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(From the Daytona Beach Morning Journal, Dec. 8, 1965)
EDITORIAL: MAIL ORDER LAND SALE CONTROL
In general, the sale of homesites by mail has done a lot of good for a lot of people,
In Florida this practice has enabled thousands of Northerners to retire in pleasant, attractive communities where developers provide everything from golf courses to adult education programs to keep them happy. The impact of such developments on the state's economy has been substantial.
Unfortunately these laudable achievements sometimes are overshadowed by the tactics of unscrupulous fringe operators who specialize in bilking the elderly of their savings. The selling of undrainable swamps ballyhooed as a paradise in the sun is an old, old story in Florida, and it is still going on despite much publicized crackdowns.
Now there is a good possibility that the federal government will take over the job of regulating this booming, billion dollar industry. A bill has been introduced by U.S. Sen. Harrison A. Williams Jr., D-N.J., that extends the protection of the Securities and Exchange Commission to buyers of mail order lots.
Many developers would not be affected because the bill specifically exempts builders.
"This bill is not an attempt to regulate the home building industry," Williams insists. “It is an attempt to end the victimizing of elderly Americans of irreplaceable savings in a search for a healthful and happy retirement homesite, as well as those who purchase such property as an investment."
Are federal controls necessary? We think so. The problem is national in its dimensions. It involves interstate commerce and the use of the mails. The minority of states that have tried to act on their own frequently are frustrated because they can't control what happens in other states.
In Florida, there is mounting evidence that state regulation has not met with resounding success. Three years ago, when the national spotlight focused on questionable practices in this state and others, the Legislature came charging to the rescue with a new law that was supposed to control the situation in Florida once and for all.
The law turned out to be so riddled with loopholes that a veteran political writer has described it as "all but unenforceable."
And the agency that was created to administer it, the Installment Land Sales Board, is controlled by land developers.
There are disturbing signs that the deceptions of the past are increasing. The board continues to license promotions of a type which have been branded before a Senate investigating committee as "inherently fraudulent." And the deficiencies of the law have allowed at least 18 of the approximately 228 active land companies to escape state regulation altogether.
Comments the Miami Herald : "For the honest businessmen in Horida and for the reputation of our state, there is a serious threat from the high pressure tactics used by some land companies. There is the smell of the bucketshop in the nationwide telephone techniques employed to sign up buyers * * * Tourists throughout South Florida are being badgered at every turn to take free trips into the boondocks; trips that are not free of the hardest type of hard sell."
In our judgment, nothing whatever can be gained by allowing mail order land selling to continue with inadequate regulation. The ill will that questionable practices have caused, the business they have lost for honest developers, is inestimable.
Thirty two years ago, Congress passed the Securities Act to create investors in stocks and bonds. The law has succeeded in curbing cheats in the securities business. The principles of caveat emptor-let the buyer beware—may be innocuous enough on a horse farm but in the complicated world of stocks and bonds it can have dangerous repercussions. The same has come to be true of real estate, now that $10 down, $10 a month land selling has assumed national proportions.
The Williams bill would, among other things, force sellers to disclose pertinent information to buyers (which is one of the most effective features of the securities law), would allow the SEC to seek court injunctions against violators, and would make it possible for buyers to bring suit against subdividers who misrepresent property. Subdividers who fail to register with the agency, and those
who furnish false information, would be subject to $5,000 fines, five years imprisonment, or both.
It sounds good to us. We would like not only to go on record in favor of speedy passage when Congress reconvenes in January, but to compliment Senator Williams for his efforts and foresight.
Typical Florida swamp. Land like this is priced by promoters at $200 to $800 an
acre. Its average value is closer to $75 an acre. [From the Daytona Beach (Fla.) News-Journal, Apr. 13, 1966) New PROSPECTUS ADOPTED; LAND FIRMS TOLD TO REVEAL MORE Florida land promoters who sell unimproved acreage by mail will be required to give prospective buyers much more information about their property after April 1.
They have been ordered by the state to furnish each prospect with a revised property report, or prospectus, giving answers to such questions as:
"Will drainage of the subdivision or any of the offered parcels or tracts be necessary to render them usable?"
** * * What is the estimated cost to a purchaser * * * to provide for drainage of the property ?”
"Will each parcel * * * be marked so that it can be located by the purchaser? If the answer is no, what then is the estimated cost for a purchaser to obtain a survey * * * ?"
The information about improvement costs—à vitally important consideration for most mail-order lot buyers—isn't provided in the property reports now being used. The reports for unimproved acreage, partly improved acreage and . improved building lots are the same.
But the Florida Installment Land Sales Board, the state watchdog agency which regulates mail-order land developers, declared in a formal order issued March 3 that "the present form of property report does not provide for the disclosure of information deemed pertinent to purchasers of unimproved
acreage * * *"
Executive director Carl A. Bertoch Jr. told a reporter the board is determined to “make sure that land buyers know exactly what they're buying."
The selling of raw acreage in small tracts, a multimillion dollar a year business in Florida, has been a target of many critics, partly because of the deceptive practices of some promoters and partly because of inherent difficulties that are created by the fractionation of land. The tracts are represented as speculative investments that are likely to appreciate in value, enabling the buyer to sell at a profit.
Abuses which came to light four years ago led to the adoption of a full disclosure law and creation of the Land Sales Board to administer it. In addition, a bill is before Congress that would place all mail order land sales under federal control.
The state's regulatory program has come in for some unflattering press reports lately but Bertoch said he thinks the new property reports will go a long way toward eliminating misrepresentation.
Along with cleaning up questions about costs of drainage, the reports call for estimates of the cost of filling the land, if filling is necessary, and obtaining a survey to locate individual tracts, if the tracts aren't marked.
Sellers also must say what, if anything, the tracts can be used for in their present condition; whether the subdivision has been platted; the extent to which drainage is necessary and what, if any, improvements are planned.
Under the board's regulations, all prospective buyers must be given a copy of the report before they sign a contract.
Contracts contain a boldface clause stating that the purchaser has received a copy and the purchaser acknowledges receipt when he signs.
Bertoch said subdividers who fail to furnish a report can be hauled up before the board to explain why in an administrative proceeding. In addition, a buyer could sue on grounds of misrepresentation. Other than this, however, there are no specific penalties for failure to give property reports.
The reports make it abundantly clear from the start that the buyer isn't getting a building lot. It contains this opening paragraph:
“This report describes property which cannot be considered presently useful for residential or for building purposes. It is undeveloped property, unsurveyed and without roads, drainage or other improvements."
[From the Daytona Beach (Fla.) Sunday News-Journal, June 5, 1966)
How's BUSINESS? LAND BOARD PULLS IN HORNS ON NEW PROPERTY REPORT
(By Morton C. Paulson) The state agency which regulates mail order real estate has backed off from its announced intention of forcing acreage promoters to be more candid with prospective buyers.
Back in March, the Florida Installment Land Sales Board served notice in a formal order that sellers of unimproved acreage would be required after April 1 to furnish all prospective buyers with a revised property report, or prospectus, giving answers to such questions as:
"Will drainage of the subdivision or any of the offered parcels or tracts be necessary to render them usable?" "* * * What is the estimated cost to a purchaser * * * to provide for drainage of the property ?"
“Will each parcel * * * be marked so that it can be located by the purchaser? If the answer is no, what then is the estimated cost for a purchaser to obtain a survey
* * *?" Carl A. Bertoch, the board's executive director, said at that time it was felt that people who are induced to buy mail order acreage as a speculative investment should be made aware of any obstacles they might face in realizing a return on the investment, or in marketing the land. The board's chief purpose, as set forth in the law that created it, is to guard against deceptive or questionable practices in the installment land industry.
And, said Bertoch, the members were determined to "make sure that land buyers know exactly what they're getting.”
But last week, when queried by this column, he said that the proposed new questions set off a storm of protest among land dealers.
"They felt it was unfair to make them say how much it would cost to drain and improve the property when they had no way of knowing the purpose for which the property would be used," he explained.
So the questions, he said, were revised. The revised questions were designed merely to tell what, if any, provisions have been made for draining, filling or surveying the property.
But the board, which is controlled by land developers (and which has been characterized by one leading newspaper as a “dull fanged watchdog"), balked at the revised questions, too. At its last meeting, held May 27 in Miami, a motion by member Gerald Gould to adopt the rephrased questions, died for want of a second.
Later, perhaps, the matter may be brought up again for reconsideration, Bertoch said.
This goes to the heart of the question of how much the seller of real estate or any other commodity, for that matter-should have to reveal to a prospective buyer. The Florida law on mail order land calls for "full and fair disclosure" of all pertinent facts.
Yet under the law as currently administered by the board, promoters can ballyhoo swamps in the boondocks as having great "profit potential” without having to add that thousands of dollars might have to be spent to put the property in shape to offer it for sale at a profit.
In March when the board decided to require the inclusion of such information, it said in a formal order that "the present form of property report does not provide for the disclosure of information deemed pertinent to purchasers of unimproved acreage
Evidently the board has changed its mind.
FLORIDA REAL ESTATE TRENDS
& EXCHANGE MART,
Stuart, Fla., April 22, 1966. Mr. MORTON C. PAULSON, Business Editor, the News-Journal, Daytona Beach, Fla.
DEAR MR. PAULSON : Thank you for your comments about the "bit” in the Orlando Sentinel. I've been selling real estate
mostly acreage in South Florida for over 16 years.
When we talk about trends or rise in prices of land in Florida, I believe we have to define it in terms of location. In certain parts of Florida--north Central and Northwest-land values have increased maybe one hundred percent in the past 15 years. In certain parts of South Florida, particularly Southeast Florida, land values have increased a fabulous 1,000 percent or over. This is also true in areas such as Orlando and Brevard Counties.
In the Indian River Counties (Martin, St. Lucie, and Indian River) raw land sold for $50 per acre just 15 years ago. The rise was gradual up to 1958–59 when it stayed on a plateau level at around $250 per acre. In 1961 and 1962, prices of raw acreage increased mainly due to citrus growing. Several hundred thousands of acres sold from $250 to $500_average around $375 per acre.
The U.S. Department of Agriculture reported in March, 1965, that the value of Florida farmland averaged $333 an acre—including all buildings and other improvements.
Probably the most authoritative statement I can make is that good improved land within a radius of 5 miles of a developed city or town has increased from $100 an acre to at least $500 an acre in the past 15 years. By good land I mean land that is high and dry and ready for development. Plenty of submarginal land (subject to flood) is available under $100 an acre.
I hope the above will assist you in your study.
M. P. NELSON. P.S.—Enclosed are some back issues of some "Trends” which may be of assistance.