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Maumelle consumer protection.

Maumelle Consumer Protection

While the first complaints with the Arkansas Real Estate Commission have been resolved against The Maumelle Co. (see main article), questions about whether the developer offers adequate protection to consumers are being raised by competitors, people formerly associated with The Maumelle Co. and other real estate observers.

The project's critics say lot buyers should be covered by consumer protection offered by the U.S. Department of Housing and Urban Development. But John W. (Jay) DeHaven, president/CEO of the Maumelle Co., says his project operates under a HUD exemption from government-required disclosure.

"Everything is disclosed. Every law is abided by," he says. Even without following HUD rules, "I don't know of anyone in the country who makes it any tougher on themselves or cleaner for our customers than we do."

Instead of receiving the right to rescind a contract within seven days of signing it, as provided by HUD, DeHaven says if lot buyers are reasonable and have grounds, he would let them out of their contracts.

HUD requires new developments, which are not exempt, to give each lotbuyer a lengthy booklet cautioning them about aspects of the deal they are making and noting prospects and timetables for the installation of utilities.

"The basic intent is to provide each purchaser with enough information before they become obligated in a real estate transaction to make an informed decision on whether or not the purchase will meet their needs and expectations," says Roger Henderson, director of the Interstate Land Sales Registration Division at HUD in Washington.

DeHaven says his lot buyers are protected by a Maumelle city ordinance requiring him to place sufficient funds into an escrow account to pay for roads, water, electricity, gas and telephone service to their subdivision.

If, within 12 months of selling a lot, The Maumelle Co. fails to put the money into escrow or fails to establish an improvement district to install roads and utilities, the city ordinance states that lot buyers shall get their money back.

DeHaven notes and Henderson's office confirms there have not been any complaints filed with HUD by lot buyers against The Maumelle Co.

The HUD exemption used by The Maumelle Co. states that the law does not apply to the sale of land under a contract obligating the seller to build a building on the property within two years.

DeHaven notes that buyers of his lots sign a document titled a "real estate sale and construction contract," which has provisions for The Maumelle Co. to build a home on each of the lots for listed costs plus 10 percent of the total cost.

He says his company fulfills its responsibilities through its shelter division. Although it does not build homes, the division provides extensive assistance to buyers seeking to have homes built on their lots.

If some people choose not to build on their lots within two years, it is their responsibility and not that of The Maumelle Co. DeHaven says he cannot force buyers to build a home.

As long as The Maumelle Co. signs a contract obligating itself to build a home on the property within two years, it has met the federal requirements, Henderson says. If the contract is breached, it becomes a matter of contract law between the two parties, he says.
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Author:Kern, David F.
Publication:Arkansas Business
Date:May 7, 1990
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