our experience shows that in the smaller subdivisions, there are usually less agressive sales programs, most of them are local in nature and the probability of consumer abuse is minimal. Staff time would be better spent on the larger subdivisions for which high volume sales requirements often invite misleading sales practices.

We have thus recommended that a simple means of reducing the coverage of the Act would be to amend the definition of "subdivision" by increasing the numerical threshold to 100 lots from the present 50 lots. For the reasons stated above, we do not favor the Minish proviso to lower the threshold figure of 50 to 40.

40-ACRE LOTS

The Administration's Bill proposes that the Act should be amended to cover lots of up to 40 acres in size rather than the present five acres. Purchasers have complained to us about sales practices perpetrated in the sale of tracts over five acres in size, but we have been prevented from taking any action because of the exemption in the current statute. A significant number of developers are selling large acreage parcels located in remote areas of the desert or mountains which have little potential for residential use or investment. We have found no correlation between lot size and buyer sophistication when

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mass marketing techniques are used. We believe that purchasers should be given the facts about this land.

COURT ORDER EXEMPTION

The Administration would exempt the sale of real estate pursuant to court order, as the present law allows, provided the Secretary has determined such sale to be in the public

interest.

Many developers of large subdivisions have gone into bankruptcy and continue court-sanctioned sales, exempt from the registration requirements. Buyers in these situations also need protection. Bankruptcy courts are concerned primarily with the interests of creditors rather than the interests of lot purchasers.

ON-SITE EXEMPTION REPEAL

The Administration would repeal the provision that exempts lots solely on the basis that the purchasers have made an on-site inspection and the lot is free of liens. This exemption has been a problem area for both the Department and developers. Not only has the language been subject to misinterpretation, but our view is that the exemption does not provide sufficient protection for purchasers. This lack of protection is compounded by the fact that statutory exemptions apply across the board and exempt the particular land sales operation from the anti-fraud provisions of the Act as well as from the registration provisions.

At present, if a lot buyer has personally inspected the lot which is free and clear of liens, encumbrances and adverse claims and has signed an acknowledgment of receipt of a copy of a statement showing restrictions, reservations, taxes and assessments, the sale is exempt--but certain information must still be filed by developers.

Since the criteria of this exemption are relevant to proposals in the Senate bill, I will comment further when discussing that bill. At this point, it is sufficient to say that our primary purpose in seeking repeal of this exemption is that even when all the qualifications for exemption are met, purchasers will have little knowlege about the subdivision and, therefore, need adequate disclosure information.

FRAUD AMENDMENTS

The Administration would improve the anti-fraud provisions of $1404 of the Act by specifically prohibiting omissions of material facts as well as misrepresentations of material facts. Also, the proposal deletes language requiring actual reliance by the purchaser on the misrepresentation. Among other things, this change should help in utilizing securities case law in land sales enforcement cases. The Minish bill contains the same provision.

33-716 78-31

COOLING-OFF PERIOD

The Administration would also allow a cooling-off period of 14 days instead of the present three business days. Based upon our experience, purchasers should have more time than the three days permitted under existing law to revoke a contract. Extending the "cooling-off" period should be one of the strongest deterrents in the Act to the use of high pressure sales techniques and misrepresentations by salespersons. A 14-day cooling-off period as proposed by the Administration is realistic and should be adequate to give consumers sufficient opportunity to evaluate their purchase decisions and would bring the Federal requirements into line with cooling-off periods found under several State laws. We believe that the 30 day voidability provision found in the Minish bill is too lengthy and may upset the proper balance between the seller and the buyer.

The Minish bill also proposes a three-year right for purchasers to void sales made on developer-financed long term installment contracts or where sales are made in the same day as the contract is presented. We favor the thrust of this proposal which would minimize problems for installment purchasers, but believe it unworkable because of difficulties developers would encounter in seeking financing, but will be pleased to work with the Committee to develop workable language in this

area.

REGISTRATION FEE

The Administration would remove the limit for fees

chargeable for registration--at present $1,000. The Secretary
should have the authority to set fees to more closely relate
to the workload created by large developments and to more
equitably distribute the fee burden.

EXCLUSIVE FEDERAL PROPERTY REPORT

The Administration would amend the Act to provide that unless the Secretary has accepted state property reports, the Federal Property Report will be used in lieu of any state disclosure document. Although approximately 20 states already accept the HUD Property Report as their own, purchasers in some cases now receive the HUD Property Report and the state report for the State in which the property is located and the state report from the purchaser's home state.

Receipt of voluminous documentation discourages purchasers from reading the myriad of facts contained in each and may confuse the consumer so much that he relies solely on the salesman's statements. By getting only one uniform Property Report, the purchaser would be spared the confusing duplication that now exists. This proposal would also assist developers selling in more than one state since they would not have to go to the time and expense of preparing and filing more than one report.