§ 1702. — Exemptions.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC1702]
TITLE 15--COMMERCE AND TRADE
CHAPTER 42--INTERSTATE LAND SALES
Sec. 1702. Exemptions
(a) Sale or lease of lots generally
Unless the method of disposition is adopted for the purpose of
evasion of this chapter, the provisions of this chapter shall not apply
to--
(1) the sale or lease of lots in a subdivision containing less
than twenty-five lots;
(2) the sale or lease of any improved land on which there is a
residential, commercial, condominium, or industrial building, or the
sale or lease of land under a contract obligating the seller or
lessor to erect such a building thereon within a period of two
years;
(3) the sale of evidence of indebtedness secured by a mortgage
or deed of trust on real estate;
(4) the sale of securities issued by a real estate investment
trust;
(5) the sale or lease of real estate by any government or
government agency;
(6) the sale or lease of cemetery lots;
(7) the sale or lease of lots to any person who acquires such
lots for the purpose of engaging in the business of constructing
residential, commercial, or industrial buildings or for the purpose
of resale or lease of such lots to persons engaged in such business;
or
(8) the sale or lease of real estate which is zoned by the
appropriate governmental authority for industrial or commercial
development or which is restricted to such use by a declaration of
covenants, conditions, and restrictions which has been recorded in
the official records of the city or county in which such real estate
is located, when--
(A) local authorities have approved access from such real
estate to a public street or highway;
(B) the purchaser or lessee of such real estate is a duly
organized corporation, partnership, trust, or business entity
engaged in commercial or industrial business;
(C) the purchaser or lessee of such real estate is
represented in the transaction of sale or lease by a
representative of its own selection;
(D) the purchaser or lessee of such real estate affirms in
writing to the seller or lessor that it either (i) is purchasing
or leasing such real estate substantially for its own use, or
(ii) has a binding commitment to sell, lease, or sublease such
real estate to an entity which meets the requirements of
subparagraph (B), is engaged in commercial or industrial
business, and is not affiliated with the seller, lessor, or
agent thereof; and
(E) a policy of title insurance or a title opinion is issued
in connection with the transaction showing that title to the
real estate purchased or leased is vested in the seller or
lessor, subject only to such exceptions as may be approved in
writing by such purchaser or the lessee prior to recordation of
the instrument of conveyance or execution of the lease, but (i)
nothing herein shall be construed as requiring the recordation
of a lease, and (ii) any purchaser or lessee may waive, in
writing in a separate document, the requirement of this
subparagraph that a policy of title insurance or title opinion
be issued in connection with the transaction.
(b) Sale or lease of lots subject to other statutory registration and
disclosure requirements
Unless the method of disposition is adopted for the purpose of
evasion of this chapter, the provisions requiring registration and
disclosure (as specified in section 1703(a)(1) of this title and
sections 1704 through 1707 of this title) shall not apply to--
(1) the sale or lease of lots in a subdivision containing fewer
than one hundred lots which are not exempt under subsection (a) of
this section;
(2) the sale or lease of lots in a subdivision if, within the
twelve-month period commencing on the date of the first sale or
lease of a lot in such subdivision after the effective date of this
subsection, or on such other date within that twelve-month period as
the Secretary may prescribe, not more than twelve lots are sold or
leased, and the sale or lease of the first twelve lots in such
subdivision in any subsequent twelve-month period, if not more than
twelve lots have been sold or leased in any preceding twelve-month
period after the effective date of this subsection;
(3) the sale or lease of lots in a subdivision if each
noncontiguous part of such subdivision contains not more than twenty
lots, and if the purchaser or lessee (or spouse thereof) has made a
personal, on-the-lot inspection of the lot purchased or leased,
prior to signing of the contract or agreement to purchase or lease;
(4) the sale or lease of lots in a subdivision in which each of
the lots is at least twenty acres (inclusive of easements for
ingress and egress or public utilities);
(5) the sale or lease of a lot which is located within a
municipality or county where a unit of local government specifies
minimum standards for the development of subdivision lots taking
place within its boundaries, when--
(A)(i) the subdivision meets all local codes and standards,
and (ii) each lot is either zoned for single family residences
or, in the absence of a zoning ordinance, is limited exclusively
to single family residences;
(B)(i) the lot is situated on a paved street or highway
which has been built to standards applicable to streets and
highways maintained by the unit of local government in which the
subdivision is located and is acceptable to such unit, or, where
such street or highway is not complete, a bond or other surety
acceptable to the municipality or county in the full amount of
the cost of completing such street or highway has been posted to
assure completion to such standards, and (ii) the unit of local
government or a homeowners association has accepted or is
obligated to accept the responsibility of maintaining such
street or highway, except that, in any case in which a
homeowners association has accepted or is obligated to accept
such responsibility, a good faith written estimate of the cost
of carrying out such responsibility over the first ten years of
ownership or lease is provided to the purchaser or lessee prior
to the signing of the contract or agreement to purchase or
lease;
(C) at the time of closing, potable water, sanitary sewage
disposal, and electricity have been extended to the lot or the
unit of local government is obligated to install such facilities
within one hundred and eighty days, and, for subdivisions which
do not have a central water or sewage disposal system, rather
than installation of water or sewer facilities, there must be
assurances that an adequate potable water supply is available
year-round and that the lot is approved for the installation of
a septic tank;
(D) the contract of sale requires delivery of a warranty
deed (or, where such deed is not commonly used in the
jurisdiction where the lot is located, a deed or grant which
warrants that the grantor has not conveyed the lot to another
person and that the lot is free from encumbrances made by the
grantor or any other person claiming by, through, or under him)
to the purchaser within one hundred and eighty days after the
signing of the sales contract;
(E) at the time of closing, a title insurance binder or a
title opinion reflecting the condition of the title shall be in
existence and issued or presented to the purchaser or lessee
showing that, subject only to such exceptions as may be approved
in writing by the purchaser or lessee at the time of closing,
marketable title to the lot is vested in the seller or lessor;
(F) the purchaser or lessee (or spouse thereof) has made a
personal, on-the-lot inspection of the lot purchased or leased,
prior to signing of the contract or agreement to purchase or
lease; and
(G) there are no offers, by direct mail or telephone
solicitation, of gifts, trips, dinners, or other such
promotional techniques to induce prospective purchasers or
lessees to visit the subdivision or to purchase or lease a lot;
(6) the sale or lease of a lot, if a mobile home is to be
erected or placed thereon as a residence, where the lot is sold as a
homesite by one party and the home by another, under contracts that
obligate such sellers to perform, contingent upon the other seller
carrying out its obligations so that a completed mobile home will be
erected or placed on the completed homesite within a period of two
years, and provide for all funds received by the sellers to be
deposited in escrow accounts (controlled by parties independent of
the sellers) until the transactions are completed, and further
provide that such funds shall be released to the buyer on demand
without prejudice if the land with the mobile home erected or placed
thereon is not conveyed within such two-year period. Such homesite
must conform to all local codes and standards for mobile home
subdivisions, if any, must provide potable water, sanitary sewage
disposal, electricity, access by roads, the purchaser must receive
marketable title to the lot, and where common facilities are to be
provided, they must be completed or fully funded;
(7)(A) the sale or lease of real estate by a developer who is
engaged in a sales operation which is intrastate in nature. For
purposes of this exemption, a lot may be sold only if--
(i) the lot is free and clear of all liens, encumbrances,
and adverse claims;
(ii) the purchaser or lessee (or spouse thereof) has made a
personal on-the-lot inspection of the lot to be purchased or
leased;
(iii) each purchase or lease agreement contains--
(I) a clear and specific statement describing a good
faith estimate of the year of completion of, and the party
responsible for, providing and maintaining the roads, water
facilities, sewer facilities and any existing or promised
amenities; and
(II) a nonwaivable provision specifying that the
contract or agreement may be revoked at the option of the
purchaser or lessee until midnight of the seventh day
following the signing of such contract or agreement or until
such later time as may be required pursuant to applicable
State laws; and
(iv) the purchaser or lessee has, prior to the time the
contract or lease is entered into, acknowledged in writing the
receipt of a written statement by the developer containing good
faith estimates of the cost of providing electric, water, sewer,
gas, and telephone service to such lot.
(B) As used in subparagraph (A)(i) of this paragraph, the terms
``liens'', ``encumbrances'', and ``adverse claims'' do not include
United States land patents and similar Federal grants or
reservations, property reservations which land developers commonly
convey or dedicate to local bodies or public utilities for the
purpose of bringing public services to the land being developed,
taxes and assessments imposed by a State, by any other public body
having authority to assess and tax property, or by a property
owners' association, which, under applicable State or local law,
constitute liens on the property before they are due and payable or
beneficial property restrictions which would be enforceable by other
lot owners or lessees in the subdivision, if--
(i) the developer, prior to the time the contract of sale or
lease is entered into, has furnished each purchaser or lessee
with a statement setting forth in descriptive and concise terms
all such liens, reservations, taxes, assessments and
restrictions which are applicable to the lot to be purchased or
leased; and
(ii) receipt of such statement has been acknowledged in
writing by the purchaser or lessee.
(C) For the purpose of this paragraph, a sales operation is
``intrastate in nature'' if the developer is subject to the laws of
the State in which the land is located, and each lot in the
subdivision, other than those which are exempt under subsection (a),
(b)(6), or (b)(8) of this section, is sold or leased to residents of
the State in which the land is located; or
(8) the sale or lease of a lot in a subdivision containing fewer
than three hundred lots if--
(A) the principal residence of the purchaser or lessee is
within the same standard metropolitan statistical area, as
defined by the Office of Management and Budget, as the lot
purchased or leased;
(B) the lot is free and clear of liens (such as mortgages,
deeds of trust, tax liens, mechanics liens, or judgments) at the
time of the signing of the contract or agreement and until a
deed is delivered to the purchaser or the lease expires. As used
in this subparagraph, the term ``liens'' does not include (i)
United States land patents and similar Federal grants or
reservations, (ii) property reservations which land developers
commonly convey or dedicate to local bodies or public utilities
for the purpose of bringing public services to the land being
developed, (iii) taxes and assessments imposed by a State, by
any other public body having authority to assess and tax
property, or by a property owners' association, which, under
applicable State or local law, constitute liens on the property
before they are due and payable or beneficial property
restrictions which would be enforceable by other lot owners or
lessees in the subdivision, or (iv) other interests described in
regulations prescribed by the Secretary;
(C) the purchaser or lessee (or spouse thereof) has made a
personal on-the-lot inspection of the lot to be purchased or
leased;
(D) each purchase or lease agreement contains (i) a clear
and specific statement describing a good faith estimate of the
year of completion of and the party responsible for providing
and maintaining the roads, water facilities, sewer facilities
and any existing or promised amenities; and (ii) a nonwaivable
provision specifying that the contract or agreement may be
revoked at the option of the purchaser or lessee until midnight
of the seventh day following the signing of such contract or
agreement or until such later time as may be required pursuant
to applicable State laws;
(E) the purchaser or lessee has, prior to the time the
contract or lease is entered into, acknowledged in writing
receipt of a written statement by the developer setting forth
(i) in descriptive and concise terms all liens, reservations,
taxes, assessments, beneficial property restrictions which would
be enforceable by other lot owners or lessees in the
subdivision, and adverse claims which are applicable to the lot
to be purchased or leased, and (ii) good faith estimates of the
cost of providing electric, water, sewer, gas, and telephone
service to such lot;
(F) the developer executes and supplies to the purchaser a
written instrument designating a person within the State of
residence of the purchaser as his agent for service of process
and acknowledging that the developer submits to the legal
jurisdiction of the State in which the purchaser or lessee
resides; and
(G) the developer executes a written affirmation to the
effect that he has complied with the provisions of this
paragraph, such affirmation to be given on a form provided by
the Secretary, which shall include the following: the name and
address of the developer; the name and address of the purchaser
or lessee; a legal description of the lot; an affirmation that
the provisions of this paragraph have been complied with; a
statement that the developer submits to the jurisdiction of this
title with regard to the sale or lease; and the signature of the
developer.
(c) Rules and regulations
The Secretary may from time to time, pursuant to rules and
regulations issued by him, exempt from any of the provisions of this
chapter any subdivision or any lots in a subdivision, if he finds that
the enforcement of this chapter with respect to such subdivision or lots
is not necessary in the public interest and for the protection of
purchasers by reason or the small amount involved or the limited
character of the public offering.
(Pub. L. 90-448, title XIV, Sec. 1403, Aug. 1, 1968, 82 Stat. 590; Pub.
L. 91-152, title IV, Sec. 411, Dec. 24, 1969, 83 Stat. 398; Pub. L. 93-
383, title VIII, Sec. 812(b), Aug. 22, 1974, 88 Stat. 736; Pub. L. 95-
557, title IX, Sec. 907, Oct. 31, 1978, 92 Stat. 2127; Pub. L. 96-153,
title IV, Sec. 402, Dec. 21, 1979, 93 Stat. 1123.)
References in Text
The effective date of this subsection, referred to in subsec.
(b)(2), probably means the effective date of title IV of Pub. L. 96-153,
section 402 of which amended subsec. (b) of this section generally. For
the effective date of title IV, see section 410 of Pub. L. 96-153, set
out as an Effective Date of 1979 Amendment note under section 1701 of
this title.
Amendments
1979--Subsec. (a). Pub. L. 96-153 revised existing provisions
formerly set out as pars. (1) to (11) into pars. (1) to (8) and, as so
revised, substituted provisions relating to sale or lease of lots in a
subdivision containing less than twenty-five lots, etc., for provisions
relating to sale or lease of real estate not pursuant to a common
promotional plan to offer or sell fifty or more lots in a subdivision,
etc.
Subsec. (b). Pub. L. 96-153 revised existing provisions formerly set
out as pars. (1) to (7) into pars. (1) to (8) and, as so revised,
substituted provisions setting forth criteria respecting sale or lease
of lots subject to other statutory registration and disclosure
requirements, for provisions setting forth criteria respecting sale or
lease of lots in municipality or county with minimum standards.
1978--Subsec. (a)(3). Pub. L. 95-557, Sec. 907(a)(1), inserted
``condominium'' after ``commercial''.
Subsec. (a)(10). Pub. L. 95-557, Sec. 907(a)(2), inserted ``United
States land patents or Federal grants and reservations similar to United
States land patents, nor to'' after ``do not refer to''.
Subsec. (a)(11). Pub. L. 95-557, Sec. 907(a)(3), inserted ``or which
is restricted to such use by a declaration of covenants, conditions, and
restrictions which has been recorded in the official records of the city
or county in which such real estate is located'' before ``when''.
Subsecs. (b), (c). Pub. L. 95-557, Sec. 907(b)(1), (2), added
subsec. (b) and redesignated former subsec. (b) as (c).
1974--Subsec. (a)(11). Pub. L. 93-383 added par. (11).
1969--Subsec. (a)(10). Pub. L. 91-152 substituted provisions
requiring a personal on-the-lot inspection of the real estate for
provisions requiring a personal inspection of the lot and restricted
definition of terms ``liens'', ``encumbrances'', and ``adverse claims''
so as not to include taxes and assessments imposed by a State, a public
body having authority to assess and tax property, or a property owners'
association, which, under the applicable law, constitute liens before
they are due and payable, and so as not to include beneficial property
restrictions enforceable by other lot owners or lessees in the
subdivision under the specified conditions.
Effective Date of 1979 Amendment
Amendment by Pub. L. 96-153 effective on effective date of
regulations implementing such amendment, but in no case later than six
months following Dec. 21, 1979, except that subsec. (b)(7) shall be
effective on Dec. 21, 1979, see section 410 of Pub. L. 96-153, set out
as a note under section 1701 of this title.
Section Referred to in Other Sections
This section is referred to in sections 1703, 1708 of this title.
