| At no point in the sales process of a condo hotel | | | | would be forced to only sell their property through |
| may the sales agent representing the developer | | | | registered securities brokers and salespersons. Making |
| discuss any aspect of rental income. In fact, not a | | | | the matter even more difficult from a sales and |
| single piece of information provided in connection with | | | | marketing standpoint, the developer would be |
| a condo hotel sale may emphasizes the economic or | | | | prohibited from public solicitation of customers. |
| tax benefits of the rental program. This has proven | | | | Additionally, any misstatements or omissions of |
| to be a point of major frustration for many potential | | | | relevant information can equate to a securities fraud. |
| purchasers. | | | | The irony in all of this is that by forcing developers |
| The laws are very clear. A developer will get into | | | | to avoid security status, the potential buyer is |
| massive trouble with SEC securities laws if he | | | | deprived of rental projections and occupancy rates |
| promotes the "investment" nature of a condo hotel. | | | | needed to help get an understanding for potential |
| And any sales agent who discusses a condo hotel as | | | | cash flow. This makes it infinitely more difficult for |
| an investment will lose their license and will no longer | | | | the buyer to make a fully informed buying decision. It |
| be able to practice real estate. | | | | also tempts aggressive salespeople to provide the |
| In fact, the only statement that a sales agent can | | | | information on the side, which if ever discovered, |
| provide to a prospective purchaser is a generic | | | | would turn the entire real estate transaction into an |
| statement to the effect that "ownership may include | | | | illegal offering of a security and criminal penalties |
| the opportunity to place your condominium in a rental | | | | would follow. |
| arrangement." | | | | Fortunately for the prospective purchaser, there is a |
| If a condo hotel is sold as an investment and the | | | | way to get more information before they commit to |
| developer wants to tout the benefits of the rental | | | | such an important purchase. Many condo hotels will |
| program, then the property must be registered with | | | | refer the more serious buyers to their rental |
| the SEC and every other appropriate securities | | | | management division. The rental management staff |
| regulatory agency in the United States. | | | | can provide potential purchasers with the rental |
| So, why not sell condo hotels as a security and avoid | | | | history of comparable properties. The information |
| the headaches and restrictions that developers and | | | | obtained is often more than enough for the |
| sales agents currently deal with? Most developers | | | | prospective buyer to gain enough understanding of |
| consider securities compliance as being too | | | | where the property might perform from a cash flow |
| expensive, far too time consuming, and poorly suited | | | | stand point. |
| to the practice of selling real estate. Additionally, they | | | | |