found that Florida had basically a good law that was well administered, and that Florida real estate remains one of the best conceivable investments. This report contains the present law and the committee's recommendations after considering all presentations made to it. It is our earnest belief, that if the recommendations proposed are incorporated into Florida law, the industry working in combination with a state regulatory agency can weed out unscrupulous dealers, and bolster the sound development and economic growth of our State. THE PRESENT LAW Sections 475.47-48, F. S. Make it unlawful to publish false or misleading information for the purpose of inducing a person to buy real estate. The penalty under the law is a fine up to $100,000 and 5 years imprisonment, or both. Section 475.49, F. S. Gives a remedy to persons who buy land before they see it, relying on false or misleading information published. They may sue to rescind the sale or to get damages (within one year after the initial payment for the land or 3 months after the land is seen by the buyer or his agent, whichever occurs first). Section 475.51, F. S. With certain minor exceptions, makes it unlawful to publish or broadcast information out of the state relating to real estate offered for sale unless the information is filed with the Florida Real Estate Commission. If "subdivided lands" are offered out of the state, the seller must give the Commission information concerning the subdivision to help the Commission determine if the advertising is false or misleading. The Commission may enter an order to stop publication if it determines the advertising is false or misleading. Section 475.52, F. S. Allows the Real Estate Commission to adopt rules and seek injunctive or other court relief to stop the publication of false or misleading advertising. Section 475.55, F. S. Provides criminal penalties for violations of the act other than Section 47 with a fine of $1,000 or 6 months imprisonment, or both. Under its rule-making power, the Florida Real Estate Commission has adopted rules which: 1. Prevent the filing and, consequently, the publication of advertising unless it is acceptable. 2. Set a guide for standards of approval and specify certain unacceptable language for advertising. 3. Require subdividers to have fee simple title unless there is provision for mortgage releases of lots as they are sold or a trust account established to assure payment of mortgages on the land. 4. Require a recordable contract to be given to out-of-state purchasers. 5. Require 75% completion of all purported improvements or a performance bond to assure completion or a reserve trust account of money paid by installment purchasers to assure improvements. 6. If "homesites" or "building lots" are offered for sale, there must be: (a) potable water available (b) publicly maintained roads to the lots (c) a sewage disposal system provided or approval of land for septic tanks and (d) no further draining or filling necessary to make lots usable. 7. Lands advertised for any other purposes must be accessible and usable for this purpose without the necessity of draining or filling or other improvement, and no fact can exist which makes the lands unusable for the advertised purposes. 8. Recreational facilities and other improvements advertised, unless otherwise stated, must be usable at no extra cost and maintained by public authority. RECOMMENDATIONS 1. It is recommended that the land development industry, of its own accord, develop canons of ethical conduct and make every effort to weed out the few unscrupulous operators who bring disrepute on Florida land development and Florida real estate in general. No law, no matter how thorough, can effectively legislate morals and standards of conduct. Frequently it occurs in business and in other social relationships that mere ignorance of proper standards causes unethical conduct. The Committee believes that if this industry, of its own volition, develops a set of canons which would govern its relationships with prospective purchasers and the public in general, subdividers will adhere to these canons. A sound basic law, bolstered by effective canons of ethics, will be the strongest possible combination that could be devised for fair land sales transactions. 2. It is recommended that a State regulatory agency be established to be known as the Florida Installment Land Sales Board. This agency will be composed of two knowledgeable members of the industry and a laymember. It will be financed through fees paid by the persons regulated. Presently the Interstate Advertising Act is administered by the Florida Real Estate commission. This Commission's primary administrative duty is to license, educate, and regulate real estate brokers and real estate salesmen. There are over 44,000 licensed real estate brokers and salesmen in the State. The installment land sales business is a peculiar type of real estate transaction. The promotional methods used are substantially different than those used by a broker or salesman, and the subdivider handles tremendous sums of money which are at his complete disposal during the development period. Because this is a unique industry, with unique problems, it does not lend itself to administration by a Commission composed of real estate brokers. The Committee envisions that the Florida Installment Land Sales Board will be composed of persons who are familiar with this type of business, and that its staff will be devoted entirely to the regulation of subdividers, subdivision advertising, and attendant problems. The new Board will not be a drain on the resources of the State as it will be financed by the subdividers. The industry representatives who appeared before the Committee said they would be happy to pay a fair fee in return for effective and full administration. 3. It should be provided that persons 'subdividing Florida land or land located elsewhere into 50 lots or more and selling a substantial portion of it by installment land sales contract be registered with the Installment Land Sales Board. In the Committee's discussions with developers, and county officials, and from their study of the typical development of a subdivision, there appeared to be one area in which difficulties usually arose. This area was where there were transactions involving installment land sales contracts. This is primarily because these contracts are not recorded; therefore, the purchasers have no notice of any mortgage foreclosure, and their rights are subordinated to the rights of lien holders, who may foreclose. A subdivider wishing to take advantage of his position cannot feasibly do so when he delivers a recorded deed and mortgage to prospective buyers. The costs for recordation, documentary stamps and the necessary expenses incident to foreclosing on the buyers who do not perform is a greater expense than the subdivider can bear. By requiring a certificate of registration for persons wishing to enter into the subdivision business, the Board, at the outset, can assure that these persons are of good moral and business repute. The Board can withhold the privilege of doing busines from those persons whose backrounds make them gravely suspect. In those situations in which a registrant is misrepresenting his lands and defrauding the public, administrative relief is quickly available to revoke the privilege of selling lands by installment land sales contract. This remedy is far more effective than a criminal action for fraud, which would perhaps result in the conviction of the subdivider, but in all probability would be too slow to be effective in preventing injury to the public. 4. Salesmen selling for subdividers should also be registered with this Board upon proof that they are registered with the Florida Real Estate Commission. The Committee feels that salesmen dealing in this business, working for subdividers, should be registered, in order that the Board may know who they are and may have an effective disciplinary power over the salesman as well as the subdivider. Mere proof of registration with the Florida Real Estate Commission as a saleman, and his familiarity with the Installment Land Sales Act, will be adequate to substantiate the grant of a salesman's permit by the Board. The Board will work hand-in-hand with the Real Estate Commission in regulating salesmen, and can assist in cutting the "red tape" now necessary to move salesmen from one subdivision to another. 5. Certificates of registration should be suspended or revoked for unethical conduct after a full hearing. A substantial administrative power is given the Board in the right to suspend or revoke a certificate of registration and consequently a person's privilege of doing business by installment land sales contract. This administrative power should be checked to be sure that it is not used capriciously; therefore, it shall be in every case necessary to have a full hearing before a certificate may be suspended or revoked. At this hearing, the registrant should have an opportunity to present all evidence he deems necessary in his own behalf and shall be entitled to fully cross-examine witnesses and rebut evidence presented against him. 6. It is recommended that registrants be required to file all promotive publications with the Board to enable the Board to examine the advertising to determine if it gives full disclosure and is not false or misleading. The present Interstate Advertising Law requires the filing of all promotive publications to ascertain if they are false or misleading. Frequently information is not false and misleading per se, but by the same token is still unfair to the prospective purchasers because it does not give a full picture of the land to be purchased. The advertising is not required to disclose peculiar physical features of the land which would perhaps rule out its use for the purchaser. By requiring full disclosure, the Board will have a freer hand in drafting rules with specific do's and don'ts to meet the needs of the subdividers. 7. The Board should have power to examine subdivisions sold by installment land sales contract to determine if the subdivider can convey good title: if the rate of development is proceeding as promised in advertising; and if the financial structure of the subdivider is such as to enable the completion of promised improvements. Complaints were listed with the Committee both by purchasers and subdividers, indicating that the Florida Real Estate Commission under its present set-up cannot examine the subdivisions. The Commission must rely solely on the representations of complainants and subdividers. The advertising is reviewed primarily by lawyers, and not by engineers or accountants who are familiar with land use and financial structures. The new Board will have the advice of engineers and accountants to examine not only the property itself, but the improvements on the property and the financial structure of the subdivider to reasonably assure that the affirmations made in advertising can and will be fulfilled. 8. In order to facilitate the ability of subdividers to get their advertising before the public in the shortest possible time, it should be mandatory that the Board approve or disapprove the advertising shortly after it is filed; and if the Board takes no action within the time limit, advertising may be published without Board action. Many persons who appeared before the Committee commented about the need for getting their advertising to the public quickly. The promotional selling of land by installment contract is on a seasonal basis; if advertising is not approved quickly, the advertising will not reach the northern market during its most susceptible period, the winter. Subdividers are also injured by the fact that taxes and interest are substantial costs in large acreage tracts and these costs accrue daily. If advertising is not approved and the land is lying fallow, the subdividers are suffering a substantial loss of money which could be effectively employed in other channels to enhance land value. The Committee feels strongly that to assist a developer in his financing and program of development, his advertising must be approved quickly. The Board should approve or disapprove properly filed advertising within a specified time or the subdivider shall be entitled to use his advertising. If it should appear later that the advertising does not give full disclosure or is false and misleading, the Board may enter an order of disapproval and prohibit further distribution of the material until it is properly amended. 9. The Board should be given rule-making powers to allow it flexibility in dealing with the exigencies of land development. The Committee strongly recommends that any legislation drafted should be broad in setting up standards within which the Installment Land Sales Board should operate. The Board should have flexibility in its rule-making power, to 66-628-66 -27 satisfy the need for speedy action to assist developers in obtaining financing and utilizing new promotional plans or to stop loopholes employed by the more devious operators. This will allow Florida development to grow and expand constantly without the need of waiting until the next legislature convenes, should it appear in practice that a well-intentioned section of the law does not fulfill its purpose. 10. It is recommended that the portions of the present advertising law which pertain to out-of-State advertising be repealed. Sections 475.47 and 475.48, which provide criminal penalties for any person advertising falsely, should be retained and the penalty stiffened to make it a felony. The new Installment Land Sales Act, as it is proposed, greatly limits the previous interstate advertising act and imposes regulation only on a small segment of Florida land sales. To continue the protection of the public from false and misleading advertising by any land seller, it is recommended that Sections 475.47 and 475.48 be retained. It is further recommended that the penalty for violating this section should be stiffened. The present act provides penalties not to exceed five years imprisonment or $100,000.00 fine or both. It is recommended that this statute provide that the imprisonment would be in the state penitentiary. As the act presently reads, the five years imprisonment would be in a county jail and, consequently, violation of this act would not constitute a felony. We believe that the legislature intended to make this crime a felony by the substantial sanction it approved and this suggested recommendation will only serve to effect the previous intention of the Legislature. 11. A criminal penalty should be provided for the subdividers who do not comply with the requirements of the Installment Land Sales Act. A criminal penalty in addition to the right to revoke a certificate will be a further deterrent to unlawful sales. 12. The Installment Land Sales Board should have the power to seek injunctions and receiverships in appropriate cases in order to prevent not only the publication of false or misleading advertising but also the sale of land. Receivership may be sought in court for companies who have grossly abused the law and whose shaky financial status may impair their promises to the public. Under the present provisions of the law, the Real Estate Commission may seek injunctions to stop false and misleading advertising, but in cases of gross abuse the damage is already done when advertising has been distributed. The Board should have an additional power to stop the sale of land in court to protect the public. Where it appears that the machinations of an unscrupulous dealer have been such as to endanger the funds presently invested and to be invested under existing and future land sales contracts, the court should have the right to appoint a receiver to handle the finances of the corporation during the throes of financial distress. This will have the beneficial effect of allowing the receiver to properly disburse funds as they come in to protect the investments already made in the real estate and to perhaps save a shaky subdivider who otherwise would go into a bankruptcy. Saving a subdivider from bankruptcy may save investments of his purchasers and creditors and also enhance the systematic and well-planned growth of the community. 13. It is recommended that this State advocate a uniform reciprocal enforcement proceeding to be enacted in all of the States to enable the prosecution of subdividers who violate the law but are not amenable to process in the State where the injury was done. It frequently arises that land sold is in another state, or the subdivider selling the Florida land is located in another state. Presently the only effective way to obtain a remedy against these subdividers would be through action by the Federal Government in a prosecution for mail fraud or for violating the tenets of the Federal Trade Commission. The actions brought by the Federal Government would only be interested in the criminal aspect of the case, and not the sound development of the land sales in this state. The criminal investigation by the Federal Government, under present law, has proved to be time consuming and consequently ineffectual, since many subdivisions could be bought. developed and sold before the United States could take action. By establishing a recip rocal enforcement act, wherein the states could obtain jurisdiction over wrongdoers in other states, the government at the lowest and consequently the most interested level could quickly take action to hobble unlawful transactions. Senator HARRISON A. WILLIAMS, Jr., EAST CENTRAL FLORIDA REGIONAL PLANNING COUNCIL, Titus, Fla., June 17, 1966. DEAR SENATOR WILLIAMS: I understand that the Senate Committee on Currency and Banking is currently considering new legislation relating to mailorder land sale techniques and procedures. As you may recall, I testified on this subject on May 19, 1964, in a hearing called by the Subcommittee on Frauds and Misrepresentations Affecting the Elderly. While I have not had an opportunity to review the proposed bill, I would like to reaffirm the statements and recommendations contained in my testimony, a copy of which is enclosed. My principal concern then and now is the fact that uncontrollable mail-order subdivision activities, at least as practiced in Florida, all too often lead to the creation of what I term "legal wastelands"-of little value to either the property purchaser or the general public. Relative to the ability of our State to control this type of activity, the Florida Installment Land Sales Board was established in recent years for such a purpose. While this Board no doubt has been of value in some cases, I understand from news accounts that some detrimental mail-order land sales activities are still taking place. This may be due, in part, to the fact that a majority of the Board is made up of land developers who specialize in mail type promotional efforts. In my personal opinion, I feel that an industry-regulating body should not contain a predominance of industry representatives. For this and other reasons, there appears to be adequate justification for federal guidelines in the form of new legislation. Sincerely, ROBERT H. DOYLE, STATEMENT PREPARED BY ROBERT H. DOYLE, EXECUTIVE DIRECTOR OF THE EAST CENTRAL FLORIDA REGIONAL PLANNING COUNCIL, FOR THE SUBCOMMITTEE ON FRAUDS AND MISREPRESENTATIONS AFFECTING THE ELDERLY (SENATOR HARRISON A. WILLIAMS, JR., N.J., CHAIRMAN) OF THE UNITED STATES SENATE SPECIAL COMMITTEE ON AGING (SENATOR GEORGE A. SMATHERS, FLA., CHAIRMAN) The East Central Florida Regional Planning Council is an organization that was formed in February of 1962 by the seven counties most directly impacted as a result of space-oriented activities at Cape Kennedy. One of the Council's chief functions is to prepare a coordinated land use, transportation and public facilities plan for a large and extremely diversified region experiencing one of the fastest growth rates in the United States. In our current activity program, the Council is engaged in a number of special studies designed to provide both information and guidance as to how various resources within the seven-county region can best be utilized. Available land and water supply areas are two of the most important resources being considered by the Council as part of this effort. We therefore welcome an opportunity to appear before this Subcommittee to outline how certain types of "mail order" sales and subdivision practices often affect the productive utilization of land; create problems for property owners and public officials alike; and, in general, prove to be detrimental to everyone but the initial promoter. My presentation today will essentially cover three aspects of this matter: engineering and planning characteristics of most "mail-order" type subdivisions; land use and land re-use difficulties created by such developments; and a series of recommendations concerning how this problem might better be handled at state and local, as well as federal, levels of governments. |