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possible approach, which I believe warrants consideration, this would involve the amendment of 2672 to provide for an exemption to registration requirements if the subdivider is subject to registration in his domiciliary State in substantially the same manner as that contenplated by the bill.

I think this is one of things we would like to talk about, sir, and make sure there is not a dilution of the control in the various States by the enactment of a Federal law that doesn't in its present form quite cover the problem as we see it.

Let us fully regulate, don't let us underregulate. Create a system that will encourage the States to act in this area. Give us the encouragement and the inducement so the legislatures will desire to improve our existing laws in those areas where it needs improvement.

W think we have a good law, but we do have this problem in Golden Palms Acres and next year it might be another one, and it might be somewhere else, and if the State doesn't want to act in this area, then the Federal Government has to act and should act.

Senator WILLIAMS. The first thing you can do to improve your own situation in Florida is to take installment sales restriction out of your jurisdictional assignment, because obviously this guy is trying to get off on the basis that he is only selling cash and deed.

Mr. BERTOCH. Because of this problem we have come up with an administrative ruling defining those acts that a person will have to do to make sure he comes within the purview of the law. We certainly will not accept their initial statement as being in fact exempting them. We investigate these people to make sure they are exempt from the law.

We have had a case where a person claimed an exemption, and we checked the form of transaction and he was not exempt and we stopped that operation. So we are not sitting there just assuming that because somebody says they are selling by deed and mortgage, that they in fact are.

Senator WILLIAMs. We have already established that no blame can be cast on you two gentlemen for the inadequacies of Florida State law, because you don't sit in the legislature, and you are administering what the legislature has given you to work with; right? That is why I asked you if you had been elected. We are not blaming you for your law.

Senator MONDALE. I want to make my viewpoint very clear on that. I have no objection to your attitude or your approach here insofar as the honesty and vigor with which you pursue your point of view. My argument is based on my concept of what is needed to reach the problem that I think is clearly before us and requires the best that we have if we are going to reach it fully and without hurting people unnecessarily. That is the responsibility of this committee, and we appreciate your testimony. Mr. BERTOCH. Thank you very much.

Senator WILLIAMS. I will in a personal way describe how interested I have been in your testimony, and I am sure we are going to be helped indeed. I just missed the last plane to have taken me to my oldest son's graduation, so I have been made a big bum at home, but I have done it because you have been very helpful.

Mr. BERTOCH. I appreciate your patience with us, sir, and we offer our cooperation to the committee in any way that we can.

Senator WILLIAMS. I have a feeling we will be in touch again.

Mr. MOYLE. Senator, may I say this? We had another witness who this morning said it was his first trip or visit to a congressional committee. This was likewise my first trip. I apologize if I have been too excited, too emotional, or impatient. I appreciate very much your patience in allowing us to say what we wanted to say and tolerating, I guess, what was overexuberance at times.

Senator WILLIAMS. I think probably from up here, there was a little more exuberance than from your witness table. I apologize if I got a little too emotional.

Mr. MOYLE. We sincerely thank you and are ready to work with you as much and as long as we can.

Mr. ORIOL. We have many more questions based on articles and other material that we have in our possession, and I presume we will ask for answers by mail. And I want you to know that the record, with the chairman's consent, will include a series from the Orlando Sentinel, May 29, 1966 (see p. 328), which raises several questions about the final settlement of the Rocket City.

We will also include an Associated Press article of about a month ago (see p. 310), which mentions several activities which I think we would like a little more information about. You know that already introduced into the record is the Miami Herald series written by Juanita Green. One question, I am sure, will relate to the experiences of the reporter who asked five times for a copy of the report. According to the article he did not receive it.

I wonder if that suggests that there are difficulties in getting reports to people at such parties. We would appreciate an additional commentary.

Mr. BERTOCH. We will be more than pleased to comment on any questions you have in reference to our activities. This has been our position throughout. We are here to tell you what we are doing in Florida. We feel we are doing an adequate job. We recognize that we are not able to do everything, but I think as has been pointed out, it took maybe 30 years in the securities law to get that thing functioning fully.

We think the record of State performance as demonstrated at these hearings shows they are moving with great speed and alacrity in this area.

Senator WILLIAMS. Thank you again, gentlemen.

(Mr. Bertoch's complete prepared statement, including an exhibit, follows:)



Mr. Chairman, distinguished Senators, I wish to express the appreciation of the members of the Florida Installment Land Sales Board and myself for this opportunity to meet with you and comment on Senate Bill 2672. Accompanying me today is Counsel for the Florida Installment Land Sales Board, Mr. Jon C. Moyle of West Palm Beach.

Due to the shortage of time between the receipt of S. 2672, as amended, and our appearance here today, we have been unable to review the bill with the members of the Installment Land Sales Board or with representatives of the industry in order to incorporate their comments or suggestions in this statement. Accordingly, the opinions expressed today and the comments made by myself and Mr. Moyle will be the result of this limited time for study and review of the bill, and should be considered as our personal observations.

Copies of the proposed bill have been submitted to the Land Sales Board members and will be discussed at our next meeting. I will be pleased to present to the members of this Committee the comments of the Board after it has had this opportunity for review and study.

Mr. Moyle and myself are probably in a better position than many others to comment with reference to some of the changes that have been made in the bill from its original form, due to our continuing contact with members of Senator Williams' staff as well as Mr. Moyle's function as one of the Reporters for the Conference of Commissioners on Uniform State Laws, which Conference is drafting a uniform state law to regulate the type of activity at which this law is directed.

The real estate industry is of vital concern to the State of Florida, and since we are a major "situs" state with regard to the activity at which this legislation is directed, we are very much concerned with the effect this bill may have on Florida's existing law as well as with other state legislation on this subject. More specifically, our concern involves a determination into whether S. 2672 will conflict with our present requirements or will it supplement our present law and render us assistance in exercising our responsibilities to the purchasing public and the land sales industry.

Prior to the introduction of S. 2672, considerable evidence relative to the land sales industry was adduced by Senator Williams' Sub-Committee on Frauds Affecting the Elderly. Senator Williams should be commended for his efforts in focusing attention on the activities of some of the marginal and unscrupulous operators in the sale of land by mail, which activities served as a predicate for S. 2672. Since those hearings in early 1963, there has been considerable activity by the individual states in meeting this problem. Our presence here today as representatives of the Florida Installment Land Sales Board is evidence of this activity.

The Florida Installment Land Sales Board was created by the Florida Legislature in 1963 and began its regulatory existence on September 1 of that year.

In addition to the legislative activity in Florida, we find that in 1963, New York and California amended their existing laws dealing with land sales and the States of Minnesota and Oregon enacted subdivision laws. Subsequently, other states, including Illinois, Iowa, New Jersey and New Mexico supplemented their existing laws, or enacted new laws to deal with this type of activity.

Presently, in the State of Massachusetts, a bill is pending which would permit the real estate department to adopt rules and regulations covering subdivision activity. This bill has passed both houses and it now is in a legislative joint conference committee and in all likelihood will become effective this year.

Today, there are 23 states which have laws in one form or another regulating this activity, which has been called, heretofore, for want of a better name, "The mail-order land business", although only a relatively small percentage of land today is sold by mail.

With almost 50% of the states having laws on this subject, it became obvious that an effort at uniformity should be made, and in 1964, the National Conference of Commissioners on Uniform State Laws undertook the preparation of a uniform state law. The drafting committee of the National Conference has prepared a bill which will be presented and, hopefully, will be adopted at a meeting of the National Conference this August.

Further evidence of state action is the establishment of better liaison and cooperation between state officials who regulate this activity. As one of these state officials, I am convinced that this will continue to expand, and the adoption of a uniform law will further contribute to the ability of the states to effectively regulate the promotional land sales industry.

These various state activities are mentioned for your consideration in determining whether or not there still exists the same need for federal action in this area as may have existed in early 1963, and it is within this frame of reference that we are here to testify relative to S. 2672.

Senate Bill 2672 is designed, according to the proponents, to eliminate abuses that presently exist in the land sales business and to provide purchasers with full disclosure of pertinent information regarding offerings of subdivided land being made through means of interstate commerce. When we first saw the amended bill last week, we were pleased to find incorporated, certain amendments which appeared to have been the result of discussions and conferences with members of the Committee's staff and various state officials who are interested in the proposal. With reference to these discusssions, I am attaching to our remarks, Exhibit “A”, which is a summary of a meeting in Washington in January of this year, which meeting was attended by representatives from 9 states and 1 Canadian Province. The states represented at this meeting included New York, which has a strong law dealing with this subject; Minnesota, which also has a strong subdivision law which came into being in 1963; Massachusetts, which is presently considering a law; New Jersey, which has a subdivision law, which was also recently strengthened; Kansas, which regulates this activity not only through its Real Estate Department, but also through its Division of Securities; the states of Ohio and Vermont, both of which deal with this subject under their securities laws; and The Canadian Province of Ontario which also has a subdivision law. The summary of this meeting sets forth, in addition to suggested amendments, possible policy alternatives that the conferee's thought warranted consideration,

Because we share the Committee's concern in eliminating deceit and deception in the merchandising of real estate, whether it be by interstate or intrastate means, and recognizing the continuing need to afford purchasers of promotional properties reasonable protection, we offer the following comments regarding S. 2672 as amended.

In Florida, where the law provides for the filing of advertising prior to use, as well as the delivery of a Property Report to the purchaser prior to his signing of his sales agreement, we still find incidents of misrepresentation and deception. However, in the majority of cases, if misrepresentation has occurred, it is not due to misleading advertising, it occurs in the sales presentation by the sales agent. We are taking action to curb such activity through our licensing authority and through the cooperation of the subdividers. However, without the authority to license, we would be very limited administratively, in our ability to deal with the problem.

We note, however, with emphasis, that the provision in the original bill requiring the registration of agents of developers with the SEC has been eliminated. Therefore, we would submit for your consideration that if you do not require the registration of the sales agent, you may conceivably defeat the entire legislative purpose.

Senate Bill 2672 contains no provision for the control of advertising other than its anti-fraud provisions. Most states have laws against false advertising presently and the Postal laws contain similar prohibitions. Florida, in 1956 enacted a law prohibiting the publication of false and misleading information in order to induce a person to buy real estate. It was found to be an ineffective deterrent, nothwithstanding its provisions for fines up to $100,000 and 5 years in prison. The control of advertising is essential if you are to make certain that purchasers are afforded full and fair disclosure. The states of California, Ohio, and New York, as well as Florida, have found this to be true.

There is little doubt that an SEC type of Prospectus can provide full and complete disclosure regarding an offering, however, in any sales oriented program if a prospective purchaser is given a colorful brochure along with a lengthy legalistic Prospectus, experience indicates that the purchaser is more likely to turn to the brochure, rather than the Prospectus for his information regarding the offering. With the subtleties of advertising today, the stated legislative goal of assuring full and fair disclosure may be very well frustrated by the absence of provisions for the control of advertising.

One of the amendments to the bill calls for the inclusion in the registration statement of a completion schedule. This, we in Florida have found to be of utmost importance and, of course, requires a physical check of the work being done in order to be assured that the work is completed according to the promised schedule. Obviously, in the absence of adequate follow up, a developer could get in serious financial difficulty prior to discovery, and the "dream commwitr" could turn into a nightmare of litigation. We see no such provisions in Senate Bill 2672.

The Florida Installment Land Sales Board, in meeting this problem is required to determine that reasonable assurances exist in order that the promised improvements will be completed. This necessitates periodic examinations of the sub

division. It would be false protection for purchasers, if the SEC or any other agency exercising jurisdiction over this activity, after once granting authority to the subdivider to sell, failed to take action to assure that the completion schedules were met, and the ability of the subdivider to convey title was not frustrated. This could create a situation where a subdivider's literal compliance with the law at the time of commencing a sales program would be sufficient to provide access to a nation-wide market, and once having sold out, he could fold his tent and silently slip way.

Another, and a most significant point concerns the effect of the enactment of a federal law. First, if it preempts the field, establishes standards, fully and completely regulates this activity down to the local sales level, then it may curb the remaining abuses. However, if it does not preempt the field and does not do a full, adequate and complete job, then the proposal could work against the best interests of the public. It would discourage additional state legislative activity in this area ; it would create possibly a false sense of security in the minds of purchasers, who because of the existence of a “federal law”, may think that protection is present, which protection, unless the law covered some of the points previously made, would be more illusory than real.

We are concerned with any legislative proposal that can directly affect an industry recognized by the Florida Legislature as a vital and important part of the state's economy. As Marshall Criser, former chairman of the Florida Installment Land Sales Board said before Senator Williams' Committee in 1964, "we are dealing with an industry that is ambitious and adolescent, and also one which well-financed and well-managed developers participate and in which, on occasion, under-financed and poorly managed speculators become involved.”

Florida must be considered a major state in this activity. A conservative estimate as to the amount of Florida real estate being offered by registrants of the Florida Installment Land Sales Board to the public today, at current selling prices is approximately one billion dollars. The present subdivider registrants of the Board have reported assets in excess of $783,000,000 according to the most recent financial statements filed with the Board, which include receivables of approximately $470,000,000.

We recognize that we are not regulating all persons who are offering Florida real estate for sale. I believe, however, that we effectively regulate most of those persons who are involved in the type of sales activity at which this legislative proposal is directed. Those subdividers who have switched to alternative methods of sale in order to avoid the jurisdiction of the Land Sales Board are, by comparison, small in number and limited in size. The publicity and the emphasis given to the activities of these few; these perennial “fast buck" operators is, I believe, certainly disproportionate, when the entire industry is considered. Of course, any wrongfulness should be corrected, and I submit to you, we have and will continue to do our utmost to correct any wrongdoing.

As Senator Williams noted in his statement for the May, 1964 hearing of the Subcommittee on Frauds Affecting the Elderly, in his opening remarks:

"It should be made clear here that the industry has already accomplished fine results in many parts of the Nation. Thousands of retired persons are now living in well-planned communities built on once-marginal land, or on lots deep in the desert, and even on land that was once jungle or swamp."

Accordingly, it would appear to be grossly unfair to impose an additional level of regulation and further expense on the majority of the people engaged in the sale of subdivided land, to correct what appears to be becoming less and less of a problem, particularly when any additional costs must ultimately be passed on to the consumer in the form of higher prices. This additional regulation would also serve to restrict or limit the ability of persons to engage in this type of business activity.

Let me submit for your consideration, a proposal that I believe was first enunciated by Mr. Herbert E. Wenig, Assistant Attorney General for the State of California, as possibly the best and most effective way to correct the abuses that still exist, without the necessity of creating what in effect would be a new agency. This proposal is to make it a federal crime, a felony, to offer to sell subdivided land by means of interstate commerce in violation of the laws of the local state where such solicitation is made. This could be further supplemented by enacting a law giving the states exercising subdivision control the authority to bring an action in the Federal Courts to enjoin those operators who refused to comply with the local law. This, then, would be a direct thrust at the problem involved because, notwithstanding its interstate character, this remains, pri

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