No. 36078 (Amendment): Rule R162-57a. Timeshare and Camp Resort Rules

(Amendment)

DAR File No.: 36078
Filed: 04/16/2012 02:03:54 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this amendment is to modify existing provisions that place an undue burden on the industry, and to specify a circumstance under which a developer is required to amend a project registration.

Summary of the rule or change:

In Section R162-57a-5, the notification requirement is modified so that the filing of a civil lawsuit no longer triggers a notice requirement. Rather, the notice requirement is triggered by a finding of fraud, misrepresentation, or deceit in a judicial or administrative proceeding. Also in Section R162-57a-5, language is added to require a developer to amend a project registration upon a court's certifying a class in a class-action lawsuit against the developer. In Section R162-57a-11, the disclosure requirement is modified so that a developer is not required to provide the complete property report to a prospective purchaser at the beginning of a direct sales presentation. At that point, the developer must provide notice of the right to rescind; the full property report may then be provided at any time prior to the purchaser's signing a sales contract. In Section R162-57a-13, the requirement to re-disclose the rescission right is modified. Rather than requiring re-disclosure in any circumstance where the developer is contacted by a purchaser during the rescission period, the requirement is limited so that it applies only when the developer is contacted by a purchaser who expresses a desire to terminate the contract.

State statutory or constitutional authorization for this rule:

• Section 57-19-3
• Subsection 57-19-9(4)
• Section 57-19-11
• Section 57-19-13

Anticipated cost or savings to:

the state budget:

The proposed amendments rework existing provisions to provide clarity and to make compliance more reasonable for industry professionals. The Division already has adequate staff and budget to administer and enforce the existing provisions, and it is not anticipated that the amendments change those provisions in any way that would require the state to create additional mechanisms for oversight. As such, no fiscal impact to the state budget is anticipated.

local governments:

Local governments are not required to comply with the timeshare and camp resort rules, nor do they enforce them. Therefore, no fiscal impact to local government is anticipated.

small businesses:

The proposed amendments are intended to make it easier for developers (both small and large) to comply. Feedback from the industry indicates that the rules currently in place are over burdensome and that developers are experiencing costs in order to comply. These costs would include duplication of property reports so that they may be provided to every prospective purchaser at the outset of a direct sales presentation, even though many of the prospective purchasers will not choose to enter into a contract. By more finely tuning these requirements, it is anticipated that developers will see meaningful savings.

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

The proposed amendments will affect developers. Where no other persons will be affected, no fiscal impact is anticipated to persons other than developers is anticipated. Fiscal impact to developers is analyzed above with regards to small businesses.

Compliance costs for affected persons:

As discussed above under "small businesses", these rule amendments are intended to make compliance with existing provisions less costly. Therefore, it is anticipated that developers may realize a cost savings. No new costs or compliance burdens are being imposed.

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

As indicated in the rule summary, this filing reworks and clarifies existing requirements, resulting in a potential cost savings to developers. No other fiscal impact to businesses is anticipated.

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
HEBER M WELLS BLDG
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:

05/31/2012

This rule may become effective on:

06/07/2012

Authorized by:

Jonathan Stewart, Director

RULE TEXT

R162. Commerce, Real Estate.

R162-57a. Timeshare and Camp Resort Rules.

R162-57a-5. Project Registration.

(1) Registration required.

(a) A person may not engage in the marketing of interests unless:

(i) the project is properly registered with the division pursuant to Section 57-19 et seq. and these rules; and

(ii) each individual who will engage in marketing is registered as salesperson pursuant to Section 57-19 et seq. and these rules.

(b)(i) A project is not considered registered until the developer seeking registration obtains from the division:

(A) a complete property report, approved by the division; and

(B) an order of registration.

(ii) A salesperson is not considered registered until the individual receives a registration from the division.

(c) Absent the issuance of a property report or registration, acceptance by the division of a registration fee does not authorize a person to engage in the marketing of interests.

(2) Registration procedure. A developer shall submit all information required under Subsection (3) to the division:

(a) through the ATR; or

(b) if the developer obtains advance permission from the division, directly to the division.

(3) Required Information. A developer shall submit to the division:

(a) property report pursuant to Section 57-19-11 and Subsection R162-57a-11;

(b) as to each officer, partner, director, and owner of the developer:

(i) as applicable, documentation of any disciplinary or adverse licensing action taken against a professional license held by the individual in any jurisdiction;

(ii)(A) a statement of the type and extent of any financial interest the individual has in the project; and

(B) an explanation of any options the individual may exercise to acquire additional financial interest in the project;

(iii) as applicable, court records from any criminal proceeding taken against the individual in any jurisdiction, regardless of whether the proceeding was resolved by:

(A) conviction;

(B) plea in abeyance;

(C) diversion agreement;

(D) sentence of confinement; or

(E) dismissal; and

(iv) as applicable, documentation of any bankruptcy filing by:

(A) the individual; or

(B) an entity in which the individual has held:

(I) an ownership interest; or

(II) a position as a manager, officer, or director;

(c) evidence that the developer is registered in good standing with the Utah Division of Corporations;

(d) corporate resolution naming a resident agent to act on behalf of the developer;

(e) copy of the current articles of incorporation or other instrument creating the developer entity;

(f) copy of the current bylaws of the developer entity;

(g)(i) states or jurisdictions in which the developer has filed an application for registration or similar document;

(ii) copy of the property report or other disclosure document required to be given to purchasers by any jurisdiction in which the project is registered or the developer is otherwise authorized to market interests;

(iii) full documentation of any adverse order, judgment, or decree entered in connection with the project by any regulatory authority in any jurisdiction;

(h) name of any salesperson who will market the project;

(i) name of the individual who will be responsible for directly supervising the salesperson(s) marketing the project;

(j) legal description of the property upon which the project is located;

(k) statement, generated or updated within the 30-day period preceding the date of application, of the condition of the title to the property upon which the project is located, including encumbrances;

(l)(i) copy of any instrument by which the developer acquired interest in the project; or

(ii) if the developer does not hold fee title to the property, evidence that the developer is legally entitled to use the property, as follows:

(A) if the property is situated within Utah:

(I) a title opinion from a title insurer licensed in Utah; or

(II) an opinion letter from an independent, third party attorney actively licensed in Utah;

(B) if the property is situated outside of Utah, an opinion letter from an independent, third party attorney who is actively licensed to practice in the jurisdiction where the property is situated; and

(C) if the property is located in a jurisdiction such as a foreign country where property title opinions are issued by parties other than title companies and attorneys, other evidence of title as specified and approved by the director;

(m) copy of any instrument creating a lien, easement, restriction, or other encumbrance affecting the project, including any recording data, but redacted as to the consideration paid upon acquisition of the project;

(n) statement of the zoning and other governmental regulations affecting the use of the project;

(o) existing and proposed taxes or special assessments that affect the project;

(p)(i) copies of the instruments that will be delivered to a purchaser to evidence the purchaser's interest in the project; and

(ii) copies of the contracts and other agreements that a purchaser will be required to agree to or sign;

(q) topograhic map and accompanying statement describing the general topography and physical characteristics of the project, including:

(i) terrain;

(ii) soil conditions;

(iii) flood control; and

(iv) climate;

(r) copy of any:

(i) recorded declaration of condominium;

(ii) recorded covenants, conditions, and restrictions (CCRs); and

(iii) instrument governing the project and incorporating all covenants of the grantor or lessor;

(s) copy of any plan to create an association for project owners;

(t) narrative description of the promotional plan for the disposition of the project;

(u) statement disclosing any inducement that will be offered in connection with the marketing of the project;

(v) map showing:

(i) the location of the interests and other improvements on the property;

(ii) the relation of the project to existing streets, roads, and other off-site improvements; and

(iii) the relation of the project to factors that might negatively impact the quiet enjoyment of an interest;

(w)(i) statement of improvements and amenities to be installed that have not been completed;

(ii) schedule for completion;

(iii) evidence that the developer has obtained all necessary permits; and

(iv) if the city or county in which the property is located does not require means of assurance that all improvements and amenities referred to in the application will be completed, copies of:

(A) escrow or trust agreements;

(B) performance bonds; or

(C) other documentation to evidence that adequate financing is available and arrangements have been made for the installation of all streets, sewers, electricity, gas, water, telephone, drainage, and other improvements;

(x)(i) provisions for maintenance to both existing and planned improvements and amenities; and

(ii) estimated cost of such maintenance to purchasers;

(y) description of any corrective work that must be performed on or relating to the project before particular interests are suitable for use;

(z) completed application as required by the division; and

(aa) a nonrefundable registration fee.

(4) The director may waive production of an item required pursuant to Subsection (3) if the developer shows that the item is not necessary to fulfill the purposes of Section 56-19 et seq.

(5) Consolidation.

(a) An application for consolidation shall be prepared and submitted in the same format as an application for initial registration.

(b) Where there is no change in the information submitted by the developer for the initial registration, the documents required by Subsection (3) may be incorporated by reference to documents on file with the division.

(c) An incomplete application for consolidation shall be treated as provided in Subsection (6).

(d) New inventory added to a project through consolidation is subject to inspection by the division.

(6) Notice of defect.

(a) If an application is incomplete, or otherwise fails to comply with Section 57-19 et seq. or these rules, the director shall send a notice of defect to the developer or the developer's legal representative specifying:

(i) what additional information is required to cure the defect; and

(ii) the deadline by which the division must receive the additional information.

(b) After receipt of a notice of defect, the developer may not offer units to the public:

(i) until the defect is cured and a registration obtained; or

(ii) without obtaining a temporary permit pursuant to Section 57-19-6(3) and Subsection (8).

(c)(i) If the additional information is not received by the division by the deadline specified in the notice of defect, the director may deny the registration.

(ii) An order of denial may be appealed pursuant to Section 57-19-17.

(7) Standards for approval.

(a) The director may not approve an application for registration of a project unless:

(i) the documents submitted pursuant to Subsection (3) meet the requirements of Section 57-19 et seq. and these rules; and

(ii) the developer demonstrates the ability to convey or cause to be conveyed the interests offered for disposition.

(b) The division may not issue a project registration to a developer that has an officer, partner, director, or owner who has:

(i) been prosecuted for a felony that resulted in a:

(A) conviction within the five-year period preceding the date of application;

(B) plea agreement within the five-year period preceding the date of application; or

(C) jail or prison release date falling within the five-year period preceding the date of application; or

(ii) been prosecuted for a misdemeanor involving fraud, misrepresentation, theft, or dishonesty that resulted in a:

(A) conviction within the three-year period preceding the date of application; or

(B) jail or prison release date falling within the three-year period preceding the date of application.

(c) If the director determines that a registration application and supporting documentation meet the criteria for registration, the division shall issue:

(i) an order of registration designating the form of the property report that the developer is required to provide to a prospective purchaser pursuant to Section 57-19-11;

(ii) a property report cover sheet, which the developer shall attach to the property report as its first page; and

(iii) a receipt for property report, which the developer shall attach to the property report as its last page.

(8) Temporary permit.

(a) To apply for a temporary permit, a person shall:

(i) make application by submitting a written request to the director;

(ii) comply with Section 57-19-6(3); and

(iii) pay all fees required for registration.

(b) A temporary permit issued by the director is valid for a period of 30 days from the date of issue.

(c) A temporary permit may not be renewed.

(9) Notification of changes.

(a) A developer whose project is registered under Section 57-19 et seq. shall report to the division within 10 business days any change in:

(i) the developer's contact information;

(ii) the disclosures required under Section 57-19-11;

(iii) the information provided under this Subsection (3), including changes in salespersons employed or contracted to market interests in the project;

(iv)(A) the bankruptcy of an entity controlled or owned by the developer that engages in the marketing of interests; and

(B) if the developer is an individual, the filing of a personal bankruptcy;

(v) the suspension, revocation, surrender, cancellation, or denial or a professional license or professional registration issued to the developer, whether the license or registration is issued by this state or another jurisdiction;

(vi) the entry of a cease and desist order, a temporary or permanent injunction, or a regulatory action:

(A) against the developer by a court or a government agency; and

(B) based on:

(I) conduct or a practice involving the marketing of interests; or

(II) conduct involving fraud, misrepresentation, or deceit; and

(vii) a finding of fraud, misrepresentation, or deceit entered against the developer in a judicial or administrative proceeding instituted by a purchaser [against the developer] and arising out of or relating to:

(A) the advertising or sale of an interest;

(B) disclosures required under Section 57-19-11; or

(C) rescission rights[;

(D) fraud; or

(E) misrepresentation of interests represented by the registration].

(b) If a deadline for notification falls on a day when the division is closed for business, the deadline shall be extended to the next business day.

(10) Amendment and supplement to initial registration.

(a) To submit an amendment to a registration, a developer shall:

(i) complete an amendment filing through the ATR; or

(ii) obtain prior permission from the division to submit the information by mail.

(b) To submit a supplement to a registration, a developer shall:

(i) complete a courtesy filing through the ATR; or

(ii) obtain prior permission from the division to submit the information by mail.

(c) Pursuant to Section 57-19-8(4), the certification of a class in a class-action lawsuit against a developer on the basis of the developer's advertising, selling, or managing a project or interest is considered to have a material adverse effect on a project and, therefore, must be disclosed through amendment.

 

R162-57a-11. Disclosure Required.

(1) The disclosures required by Section 57-19-11 and submitted to the division as part of the application for project registration shall be:

(a)(i) reproduced on good quality white paper 8-1/2 by 11 inches in size;

(ii) typed in a font no smaller than 10-point type, except that financial statements or other statistical or tabular matter may be set in type as small as 8-point type; and

(iii) organized into reasonably short paragraphs or sections with appropriate captions or headings to identify each paragraph or section; or

(b) if acceptable to the director, approved by another state.

(2)(a) Upon approving the developer's disclosures, the division shall supply to the developer:

(i) a cover sheet, which the developer shall use as the first page of the property report; and

(ii) a receipt for property report, which the developer shall use as the last page of property report.

(b) (i) The developer shall provide a copy of the complete property report, reproduced in a manner that allows all text to remain visible and legible, not obscured by shading or watermarks, to each prospective purchaser prior to requiring the prospective purchaser to sign a contract for purchase of an interest.

(ii) The developer shall provide a notice of the purchaser's right to cancel described in Section 57-19-12, reproduced in a manner that allows all text to remain visible and legible, not obscured by shading or watermarks, to each prospective purchaser:

[(i)](A) at the beginning of a direct sales presentation; or

[(ii)](B) if the prospective purchaser does not attend a direct sales presentation, at the same time the developer obtains the prospective purchaser's personal information.

 

R162-57a-13. Unprofessional Conduct.

(1) Developer.

(a) Affirmative duties. A developer or an individual designated by the developer shall:

(i) actively supervise project salesperson(s) to ensure compliance with Section 57-19 et seq. and these rules;

(ii) provide the complete property report to each prospective purchaser;

(iii) obtain a signed receipt for property report from a prospective purchaser prior to:

(A) executing a purchase agreement; or

(B) receiving any item of value toward the purchase of an interest; and

(iv) (A) clearly inform a purchaser of the purchaser's right to rescind the agreement if, during the rescission period mandated by Section 57-19-12, the purchaser [contacts:]expresses a desire to terminate a contract or agreement entered into by the purchaser; and

(B) ensure compliance with this Subsection (iv)(A) by:

(I) all subsidiaries of the developer;

(II) all persons affiliated with the developer; and

(III) all persons affiliated with a subsidiary of the developer

[ (A) the developer;

(B) a subsidiary of the developer; or

(C) a person affiliated with the developer or a subsidiary of the developer].

(b) Prohibited conduct. A developer is subject to discipline if the developer or an affiliated person:

(i) makes a misrepresentation or material omission in a document submitted to the division; or

(ii) fails to comply with an order of the division.

(2) Salesperson. A salesperson shall comply with:

(a) Section 57-19 et seq.;

(b) these rules; and

(c) this Subsection (1)(a)(ii)-(iv).

 

KEY: timeshare, camp resort, registration, professional conduct

Date of Enactment or Last Substantive Amendment: [November 8, 2010]2012

Authorizing, and Implemented or Interpreted Law: 57-19-3; 57-19-5 through 57-19-26

 

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