Z-0501

AN ACT Relating to the protection of consumers in the sale of lands; amending RCW 58.19.010, 58.19.020, 58.19.030, 58.19.070, 58.19.120, 58.19.130, 58.19.140, 58.19.180, 58.19.190, 58.19.270, 58.19.300, and 58.19.940; adding new sections to chapter 58.19 RCW; and repealing RCW 58.19.040, 58.19.050, 58.19.060, 58.19.080, 58.19.090, 58.19.100, 58.19.110, 58.19.150, 58.19.160, 58.19.170, 58.19.200, 58.19.210, 58.19.220, 58.19.230, 58.19.240, 58.19.250, 58.19.260, 58.19.290, 58.19.900, 58.19.910, and 58.19.930.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 58.19.010 and 1973 1st ex.s. c 12 s 1 are each amended to read as follows:

The legislature finds and declares that the sale and offering for sale of land or of interests in associations which provide for the use or occupancy of land touches and affects a great number of the citizens of this state and that full and complete disclosure to prospective purchasers of pertinent information concerning land developments, including any encumbrances or liens which might attach to the land and the physical characteristics of the development as well as the surrounding land, is essential. The legislature further finds and declares that ((~~a program of state registration and of publication and~~)) delivery to prospective purchasers of a complete and accurate public offering statement is necessary in order to adequately protect both the economic and physical welfare of the citizens of this state. It is the purpose of this chapter to provide for ((a)) the reasonable ((~~program of state registration and~~)) regulation of the sale and offering for sale of any interest in significant land developments within or without the state of Washington, so that the prospective purchasers of such interests might be provided with full, complete, and accurate information of all pertinent circumstances affecting their purchase.

Sec. 2. RCW 58.19.020 and 1979 c 158 s 208 are each amended to read as follows:

When used in this chapter, unless the context otherwise requires:

(1) "Blanket encumbrance" shall mean a trust deed, mortgage, mechanic's lien, or any other lien or encumbrance, securing or evidencing the payment of money and affecting the land to be developed or affecting more than one lot or parcel of developed land, or an agreement affecting more than one such lot or parcel by which the developer holds said development under option, contract, sale, or trust agreement. The term shall not include taxes and assessments levied by a public authority.

(2) ((~~"Director" means the director of licensing or his authorized designee.~~)) "Common promotional plan" means an offering of developed lands by a person in a similar plan of disposition. Elements relevant to whether the developed lands are being offered as part of a common promotional plan include but are not limited to: The physical relationship of the properties being offered; whether the offered properties are known, designated, or advertised as a common unit or by a common name; the utilization of a common broker or sales personnel, common sales office or facilities, or common promotional methods; the utilization of cross-referrals of prospective purchasers between sales operations; and common ownership interests.

(3) "Developer" means any owner of a development who offers it for disposition, or the principal agent of an inactive owner.

(4) "Development" or "developed lands" means land which is divided or is proposed to be divided for the purpose of disposition into ((~~ten~~)) twenty-six or more lots, parcels, or units (excluding interests in camping ((~~clubs~~)) resorts regulated under chapter 19.105 RCW and interests in condominiums regulated under chapter 64.34 RCW) ((~~and~~)) or any other land whether contiguous or not, if ((~~ten~~)) twenty-six or more lots, parcels, units, or interests are offered as a part of a common promotional plan of advertising and sale.

(5) "Disposition" includes any sale, lease, assignment, or exchange of any interest in any real property which is a part of or included within a development, and also includes the offering of property as a prize or gift when a monetary charge or consideration for whatever purpose is required in conjunction therewith, and any other transaction concerning a development if undertaken for gain or profit.

(6) "Offer" includes every inducement, solicitation, or media advertisement which has as a principal aim to encourage a person to acquire an interest in land.

(7) "Hazard" means all existing or proposed unusual nuisance-type conditions relating to the location of the development, noise, safety, or other nuisance which affect or might affect the development or the purchaser's interest therein.

(8) "Person" means an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, unincorporated association, two or more of any of the foregoing having a joint or common interest, or any other legal or commercial entity.

(9) "Purchaser" means a person who acquires or attempts to acquire or succeeds to any interest in land.

(10) "Residential buildings" shall mean premises that are actually intended or used as permanent residences of the purchasers and that are not devoted exclusively to any other purpose.

Sec. 3. RCW 58.19.030 and 1979 c 158 s 209 are each amended to read as follows:

((~~(1)~~)) Unless the method of disposition is adopted for the purpose of evasion of this chapter, the provisions of this chapter shall not apply to ((~~land and offers or dispositions~~)):

((~~(a)~~)) (1) An offer or disposition of any interest in a development by a purchaser of developed lands for his or her own account in a single or isolated transaction, except that this exemption shall not apply to developers;

((~~(b) If fewer than ten separate lots, parcels, units, or interests in developed lands are offered by a person in a period of twelve months;~~

~~(c)~~)) (2) A development if each lot offered in the development is one one-hundred-twenty-eighth of a section of land or larger, or five acres or ((~~more~~)) larger if the land is not capable of description as a fraction of a section of land. For purposes of computing the size of a lot under this subsection that borders on a street or road the lot size shall be expanded to include that area which would be bounded by the center line of the road or street and the side lot lines of the lot running perpendicular to such center line;

((~~(d)~~)) (3) Any lot, parcel, unit, or interest on which there is a residential, commercial, or industrial building, or as to which there is a legal obligation on the part of the seller to construct such a building within two years from date of disposition;

((~~(e) To~~)) (4) Any person who acquires ((~~such~~)) lots, parcels, units, or interests ((~~therein~~)) in a development for the purpose of engaging in the business of constructing residential, commercial, or industrial buildings or for the purpose of resale or lease or other disposition of such lots to persons engaged in such business or businesses;

((~~(f) Any lot, parcel, unit or interest if the development is located within an area incorporated prior to January 1, 1974;~~

~~(g)~~)) (5) A development or part of a development if it became an incorporated city or a part of an incorporated city prior to January 1, 1974;

(6) Offers or dispositions pursuant to court order; ((or

~~(h)~~)) (7) Offers or dispositions as cemetery lots or interests((.));

((~~(2) Unless the method of disposition is adopted for the purpose of evasion of this chapter, the provisions of this chapter shall not apply to:~~

~~(a)~~)) (8) Offers or dispositions of evidence of indebtedness secured by a mortgage or deed of trust of real estate;

((~~(b)~~)) (9) Offers or dispositions of securities or units of interest issued by a real estate investment trust regulated under any state or federal statute;

((~~(c) A development as to which the director has waived the provisions of this chapter as provided in RCW 58.19.040;~~

~~(d)~~)) (10) Offers or dispositions of securities currently registered with the ((~~business and professions administration in the~~)) department of licensing; or

((~~(e)~~)) (11) Offers or dispositions of any interest in oil, gas, or other minerals or any royalty interest therein if the offers or dispositions of such interests are regulated as securities by the United States or by the business and professions administration in the department of licensing.

NEW SECTION. Sec. 4. A new section is added to chapter 58.19 RCW to read as follows:

(1) A developer shall prepare a public offering statement conforming to the requirements of RCW 58.19.070 unless the development or the transaction is exempt under RCW 58.19.030.

(2) Any agent, attorney, or other person assisting the developer in preparing the public offering statement may rely upon information provided by the developer without independent investigation. The agent, attorney, or other person shall not be liable for any material misrepresentation in or omissions of material facts from the public offering statement unless the person had actual knowledge of the misrepresentation or omission at the time the public offering statement was prepared. The developer shall be liable for any misrepresentation contained in the public offering statement or for any omission of material fact therefrom if the developer had actual knowledge of the misrepresentation or omission or, in the exercise of reasonable care, should have known of the misrepresentation or omission.

(3) A developer shall provide a purchaser of a lot, parcel, unit, or interest with a copy of the public offering statement and all material amendments thereto before conveyance of that lot, parcel, unit, or interest. Unless a purchaser is given the public offering statement more than two days before execution of a contract for the purchase of a lot, parcel, unit, or interest, the purchaser, before conveyance, shall have the right to cancel the contract within two days after first receiving the public offering statement and, if necessary to have two days to review the public offering statement and cancel the contract, to extend the closing date for conveyance to a date not more than two days after first receiving the public offering statement. The purchaser shall have no right to cancel the contract upon receipt of an amendment unless the purchaser would have that right under generally applicable legal principles. The two-day period shall not include Saturdays, Sundays, or legal holidays.

(4) If a purchaser elects to cancel a contract pursuant to subsection (3) of this section, the purchaser may do so by hand-delivering notice thereof to the developer or the developer's agent or by mailing notice thereof by prepaid United States mail to the developer or the developer's agent for service of process. If cancellation is by mailing notice, the date of the postmark on the mail shall be the official date of cancellation. Cancellation is without penalty, and all payments made by the purchaser before cancellation shall be refunded within thirty days from the date of cancellation.

(5) If a person required to deliver a public offering statement pursuant to subsection (1) of this section fails to provide a purchaser to whom a lot, parcel, unit, or interest is conveyed with that public offering statement and all material amendments thereto as required by subsection (3) of this section, the purchaser is entitled to receive from that person an amount equal to the greater of: (a) Actual damages, or (b) ten percent of the sales price of the lot, parcel, unit, or interest for a willful failure by the developer or five percent of the sales price of the lot, parcel, unit, or interest for any other failure. There shall be no liability for failure to deliver any amendment unless such failure would have entitled the purchaser under generally applicable legal principles to cancel the contract for the purchase of the lot, parcel, unit, or interest had the undisclosed information been evident to the purchaser before the closing of the purchase.

Sec. 5. RCW 58.19.070 and 1973 1st ex.s. c 12 s 7 are each amended to read as follows:

The ((~~proposed~~)) public offering statement((,)) required to be ((~~submitted as part of the application for registration, shall be on a form prescribed by rules and regulations adopted by the director and~~)) provided to purchasers shall include the following:

(1) The name and principal address of the developer;

(2) A general description of the development stating the name, the location or address, and the total number of lots, parcels, units, or interests in the offering;

(3) The significant terms of any encumbrances, easements, liens, and restrictions, including zoning and other regulations affecting the development and each unit or lot, and a statement of all existing taxes and existing or proposed special taxes or assessments which affect the development;

(4) A statement of the use for which the property is offered;

(5) Information concerning all existing, advertised, and governmentally required improvements, including, but not limited to, streets, potable water supply, levees, drainage control systems, irrigation systems, sewage disposal facilities, customary utilities including power, water, natural gas, and telecommunications, and recreational facilities, and the estimated cost, means of financing, date of completion, and responsibility for construction and maintenance of existing and proposed improvements which are referred to in connection with the offering or disposition of any interest in a development;

(6) A statement of any hazard on or around the development;

(7) ((~~Additional information required by the director to assure full and fair disclosure to prospective purchasers~~)) A statement that the developer has or has not received all approvals and permits required by the local health and planning departments;

(8) A statement setting forth all material terms and conditions of any common improvement or facility in which the purchaser will have an interest, including the identification of all management or governing documents;

(9) A statement setting forth all material terms and conditions of a homeowner's association that the purchaser will be a member of, including the identification of all properties and improvements owned by the association, and the management or governing documents thereof;

(10) A disclosure which shall appear at the top of the first page of the public offering statement and be typed or printed in ten-point, bold-faced type size that states:

"YOU MAY REVOKE ANY CONTRACT OR AGREEMENT WITHIN TWO DAYS AFTER RECEIVING THIS PUBLIC OFFERING STATEMENT. NOTICE OF REVOCATION MUST BE IN WRITING AND DELIVERED TO THE DEVELOPER OR THE DEVELOPER'S AGENT. THE TWO-DAY PERIOD SHALL NOT INCLUDE SATURDAYS, SUNDAYS, OR LEGAL HOLIDAYS";

(11) Any other information that the developer believes will be helpful in describing the development to the prospective purchasers, all of which may be included or not included at the option of the developer;

(12) A copy of the survey map or county-approved and recorded final plat of the development, which shall be physically separate from the public offering statement, but which shall be delivered to the purchaser with the public offering statement; and

(13) A copy of the plat certificate covering all lots offered for sale and issued within twenty days of the date of sale, which shall be physically separate from the public offering statement, but which shall be delivered to the purchaser with the public offering statement.

Sec. 6. RCW 58.19.120 and 1973 1st ex.s. c 12 s 12 are each amended to read as follows:

The developer shall immediately ((~~report to the director~~)) amend the public offering statement to include any material changes ((~~in the information contained in his application for registration~~)) affecting the development. No change in the substance of the promotional plan or plan of disposition or completion of the development may be made ((~~after registration without notifying the director and~~)) without first making an appropriate amendment of the public offering statement. A public offering statement is not current unless it incorporates all amendments. There shall be no liability for failure to incorporate any amendment unless such failure would have entitled the purchaser under generally applicable legal principles to cancel a contract or agreement for purchase of the lot, parcel, or unit had the undisclosed information been evident to the purchaser before the closing of the purchase.

Sec. 7. RCW 58.19.130 and 1973 1st ex.s. c 12 s 13 are each amended to read as follows:

No portion of the public offering statement form may be underscored, italicized, or printed in larger or heavier or different color type than the remainder of the statement ((~~unless the director so requires~~)) except the revocation clause as described in RCW 58.19.070(10).

Sec. 8. RCW 58.19.140 and 1973 1st ex.s. c 12 s 14 are each amended to read as follows:

The public offering statement shall not be used for any promotional purposes((~~. It may not be distributed to prospective purchasers before registration of the development~~)) and may be distributed ((~~afterwards only when it is~~)) or used only in its entirety. ((~~No person may advertise or represent that the state of Washington or the director, the department, or any employee thereof approves or recommends the development or disposition thereof.~~))

Sec. 9. RCW 58.19.180 and 1973 1st ex.s. c 12 s 18 are each amended to read as follows:

It shall be unlawful for the developer to make a sale of lots or parcels within a development which is subject to a blanket encumbrance which does not contain, within its terms or by supplementary agreement, a provision which shall unconditionally provide that the purchaser of a lot or parcel encumbered thereby can obtain the legal title, or other interest contracted for, free and clear of the lien of such blanket encumbrance upon compliance with the terms and conditions of the purchase agreement, unless the developer shall elect and comply with one of the following alternative conditions:

(1) The developer shall deposit earnest moneys and all subsequent payments on the obligation in ((an)) a neutral escrow depository ((acceptable to the director: In cases where the blanket encumbrance does not provide for partial release, all or such portions of the money paid or advanced by the purchaser on any such lot or parcel within said development as the director shall determine to be sufficient to protect the interest of the purchaser; or in cases where the blanket encumbrance provides for partial releases thereof which are not unconditional, the developer shall deposit, at such time as the balance due to the developer from such purchasers is equal to the sum necessary to procure a release of such lots or parcels contracted for from the lien of such blanket encumbrance, all of the sums thereafter received from such purchasers until either)), or real estate trust account regulated under RCW 18.85.310, until such time as all payments on the obligation have been made and clear title is delivered, or any of the following occurs:

(a) A proper release is obtained from such blanket encumbrance;

(b) Either the developer or the purchaser defaults under the sales contract and there is a forfeiture of the interest of the purchaser or there is a determination as to the disposition of such moneys, as the case may be; or

(2) The title to the development is held in trust under an agreement of trust ((~~acceptable to the director~~)) until the proper release of such blanket encumbrance is obtained.

((~~(3) A bond to the state of Washington or such other~~

proof of financial responsibility is furnished to the director for the benefit and protection of purchasers of such lots or parcels in such an amount and subject to such terms, as may be approved by the director, which shall provide for the return of moneys paid or advanced by any purchaser on account of a sale of any such lot or parcel if a proper release from such blanket encumbrance is not obtained: PROVIDED, That if it should be determined that such purchaser, by reason of default, or otherwise, is not entitled to the return of such moneys or any portion thereof, such bond or other proof of financial responsibility shall be exonerated to the extent and in the amount thereof. The amount of the bond or other proof of financial responsibility may be increased or decreased or a bond may be waived from time to time as the director shall determine.))

Sec. 10. RCW 58.19.190 and 1973 1st ex.s. c 12 s 19 are each amended to read as follows:

No person shall publish in this state any advertisement concerning a development subject to the ((~~registration~~)) requirements of this chapter ((~~after the director finds that the advertisement~~)) which contains any statements that are false, misleading, or deceptive ((and so notifies the person in writing. Such notification may be given summarily without notice or hearing. At any time after the issuance of a notification under this section the person desiring to use the advertisement may in writing request the order be rescinded. Upon receipt of such a written request, the matter shall be set down for hearing to commence within fourteen days after such receipt unless the person making the request consents to a later date. After such hearing, which shall be conducted in accordance with the provisions of the Administrative Procedure Act, chapter 34.04 RCW, the director shall determine whether to affirm and to continue or to rescind such order and shall have all powers granted under such act)).

NEW SECTION. Sec. 11. A new section is added to chapter 58.19 RCW to read as follows:

If a developer, or any other person subject to this chapter, fails to comply with any provision of this chapter, any person or class of persons adversely affected by the failure to comply may seek appropriate relief through an action for damages or an injunctive court order. The court, in an appropriate case, may award attorneys' fees.

Sec. 12. RCW 58.19.270 and 1973 1st ex.s. c 12 s 27 are each amended to read as follows:

(1) The commission by any person of an act or practice prohibited by this chapter is hereby declared to be an unfair act or practice or unfair method of competition in the conduct of trade or commerce for the purpose of the application of the Consumer Protection Act, chapter 19.86 RCW, as now or hereafter amended.

(2) ((~~The director may refer such~~)) Evidence ((~~as may be available to him~~)) concerning violations of this chapter ((~~or of any rule or regulation adopted hereunder~~)) may be referred to the attorney general or the prosecuting attorney of the county wherein the alleged violation arose, who may, in their discretion, with or without such a reference, in addition to any other action they might commence, bring an action in the name of the state against any person to restrain and prevent the doing of any act or practice prohibited by this chapter: PROVIDED, That this chapter shall be considered in conjunction with chapters 9.04 and 19.86 RCW, as now or hereafter amended, and the powers and duties of the attorney general and the prosecuting attorney as they may appear in the aforementioned chapters, shall apply against all persons subject to this chapter.

Sec. 13. RCW 58.19.300 and 1973 1st ex.s. c 12 s 30 are each amended to read as follows:

If, ((~~after~~)) before disposition of all or any portion of a development which is covered by this chapter, a condition constituting a hazard is discovered on or around the development, the developer or government agency discovering such condition shall notify the ((~~director immediately. After receiving such notice, the director shall forthwith take all steps necessary to notify the owners~~)) purchasers of the affected lands either by transmitting notice through the appropriate county assessor's office or such other steps as might reasonably give actual notice to the ((~~owners~~)) purchasers.

Sec. 14. RCW 58.19.940 and 1973 1st ex.s. c 12 s 35 are each amended to read as follows:

This chapter may be cited as the Land Development Act ((~~of 1973~~)).

NEW SECTION. Sec. 15. The following acts or parts of acts are each repealed:

(1) RCW 58.19.040 and 1973 1st ex.s. c 12 s 4;

(2) RCW 58.19.050 and 1973 1st ex.s. c 12 s 5;

(3) RCW 58.19.060 and 1973 1st ex.s. c 12 s 6;

(4) RCW 58.19.080 and 1973 1st ex.s. c 12 s 8;

(5) RCW 58.19.090 and 1973 1st ex.s. c 12 s 9;

(6) RCW 58.19.100 and 1973 1st ex.s. c 12 s 10;

(7) RCW 58.19.110 and 1973 1st ex.s. c 12 s 11;

(8) RCW 58.19.150 and 1973 1st ex.s. c 12 s 15;

(9) RCW 58.19.160 and 1973 1st ex.s. c 12 s 16;

(10) RCW 58.19.170 and 1973 1st ex.s. c 12 s 17;

(11) RCW 58.19.200 and 1973 1st ex.s. c 12 s 20;

(12) RCW 58.19.210 and 1973 1st ex.s. c 12 s 21;

(13) RCW 58.19.220 and 1973 1st ex.s. c 12 s 22;

(14) RCW 58.19.230 and 1973 1st ex.s. c 12 s 23;

(15) RCW 58.19.240 and 1973 1st ex.s. c 12 s 24;

(16) RCW 58.19.250 and 1973 1st ex.s. c 12 s 25;

(17) RCW 58.19.260 and 1973 1st ex.s. c 12 s 26;

(18) RCW 58.19.290 and 1973 1st ex.s. c 12 s 29;

(19) RCW 58.19.900 and 1973 1st ex.s. c 12 s 31;

(20) RCW 58.19.910 and 1973 1st ex.s. c 12 s 32; and

(21) RCW 58.19.930 and 1973 1st ex.s. c 12 s 34.

NEW SECTION. Sec. 16. If any provision of this act or its application to any person or circumstances is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.