleading "no contest." Also, even if he has successfully cleared himself of one charge, he faces the possibility that the agency will continue to search for violations in an effort to achieve vindication.

Thus, as stated by Mr. Crane, we are now faced with the reality that compliance by coercion rather than compliance based on the merits of the case is becoming the rule, not the exception.

Well, after spending $6,400.81 in legal fees alone and on the advice of this counsel we gave up and on July 8, 1976 were forced to accept an on-site exemption by making the following face saving concessions to the bureaucracy.

1. We hold an election of members of the Architectural Control
Committee.

2. Rather than conveying the lots in the normal way with the
Power Company's flood easement set out as an exception we
convey only down to the Power Company easement and give the
lot purchaser an easement across the Power Company's easement.
3. We obtain affidavits from each purchaser that they have
personally inspected the lot and send them to OILSR at the
end of each year. (We had never sold a lot that the buyer
did not walk over and in most cases several times).

4. When we have sold 299 lots we must go out of business or
comply with the very expensive property reporting originally
demanded.

Of course, the only reason we were able after over 20 months to work out this compromise was that OILSR was persuaded that they were about to write some new case law under most unfavorable circumstances, i.e. their persecution of a thoroughly ethical land sales company.

Respectfully submitted,

Louie Reese

LR/ejr

P.S. If she means it, it is heartening to read the following quotes from HUD Secretary Carla A. Hills.

"There is no industry in America that is not encumbered by more regulations that it can handle and more than is needed to get the job done."

"(There is) A jumble of overlapping-often conflicting-codes and regulations provided by benevolent bureaucracies at every level of local and national government."

"When government gets into the act, the consumer pays the price. And once into the act, the government hardly ever gets out, and the consumer continues to pay.'

"The likely benefits of any federal regulation must be carefully weighed against the costs of such experiments.

Secretary Hills. "My whole approach to this condominium regulation is a cost balance. What are the benefits that I am buying for the consumer? How much do they cost?

I can assure you that if we lay on a responsibility, it will be passed through and the consumer will pay for it."

"Mr. Lundine, I tend to agree with you about being as concerned with overregulation as I am with no regulation at all."

"Highly technical and voluminous disclosure statements are complicated, costly, and, as we found during our study, often not read by the buyer."

Mr. AUCOIN. Thank you very much, Mr. Roberts.
We will now hear from Mr. Smith.

STATEMENT OF HERMAN J. SMITH, VICE PRESIDENT, NATIONAL ASSOCIATION OF HOME BUILDERS, ACCOMPANIED BY ROBERT D. BANNISTER, SENIOR STAFF VICE PRESIDENT, AND GARY PAUL KANE, ASSOCIATE LEGISLATIVE COUNSEL

Mr. SMITH. Thank you, Mr. Chairman.

I am Herman J. Smith, and I am a homebuilder from Forth Worth, Tex., and I am testifying today on behalf of the 103,000 members of the National Association of Home Builders. Accompanying me is Robert D Bannister, senior vice president, and Gary Paul Kane, associate legislative counsel.

We certainly appreciate the opportunity to testify.

Interstate Land Sales Act passed and we supported it, and the intent for which it was passed. Since then we have run into the same problems that the Congressman from San Antonio was talking about. We have a problem understanding why a legitimate subdivision within a city, that has all of the protections of the local government, and has only intrastate sales has to be governed and brought under the jurisdictions of OILSR.

The Congressman explained he has not received an answer to that question, and neither have we. This is a classic example of how an administrative agency can distort the purpose of well-intended legislation over a period of years.

OILSR's involvement in regulated jurisdictions is the area that most concerns our homebuilders. OILSR has extended its jurisdiction from undeveloped lots in remote parts of the country to the sales of fully improved or development lots in metropolitan areas where land development activities are heavily regulated.

For example, in most of our areas-I would say this is true in Portland and Fort Worth and other areas that we are concerned aboutbefore a builder can even sell a lot he must gain approval from local and State governmental entities.

Mr. AUCOIN. Do you think it would be true in Florida and Michigan, as well?

Mr. SMITH. I believe it would.

I know it is true in Orlando and Battle Creek.

The builder's plans must be reviewed by planning and zoning authorities, environmental review boards, departments of public works, public health and engineering, local utility districts, school boards, city councils, county supervisors. We can go on and on and on with what happens in the local jurisdiction that has the controls within their area.

There is another oddity here. Even in cases where an FHA lot is approved, or in an area where VA loans are approved or where Farmers' Home loans are approved, we still must file and receive an exemption from OILSR if the subdivision was over 50 lots. In some cases these requirements are within the same Government department.

OILSR's intrusion into this process generally comes in the form of a letter or subpena sent to the builder, sometimes after house and lot sales have commenced. The builder is compelled to appear in person in