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Sponsor Statement for HB 470
Common Interest Ownership: Offering Statements

An Act relating to public offering statements required under the Uniform Common Interest Ownership: Offering Statements Act; and providing for an effective date.

Senate Committee Subsitute for Committee Substitute for House Bill 470 (Rules) puts into statute what is currently the practice in regards to public offering statements (POS) for what are commonly referred to as condominium developments.

AS 34.08.580 currently provides that a purchaser, prior to conveyance of title, may cancel a purchase agreement within 15 days of receipt of a public offering statement. Such cancellation is made without penalty and each payment made by the purchaser before cancellation must be refunded promptly to the purchasers. The problem occurs because a POS with a final legal description cannot be issued until the unit is built and surveyed. This technical requirement of the law effectively inhibits the "pre-sale" of smaller projects. This is especially difficult when a custom unit is being built as the buyer can cancel the agreement without penalty 15 days after that unit is built and surveyed. What happens is that high-end units, e.g., a $500,000 custom condominium, cannot get financing due to this recision provision.

SCS CSHB 470 (RULES) indicates that a preliminary version of the POS that reasonably reflects the contents of the POS that is subsequently delivered to a purchaser may be used. It gives the customer 15 days after the receipt of the preliminary POS to cancel a contract.

Additionally SCS CSHB 470 (RULES) changes the current penalty for noncompliance with the POS statutes from a flat ten percent no matter what the "mistake" might be to "up to" ten percent. This way the error may be judged on its merit and penalties may be charged accordingly.

This legislation is needed in order to keep the business of building custom units available as an option for a purchaser.

ED 03:05/01/02

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