Selling Exempt Subdivisions

Most people know that subdivisions located within city limits, with no homeowners’ associations or common areas, where the developer is selling only completed homes, are exempt from the Public Report process. The important thing to note, is that they are NOT entirely exempt from Department of Real Estate (DRE) jurisdiction. What exactly does the DRE have jurisdiction over in this type of development?

Purchase Money Handling: Any subdivision in the state must comply with the law in protecting the buyer’s purchase money. This protection includes depositing the funds into a neutral escrow depository. The only legal way to avoid depositing 100% of buyer’s purchase money into escrow is through the filing of a bond for this purpose, with the DRE directly. As we have indicated in previous articles, this is a good approach for use in handling funds for options and upgrades.

Advertising Guidelines: Care must be taken that any element of a promotion or advertising campaign avoid any statement or pictorial representation that may be false or misleading. For example, if a picture of the ocean or waterway is used, the advertisement should include a true statement that advises the correct distance to the ocean or waterway. Pictorial representations include project advertising logos; it is recommended to validate representations through disclosure statements included in the advertisement, which inform prospective buyers of proper distances or conditions.

Sales promotions promising delivery of a gift or inducement of any type must be filed with the DRE and financially secured. Examples of commonly seen inducements include delivery of appliances (upgraded kitchen appliances, or washer/dryer), or big-screen TVs, or gas cards to prospective buyers. The procedure for developers wishing to offer promotional gifts to potential buyers is easy to comply with.

Call our office today and we will be happy to guide you through it.

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