The HUD bombshell.
Lawsuits, real estate complaints and bad publicity aside, ex-sales staff employees at The Maumelle Co. say the real bombshell for many of the approximately 2,100 lots sold could come in the form of a little noticed disclosure notice on the back of every contract.
That clause potentially could invalidate all the contracts.
On the bottom fourth of the back page is a "special condition" clause which says that, in essence, The Maumelle Co. and lot buyers together will build a house within two years.
Apparently The Maumelle Co. included the clause on lots sold after April 1989 as a means of escaping regulation under the Interstate Land Sales Full Disclosure Act of 1969. (Because The Maumelle Co. used mail solicitations it falls under this act.)
The Maumelle Co. is contending to the federal Housing and Urban Development agency which oversees the Interstate Land Sales act that the special condition clause only gives The Maumelle Co. lot buyers the option to build a house within two years.
But, Lynn Herbert, chief of enforcement for HUD in Washington, D.C., says since the Interstate Land Sales act was first passed, the case law is very clear that to gain an exemption "there must be a concrete, real obligation on the part of the seller, unconditional, to build."
Herbert says all contracts for the past two years could be rescinded if HUD decides The Maumelle Co. has violated the act. This would include full refunds.
If regulated by the act, The Maumelle Co. has to provide a booklet to all buyers before purchasing that outlines various pitfalls of purchasing undeveloped land. The act also allows buyers up to seven days to walk away from a contract.
Because of complaints from lot buyers, HUD is currently investigating The Maumelle Co.
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|Title Annotation:||Housing and Urban Development agency's disclosure notice on back of every contract on lots sold|
|Date:||Apr 22, 1991|
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