Southwest Sunsites, Inc.

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IN THE MATTER OF SOUTHWEST SUNSITES, INC., ET AL.

CONSENT ORDER IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9134. Complaint April 29, 1980-Decision, Aug, 1985 This consent order requires Porter Realty, Inc. and Irvin Porter, among other things to cease, in connection with the advertising or sale of land or the inducement of payments for land, representing that the purchase of any land is a sound financial investment; involves little monetary risk; is a way to achieve financial security; and will result in economic benefit to the purchaser stemming from an increase in the value of the land as a result of mineral rights, exploration, profitable resale or as a hedge against inflation. Respondents are prohibited from representing that any land is currently usable as a homesite, farm or ranch, unless that land is immediately usable for the cited purpose without any substantial improvement or development by the purchasers; and from misrepresenting in any manner the cost of obtaining or availability of electric power, telephone service, potable water sewage disposal, or any utility; and any interest in land by respondents or others. Respondents are further required to prepare a "Fact Sheet" containing specified information and to distribute a copy to all purchasers in a prescribed manner. Advertisements, promotional material and sales presentations must include statements warning that investment is risky and that prospective buyers should consult a qualified professional before purchasing; and that substantial expenditures may be necessary to make lots suitable for use. Contracts must contain a seven-day right-to-cancel provision and a disclosure that refunds will be made within 30 days after the seller receives a cancellation notice. Additionally, respondents are required to provide consumers with cancellation forms; honor all valid cancellation requests; and make refunds in a timely manner. The order further requires that sales representatives receive a copy of the order; that respondents institute a surveilance program designed to reveal those who fail to comply with the provisions of the order and discontinue dealing with any person who engages in any prohibited act or practice.

Appearances For the Commission: Gary D. Kennedy. For the respondents: AninsZee R. Ferdie, Ferdie Gouz Coral Gables, Fla.

DECISION AND ORDER The Commission having heretofore issued its complaint charging the respondents named in the caption hereof with violation of Section 5 ofthe Federal Trade Commission Act, as amended, and the respond- . Complaint previously published at 105 FT-C 7 (1985) Decision and Order 106 F. ents having been served with a copy ofthat complaint, together with a notice of contemplated relief; and The respondents, their attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order an admission by Porter Realty, Inc. and Irvin Porter of all thejurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Secretary ofthe Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3.25(c) of its Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 3.25(1) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

(1) Respondent Porter Realty, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Florida, with its offce and principal place of business located at 717 Ponce de Leon Boulevard, in the city of Coral Gables, State of Florida. (2) Respondent Irvin Porter is an offcer or former offcer of respondent, Porter Realty, Inc. During all relevant times, respondent Porter has formulated, directed, and controlled the policies, acts, and practices of said corporation, and his address is the same as that of said corporation.

(3) The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER As used in this order, the following definitions shall apply: (A) Respondents means respondent Porter Realty, Inc., its successors and assigns, and its offcers, directors, representatives and employees, or respondent Irvin Porter, or both, and any corporation subsidiary, division, agent, or other device through which either corporate or individual respondent acts.

(B) Seller means one who owns and, directly or indirectly, sells offers to sell, or advertises for sale any land. SOUTHWEST SUNSITES, INC., ET AL.

Decision and Order seller in sellng, offering to sell, or advertising for sale any land, but shall not include an attorney at law whose representation of another person consists solely of rendering legal services. (D) Land, property, or lot means any real property unimproved by a commercial or residential building sold, offered for sale, or advertised for sale by respondents, but shall not include any real property sold or offered for sale to a purchaser pursuant to a single contract for a sum in excess of $50 000.

(E) Purchaser or buyer means any individual who is a potential or actual vendee of the land offered for sale or sold by respondents. (F) Commission means the Federal Trade Commission and/or its duly authorized representatives and employees. (G) Homesite means any lot in which (1) potable water is available at a reasonable cost, (2) the lot is suitable for a septic tank or there is reasonable assurance that the lot can be served by a central sewage system, (3) the lot is legally accessible, and (4) the lot is free from periodic flooding.

It is ordered That respondent Porter Realty, Inc., a corporation, its successors and assigns, and its officers, representatives, and employees, and Irvin Porter, individually and as an offcer or former offcer of said corporation, directly or through any corporation, subsidiary. division, agent, or other device, in connection with the advertising, marketing, offering for sale, sale, or inducement of payments for land, in or affecting commerce, as commerce is defined in the Federal Trade Commission Act, as amended, shall forthwith cease and desist from:

A. Representing, directly or by implication, through the use of any means, that:

1. The purchase of any land has been, is, or wil be a good, profitable short-term, safe, or sound financial investment; 2. There has been, is, or wil be litte or no financial risk involved in the purchase of any land;

3. The resale of any land is not or will not be diffcult, or such land can be or has been resold within a certain time; 4. The purchase of any land is a way to achieve financial security or self-suffciency, to deal with inflation, or to make money; 5. The value of, or demand for, any land has increased, is increasing, or will increase;

6. Purchasing any interest in land wil result in any economic benefit to the purchaser, including but not limited to a benefit result- Decision and Order 106 F. ing from an increase in the value of the land from its use or development for any purpose, or as a result of mineral rights, exploration, or extraction; the land's profitable resale; the provision of a hedge against inflation; or the receipt of income or reduction of expenses from growing any crop, raising any animal, or any other source; 7. Any land is suitable for use as a homesite, farm, or ranch, for personal or commercial purposes;

unless such representation is not misleading and unless, at the time such representation is made, respondents possess and rely upon competent and reliable evidence which substantiates the representation, including, at a minimum, (a) data suffcient to demonstrate that the typical owner of such land is likely to achieve the results represented, and (b) where the representation predicts or projects future occurrences, evidence that would generally be accepted by the community of experts qualified to make such representations as providing a reasonable basis for the projection.

B. Failing to maintain evidence in support of and upon which respondents rely in making any representation about the value, suitability, or use of land, including evidence substantiating the representations described in Paragraph LA., such evidence to be retained for three years from the date of respondents' last use of such representation and to be furnished to the Commission upon request. C. Representing, directly or by implication, through the use of any means, that any land is currently usable as a homesite, farm, or ranch, unless such land is immediately usable for such purpose without any substantial improvement or development by the purchaser. D. Misrepresenting in any manner:

1. The cost of obtaining or availability of electric power, telephone service, potable water, sewage disposal, or any utility; 2. The past, present, planned, proposed, or potential purchase, use or development of any interest in land by respondents or any other party;

3. The extent, location, value, nature, or significance of any actual or potential mineral right or resource or any activity related thereto. It is further ordered That respondents, in connection with the advertising, marketing, offering for sale, or sale of land in or affecting commerce, as commerce is defined in the Federal Trade Commission Act, as amended, shall:

SOUTHWEST SUNSITES, INC., ET AL.

Decision and Order tion as is set forth or referred to in Attachment A to this order (incorporated herein by reference), and distribute to all purchasers a copy of the Fact Sheet in the following manner: 1. If respondents invite the purchaser by mail to attend a meeting sponsored by respondents, respondents shall include the Fact Sheet with the invitation;

2. If respondents arrange to meet with the purchaser in his or her home or other location, respondents shall mail the Fact Sheet to the purchaser, allowing suffcient time for the Fact Sheet to arrive at least two days prior to the meeting;

3. If the initial contact with the purchaser is in person (for example, at a booth located in a public place), respondents shall, after identifying briefly the purpose of the contact, give the Fact Sheet to the purchaser, request that he or she read it, and provide ample uninterrupted time for it to be read completely before continuing with any sales presentation;

4. If the initial contact is by telephone or the sale is to be completed entirely through the mail, the Fact Sheet shall accompany the initial mailing to the purchaser.

B. Refrain from misrepresenting any information in the Fact Sheet. C. Refrain from making any representation, directly or by implication, through the use of any means, about: 1. The present, planned, proposed, or potential development, improvement, or facilities of the land or ofthe subdivision or project in which the land is located where such representation differs in any material respect from the information contained in the Fact Sheet or the Property Report required by the Interstate Land Sales Full Disclosure Act and related regulations, 15 U. C. 1701 to 1720 (1982); 24 R.1700. et seq. (1983);

2. The respondents' or purchasers' rights or obligations where such representation differs in any material respect from the parties' rights or obligations as stated in the contract, the Fact Sheet, or the Property Report required by the Interstate Land Sales Full Disclosure Act and related regulations.

D. Where respondents are sellers, honor any purchaser s request to rescind the contract and recover all payments thereunder at the purchaser s option, if respondents fail to distribute a copy of the Fact Sheet to such purchaser as required by Paragraph ILA., provided that the purchaser makes such request within thirty days after receiving a copy of the Fact Sheet.

Decision and Order 106 F. It is further ordered That where respondents are sellers, in connection with the advertising, marketing, offering for sale, or sale ofland in or affecting commerce as commerce is defined in the Federal Trade Commission Act, as amended, they shall:

A. Disclose clearly and prominently in every written promotional material, magazine or newspaper advertisement greater than onequarter page, and oral sales presentation the following statements: 1. THE FUTURE VALUE OF LAND IS UNCERTAIN. THESE LOTS ARE NOT BEING SOLD AS A FINANCIAL INVESTMENT. YOU SHOULD NOT COUNT ON YOUR LOT RISING IN VALUE OR YOUR BEING ABLE TO RESELL IT. DISCUSS ANY POSSIBLE PURCHASE WITH A QUALIFIED PROFESSIONAL.

2. THESE LOTS MAY BE SUITABLE FOR USE ONLY WITH SUBSTANTIAL EXPENDITURES FOR THE EXTENSION OF UTILITIES, WATER, AND OTHER NECESSITIES. THESE EX- PENDITURES VARY DEPENDING ON THE LOCATION OF THE LOT AND COULD BE SO GREAT AS TO MAKE USE OF THE LAND IMPRACTICAL.

B. Disclose clearly and prominently in every radio advertisement television advertisement, and magazine or newspaper advertisement of one-quarter page or less the following statement: REMEMBER-BUYING LAND MAY BE RISKY. CONSULT A QUALIFIED PROFESSIONAL BEFORE BUYING.

C. Include clearly and prominently, immediately preceding the space provided for the purchaser s signature in each contract for the sale of land, the following statement in l2-point boldface type: SEVEN DAY RIGHT TO CANCEL YOU HAVE THE RIGHT TO CANCEL YOUR CONTRACT, WITH- OUT ANY PENALTY OR OBLIGATION, AT ANY TIME UNTIL MIDNIGHT OF THE SEVENTH DAY AFTER YOU SIGN THIS CONTRACT. SEE THE A TT ACHED "RIGHT OF CANCELLATION" FOR AN EXPLANATION OF THIS RIGHT.

IF YOU CHOOSE TO CANCEL WITHIN THIS TIME, ANY PAY- MENT YOU MADE UNDER THIS CONTRACT WILL BE REFUND- ED AND ANY DOCUMENT YOU SIGNED WILL BE CANCELLED AND RETURNED WITHIN THIRTY DAYS AFTER THE SELLER RECEIVES YOUR CANCELLATION NOTICE.

, SOUTHWEST SUNSITRS, INC., ET AL.

Decision and Order TO RECONSIDER YOU DECISION AND CANCEL THIS CON- TRACT WITH FULL REFUND, WE RECOMMEND THAT BEFORE SIGNING, YOU CONSIDER YOUR NEEDS CAREFULLY AND HAVE THIS CONTRACT AND THE ATTACHED NOTICE TO BUYERS REVIEWED BY A QUALIFIED PROFESSIONAL. D. Furnish each purchaser, at or before the time the purchaser signs a contract for the sale ofland, with two copies of a form, containing only such information as is set forth or referred to in Attachment B to this order (incorporated herein by reference), captioned in 12point boldface type RIGHT OF CANCELLATION " and with all other writing in lO-point boldface type.

Provided, however That if respondents fail to distribute the RIGHT OF CANCELLATION" forms as required by this paragraph the period during which the purchaser may cancel the contract shall be extended until seven days after the purchaser receives said RIGHT OF CANCELLATION.

Provided further That during the seven-day cancellation period after a purchaser s signing of a land purchase contract, respondents shall not initiate any contact or communication, personal, telephonic or otherwise, with such purchaser, but if respondents initiate any such contact, the period during which the purchaser may cancel the contract shall be extended until thirty days after the date of purchase. E. Honor any signed and timely exercise ofa "RIGHT OF CANCEL- LATION" (or its functional equivalent) by the purchaser, and within thirty business days after the receipt of such notice of cancellation (a) refund all payments made under the contract, and (b) cancel and return any contract or other legal document executed by the purchaser.

F. Refrain from misrepresenting, soliciting, or obtaining any purchaser s assent to or otherwise imposing any condition, waiver, or limitation upon the right of a purchaser to cancel a transaction or receive a refund under any provision ofthis order or by any applicable statute or regulation.

It is further ordered That respondents shall, within thirty days of a request by the Commission, Southwest Sunsites, Inc., Green Valley Acres, Inc., Green Valley Acres, Inc. II, Sydney Gross, or Edwin Kritzler, furnish to such requester a list of the names and last known addresses for each purchaser of land in the subdivisions known as Southwest Sunsites, Green Valley Acres, and Green Valley Acres II who bought such land through respondents, insofar as this inform a- Decision and Order 106 F. tion appears in fies or records within respondents' custody and control.

Provided further That whenever it appears that an address supplied by respondents is not a purchaser s correct present address and whenever a subsequent request for such purchaser s present address is made by the Commission, Southwest Sunsites, Inc., Green Valley Acres, Inc., Green Valley Acres, Inc. II, Sydney Gross, or Edwin Kritzler, respondents shall, within ten days of such request, make all reasonable efforts, including contacting credit bureaus, telephone and utility companies, county land records, and purchasers' relatives or representatives whose addresses are in respondents' fies, to obtain the correct present address of such purchaser and furnish it to the requester.

It is further ordered That respondents shall: A. Forthwith deliver by certified mail or in person, a copy of this order to all present and future sales representatives and other employees, independent brokers, advertising agencies, and others who sell or promote the sale of land or who otherwise have contact with the public on behalf of respondents in connection with the sale ofland. B. Provide each person described in Paragraph V.A. with a form to be returned to respondents, clearly stating that person s intention to conform his or her sales practices to the requirements ofthis order. C. Inform each person described in Paragraph V.A. that respondents shall not use the services of any such person, unless such person agrees to and does fie notice with respondents that he or she wil conform his or her practices to the requirements of this order. D. In the event such person wil not agree to so fie notice with respondents and to conform his or her practices to the requirements of this order, respondents shall not use the services of such person. E. Inform the persons described in Paragraph V.A. that respondents are obligated by this order to discontinue dealing with those persons who engage on their own in the acts or practices prohibited by this order, or who fail to adhere to the affrmative requirements of this order.

F. Institute a reasonable program of continuing surveillance adequate to reveal whether the practices of each person described in Paragraph V.A. conform to the requirements of this order, and promptly investigate and make good faith efforts to resolve any complaints about any such person received by respondents, and maintain Decision and Order records of any such complaint, investigation, and disposition of the complaint for ten years from the date of the complaint, such records to be furnished to the Commission upon request. G. Discontinue dealing with any person described in Paragraph A. who more than once engages on his or her own in the acts or practices prohibited by this order.

H. Forthwith deliver a copy of this order to each of respondents subsidiaries.

1. Notify the Commission at least thirty days prior to any proposed change in the corporate respondent, such as dissolution, assignment reorganization, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation that may affect compliance obligations arising out of this order.

J. Within sixty days after service upon it ofthis order and annually for three years thereafter, fie with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

Commissioner Azcuenaga did not participate. ATTACHMENT A FACT SHEET FOR BUYERS FACT SHEET CONCERNING, (insert name of subdivision) NAMES OF SELLER/AGENT, (insert name of seller and agent) EFFECTIVE DATE OF NOTICK (insert date of notice) IMPORTANT YOU ARE ADVISED THAT THE FUTURE VALUE OF LAND IS UNCERTAIN. THESE LOTS ARE NOT BEING SOLD AS A FINANCIAL INVESTMENT. YOU SHOULD NOT COUNT ON YOUR LOT RISING IN VALUE OR YOUR BEING ABLE TO RESELL IT. IF YOU OFFER YOUR LOT FOR SALE, YOU MAY FACE THE COMPETITION OF THE SELLER'S OWN SALES PROGRAM, WHICH MAY IN. VOLVE AN EXTENSIVE SALES CAMPAIGN. REAL ESTATE BROKERS ALSO MAY NOT BE INTERESTED IN SELLING YOUR LOT OR LISTING IT FOR SALE. YOU ARE ALSO ADVISED THAT THESE LOTS MAY BE SUITABLE FOR USE ONLY WITH SUBSTANTIAL EXPENDITURES FOR THE EXTENSION OF UTILI. TIES, WATER, AND OTHER NECESSITIES. THESE EXPENDITURES VARY DE. PENDING ON THE LOCATION OF THE LOT AND COULD BE SO GREAT AS TO MAKE USE OF THE LAND IMPRACTICAL.

AS OF THE DATE OF THIS FACT SHEET, THE SELLER HAS SOLD_ division).(insert number) LOTS IN (insert number) LOTS REMAIN UNSOLD (insertAND AnameV AILABLEof sub- FOR SALE.

(In connection with any land for which federal property reports are not provided as required by the Interstate Land Sales Full Disclosure Act and related regulations, 15 Decision and Order 106 F. C. 1701 10 1720 (1982), 24 C. R. 1700. l el seq. (1983), provide the following information:) THIS FACT SHEET PROVIDES IMPORTANT INFORMATION ABOUT THE VALUE OF THESE LOTS AND THE AVAILABILITY AND ESTIMATED COSTS TO YOU OF UTILITIES, WATER, AND OTHER NECESSITIES. WATER (provide the following information regarding water services: (a) the method of water service to be used; (b) if individual wells are to be used: whether the seller is responsible for installing such wells; whether evidence exists that water can be found under every lot offered for sale; the estimated depth at which water can be found in the applicable area; the estimated cost of driving a well for household purposes and for agricultural purposes if agricultural use is feasible; and whether and under what conditions a refund or exchange will be offered in the event a productive well cannot be installed; (c) if water is to be provided by a central system: who is responsible for constructing such a system; the estimated amount of any construction costs or any connection or use fees to be paid by the purchaser, including the estimated cost of installing water mains to either the most remote lot in the subdivision or the lot the prospective purchaser is considering purchasing; the estimated service availability date of the water system; and, ifthe seller is responsible for constructing the system, whether a separate account or fund has been established to finance such construction and the extent of construction completed as of the date of the Fact SheeL) SEWER SERVICE (Provide the following information about sewer service: (a) the method of sewage disposal to be used; (b) if sewage disposal is to be by septic tank or other individual system: whether the seller is responsible for installing the system; the estimated cost ofthe system; whether a permit is required for such a system; and whether and under what conditions a refund or exchange will be offered if the purchaser is unable to install a septic tank or other on-site sewage system;

(c) if sewage disposal is to be by a central treatment and collection system: who is responsible for constructing such a system; the estimated amount of any construction costs or any connection or use fees to be paid by the purchaser; the estimated service availability date of the system; and, if the seller is responsible for constructing the system, whether a separate account or fund has been established to finance such construction and the extent of construction completed as of the date of the Fact Sheet. ELECTRIC SERVICE (Provide the following information about electric service: (a) whether primary service lines have been extended in front of, or adjacent to, each lot;

(b) ifnot, the utility company s policy and charges for extension of primary lines, and the estimated cost for extending primary service to either the most remote lot in the subdivision or the specific lot the prospective purchaser is considering purchasing.) TELEPHONE SERVICE (Provide the following information about telephone service: (a) whether primary service lines have been extended in front of, or adjacent to, each lot;

::OUTHWB;::T ::UNtilT1!t), lnc., t;T AL.

Decision and Order (b) if not the utility company policy and charges for extension of primary lines, and the estimated cost for extending primary service to either the most remote lot in the subdivision or the specific lot the prospective purchaser is considering purchasing. IMPORTANT: BEFORE SIGNING ANY DOCUMENT, OBTAIN AND READ THOROUGHLY THE CONTRACT AND THIS FACT SHEET. IT IS DESIRABLE TO HAVE A QUALIFIED PROFESSIONAL EVALUATE THE TERMS OR MERI'' S OF THIS PURCHASE BEFORE YOU SIGN ANYTHING. (In connection with any land for which federal property reports are provided as required by the Interstate Land Sales Full Disclosure Act and related regulations, 15 C. 17OI to 1720 (1982), 24 C. R. 1700.l et seq. (1983), provide the following information:) IMPORTANT: BEFORE SIGNING ANY DOCUMENT, OBTAIN AND READ THOROUGHLY EACH PROPERTY REPORT AND CONTRACT. THE PROPERTY REPORT CONTAINS ADDITIONAL INFORMATION THAT YOU SHOULD KNOW AND UNDERSTAND BEFORE YOU SIGN A CONTRACT TO BUY THIS LAND. IT IS DESIRABLE TO HAVE A QUALIFIED PROFESSIONAL EVALUATE THE TERMS OR MERITS OF THIS PURCHASE BEFORE YOU SIGN ANYTHING. ATTACHMENT B RIGHT OF CANCELLATION (insert date purchaser signed e contract) Date of Transaction (insert lot identification information) Lot Identification YOU HAVE THE RIGHT TO CANCEL YOUR CONTRACT, WITHOUT ANY PENAL- TY OR OBLIGATION, AT ANY TIME UNTIL MIDNIGHT OF THE SEVENTH DAY AFTER YOU SIGN THE CONTRACT. YOU SHOULD USE THIS TIME TO EXAM- INE WITH CARE THIS CONTRACT AND THE FACT SHEET OR PROPERTY RE PORT. WE ALSO RECOMMEND THAT YOU HAVE THIS CONTRACT AND OTHER INFORMATION ABOUT THE PROPERTY REVIEWED BY A QUALIFIED PROFES SIONAL.

NO REPRESENTATIVE OF THE SELLER SHOULD CONTACT YOU IN ANY WAY DURING THIS SEVEN DAYPERIOD. IF, HOWEVER, THE SELLER OR ITS REPRE SENTATIVE CONTACTS YOU DURING THIS SEVEN DAY PERIOD, YOU MAY CANCEL Tile PURCHASE BY NOTIFYING Tile SELLER BY MIDNIGHT OF Tile THIRTIETH DAY AFTER THE DATE OF PURCHASE.

IF YOU CANCEL WITHIN THIS TIME, ANY PAYMENTS YOU MADE UNDER THE CON'I'ACT WILL BE REFUNDED AND ANY DOCUMENT YOU SIGNED WILL BE CANCELLED AND RETURNED WITHIN TIIRTY DAYS AFTER THE SELLER RE- CEIVES YOUR CANCELLATION NOTICE.

TO CANCEL THE TRANSACTfON, MAIL OR DELIVER A SIGNED COPY OF THIS CANCELLATION NOTICE, OR ANY OTHER WRITTEN NOTICE OR TELEGRAM STATING YOU ARE EXERCISING YOUR RIGHT TO CANCEL, TO (insert name of seller), AT (insert address of seller place of business) POSTMARKED (if mailed) FILED FOR TRANSMISSION (if telegraphed) NOT LATER THAN MIDNIGHT OF (insert date not earlier than the seventh day following the date the purchaser signed the contract).

Decision and Order 106 F. I (WE) HEREBY CANCEL THIS TRANSACTION. (EACH BUYER MUST SIGN THIS NOTICE.) (Date) (Buyer s signature) (Buyer s signature) ".1U a'-.LUv.1U , .1HV. .1.1 r1.L.

Complaint