No. 34204 (Repeal): Rule R162-11. Undivided Fractionalized Long-Term Estates

(Repeal)

DAR File No.: 34204
Filed: 11/01/2010 03:55:13 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The substantive elements of this rule have been incorporated into the proposed new Rule R162-2f. Therefore, this rule is no longer needed. (DAR NOTE: The proposed new Rule R162-2f is under DAR No. 34191 in this issue, November 15, 2010, of the Bulletin.)

Summary of the rule or change:

The rule is repealed in its entirety.

State statutory or constitutional authorization for this rule:

• Subsection 61-2f-307(1)(b)

Anticipated cost or savings to:

the state budget:

Where the substantive provisions of this rule are incorporated into the proposed new Rule R162-2f, no fiscal impact to the state budget is anticipated from this filing.

local governments:

Where the substantive provisions of this rule are incorporated into the proposed new Rule R162-2f, no fiscal impact to local governments is anticipated from this filing.

small businesses:

Where the substantive provisions of this rule are incorporated into the proposed new Rule R162-2f, no fiscal impact to small businesses is anticipated from this filing.

persons other than small businesses, businesses, or local governmental entities:

Where the substantive provisions of this rule are incorporated into the proposed new Rule R162-2f, no fiscal impact to affected persons is anticipated from this filing.

Compliance costs for affected persons:

In repealing this rule, the division and commission relieve affected persons of any obligation to comply with it. There are no compliance costs.

Comments by the department head on the fiscal impact the rule may have on businesses:

No fiscal impact to businesses is anticipated from this rule repeal as the substance of these provisions is contained in the new Rule R162-2f proposed by the Division.

Francine A. Giani, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Commerce
Real Estate
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Jennie Jonsson at the above address, by phone at 801-530-6706, by FAX at 801-526-4387, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/15/2010

This rule may become effective on:

12/22/2010

Authorized by:

Deanna Sabey, Director

RULE TEXT

R162. Commerce, Real Estate.

[ R162-11. Undivided Fractionalized Long-Term Estates.

R162-11-1. Authority and Definitions.

11.1.1 The following administrative rules are promulgated under the authority granted by Sections 61-2-5.5 and 61-2-26.

11.1.2 Terms used in these rules are defined as follows:

(a) "Affiliate" means an individual or entity that directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with, a specified individual or entity.

(b) "Entity" means any corporation, limited liability company, general or limited partnership, company association, joint venture, business trust, trust, or other organization.

(c) "Sponsor" means the party that is the seller of an undivided fractionalized long-term estate.

(d) "Undivided fractionalized long-term estate" is defined as in Section 61-2-2.

 

R162-11-2. Marketing Disclosures.

11.2.1 All real estate licensees who market an undivided fractionalized long-term estate shall obtain from the sponsor, and shall provide to purchasers in the form of written disclosures provided in a reasonable amount of time in advance of closing to allow adequate review by the purchaser, the following information:

11.2.1.1 Information concerning the sponsor and the sponsor's affiliates:

(a) The financial strength of the sponsor and all affiliates, as evidenced by current certified financial statements and current credit reports, and information concerning any bankruptcies or civil suits;

(b) Whether any affiliate of the sponsor is a third party service provider in the transaction, including mortgage brokers, mortgage lenders, loan originators, title service providers, attorneys, appraisers, document preparation services, providers of credit reports, property condition inspectors, settlement agents, real estate brokers or other marketing agents, insurance providers, and providers of any other services for which the investor will be required to pay.

(c) Whether any affiliate of the sponsor is a master lease tenant or whether the sponsor is an affiliate of any master lease tenant.

(d) Any use that will be made of purchaser proceeds.

11.2.1.2 Information concerning the real property in which the undivided fractionalized long-term estate is offered:

(a) Material information concerning any leases or subleases affecting the real property;

(b) Material information concerning any environmental issues affecting the real property;

(c) A preliminary title report on the real property;

(d) If available, financial statements on any tenants for the life of the entity or the last five years, whichever is shorter;

(e) If applicable, rent rolls and operating history;

(f) If applicable, loan documents;

(g) The Tenants in Common agreement, or any agreement that forms the substance of the undivided fractionalized long-term estate, including definition of the undivided fractionalized interest;

(h) All third party reports acquired by the sponsor;

(i) A narrative appraisal report, with an effective date no more than 6 months prior to the date the offer of sale is made, that includes at minimum pictures, type of construction, age of building, and site information such as improvements, parking, cross easements, site and location maps;

(j) All material information concerning the market conditions for the property class; and

(k) All material information concerning the demographics of the general market area.

11.2.1.3 Information concerning the asset managers and the property managers of the real property in which the undivided fractionalized long-term estate is offered:

(a) Contact information for any existing or recommended asset managers and property managers;

(b) Any relationship between the asset managers and the sponsor;

(c) Any relationship between the property managers and the sponsor; and

(d) Copies of any existing asset management agreements and any property management agreements.

11.2.2 All real estate licensees who market an undivided fractionalized long-term estate that is subject to a master lease shall obtain from the sponsor and provide to purchasers in a reasonable amount of time in advance of closing to allow adequate review by the purchaser, financial statements of the master lease tenant, audited according to generally accepted accounting principles. If the master lease tenant is an entity formed for the sole purpose of acting as the master lease tenant, then the financial statements of the owners of that entity shall be furnished.

11.2.3 All real estate licensees who market an undivided fractionalized long-term estate shall, in a reasonable amount of time in advance of closing to allow adequate review by the purchaser:

(a) disclose in writing to purchasers:

(i) that there may be tax consequences for a failure to close on the purchase;

(ii) that there may be risks involved in the purchase; and

(b) shall advise purchasers that they should consult with tax advisors and other professionals for advice concerning these matters.

 

R162-11-3. Regulation D Offerings.

11.3 The Division and the Commission shall consider any offering of a fractionalized undivided long-term estate in real property that is compliant with Securities and Exchange Commission Regulation D, Rule 506, 17 C.F.R. Sec. 230.506 to be in compliance with these rules.

 

KEY: tenants-in-common interests

Date of Enactment or Last Substantive Amendment: October 19, 2006

Authorizing, and Implemented or Interpreted Law: 61-2-26 ]

 

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