The SEC's view is that selling condo hotel units combined
with a rental arrangement or similar service constitutes the offering
of a security. The SEC has said that it will take “no action” in the following
cases;
- there is no emphasis on economic benefits the purchaser might receive from
the rental of the purchased condo-hotel unit or from the managerial efforts of
a third party manager/operator of the project
- there are no representations regarding economic or tax benefits of
ownership
- there is no advertising of the rental services in the materials offering
the unit for sale
- written material containing publicly available information regarding
comparable developments (and not including rental projections, estimates, or
speculative information) is provided to prospective purchasers
- no contract for rental or management of the purchased unit is entered into
before the unit is purchased (but it now seems that it can be at the same time
or at least when the deposit is non-refundable and the contract has no
unsatisfied contingencies)
- there is no rental pooling arrangement (rather than a rental program
agreement)
- there are no limits on occupancy by the owner in the sale documents other
than those established by generally applicable zoning laws (but there can be
limitations later under the rental program agreement)
As a result, it is especially important that you realize
what our sales and marketing personnel can and cannot say to prospective
purchasers. The sale cannot be made with any emphasis on economic benefits
to be derived from the purchase.
Please do not expect an answer
to the following questions:
- What will my condo hotel be worth in a month/year/decade?
- Will I break even?
- Will they appreciate?
- What will I receive as rental income?
- Is this a good investment?
At MBT Homes we understand that these are pertinent questions that you want
us, as your agents, to answer, but SEC law clearly prohibits these projections
or guarantees.
