Current through Register Vol. 63, No. 9, September 1, 2024
(1)
Definitions:
(a) "Condominium Security" shall
be defined to include the sale of a condominium in fee, leasehold, undivided
interest or a license or right to use a facility with any of the following
arrangements: Units offered in conjunction with:
(A) The offer of a rental arrangement or
similar service with emphasis on the economic benefits derived by the purchaser
from the managerial efforts of the promoter in connection with the rental of
the units;
(B) The offering of
participation in a rental pool arrangement;
(C) The offering of a rental or similar
arrangement which requires the purchaser to hold a unit available for rental or
to use an exclusive rental agent or otherwise materially restricts the
purchaser's occupancy of his units.
(b) "Net Fee Contract" means a contract under
which a management company, for a percentage of the gross rental income,
provides overall management of the rental operation of the condominium project
but the operating costs are borne by unit owners;
(c) "Gross Fee Contract" means a contract
under which a management company, for a percentage of the gross rental income,
provides management services. The cost of operation of the rental aspects of
the project are borne by the management company but the cost of maintenance of
the project is borne by the unit owners;
(d) "Unit" shall mean either a condominium
unit, a leasehold interest in a condominium unit, or condominium project, a
partial or limited partnership interest, or undivided interest in a condominium
unit;
(e) "Operator" means the
individual or company which does or will operate the project for the
condominium unit owners;
(f)
"Developer" means the individual or company which constructs, acquires or
converts a property in which condominium unit securities, as herein defined,
are to be sold.
(2)
Project Financing:
(a) The financing
arrangements for completion of the project shall be fully disclosed in the
prospectus;
(b) If the project is
to be phased or staged, the prospectus should clearly disclose what the effect
of failure to complete the phases would be on the recreational amenities,
public facilities and future use of the units;
(c) No encumbrances or liens of any kind
shall be permitted on any portion of the project, except an individual
investor-purchaser may arrange for financing the purchase of his unit and
encumber the unit for the purchase price, including a mortgage or other
arrangement to purchase the furniture package;
(d)
(A) The
developer or operator shall undertake to commit the restaurant, bar, hotel, and
convention facilities to their specific uses through dedication in the
Declaration of Unit Ownership; and any other use of those facilities shall only
be permitted by a majority of unit owners;
(B) If, for any reason, the developer or
operator shall be unable or unwilling to continue the operation of those
facilities, the unit owners shall have the right to acquire title to the
facilities, with the purchase price to be determined by arbitration;
(C) There shall be no separate ownership of
service areas and other maintenance facilities necessary for the operation of
the restaurant, bar, hotel, and convention facilities, and the unit owners
shall own pro rata shares in all such service areas and maintenance
facilities.
(e) The
amount of any profits to the developer, whether by way of construction fee,
finder's fee, acquisition fee, conversion costs, developer's fee, or otherwise
should be disclosed in the prospectus;
(f) The proceeds of the offering shall be
escrowed until the following conditions have been met:
(A) That the other condominium units can be
delivered free and clear of any encumbrance (other than the major lease or
long-term ownership, if such is the case). This shall not prevent a unit
purchaser from encumbering a unit by purchase money lien or mortgage. In lieu
of the escrow requirement, a satisfactory completion bond or guaranty by a
financial institution may be substituted;
(B) A number of units have been sold which,
in the opinion of the Director and as represented in the prospectus, will make
the project feasible in light of the objectives promised to the
investor-purchaser;
(C) The
submission to the Director of an architect's certification that the units have
been constructed according to specifications and in accordance with industry
standards. In the case of a conversion of an existing structure into units, the
architect's certificate should include a statement that the conversion has
taken place according to specifications and in accordance with industry
standards. As an alternative to the architect's certificate, an Engineer's
Certification may be submitted which includes a structural or condition report
on the units.
(3) Management Contracts:
(a) The management fee shall be reasonable in
light of the number of units proposed to be managed and the duties imposed
thereby and shall be disclosed in the prospectus. The fees, rights, and duties
of the operator and unit owners may be negotiated at the end of not more than
the three-year period from the date of the first notice and at any time after
the first three years, and may be canceled upon a majority vote of the unit
owners. The operator shall provide for full-time management of the units and
hotel facilities. In lieu of the above, a management contract with a major
hotel operator with demonstrated management capabilities and expertise will be
permitted for a term of up to ten years. Any such contract can be terminated by
a vote of the holders of at least two-thirds (2/3) of the units;
(b) A minimum number of rooms committed to a
rental program shall be required and withdrawal from such a rental program
shall not be permitted except upon approval of the manager and all other unit
owners participating in the rental program;
(c) The management contract shall provide
that the operator shall submit to the unit owners, at least once annually, a
written report summarizing the receipts and disbursements affecting the
operation of the hotel facilities;
(d) In addition, the management contract
shall provide for the disbursement to the unit owners, at least quarterly,
their pro rata share of receipts from the operations of the hotel
facilities.
(4)
Financial Statements:
(a) If the operator is a
subsidiary of another company, the financial statements of both the parent and
subsidiary will be required to be furnished in the prospectus. Such statements
shall be audited in accordance with the standards prescribed by Securities and
Exchange Commission Release S-X;
(b) In an interstate offering of units, the
use of projections will be encouraged unless prohibited by the Securities and
Exchange Commission. In all intrastate offerings of units, the
operator/developer shall provide the Director with a projected cash flow for
the first three years of operation, the projection shall be realistic in its
predictions and shall clearly identify the assumptions made with respect to all
material features of the presentation.
(5) Commissions and Fees: The combined real
estate brokerage selling commission and securities underwriting commissions and
fees in total shall not exceed 15 percent of the aggregate purchase price of
the units being offered. All such commissions and fees shall be disclosed in
the prospectus. Additional costs for accountants' fees, attorneys' fees,
printing costs, and any additional costs required by any state or federal
regulatory agency may be allowed in addition to the 15 percent
limitation.
(6) Prospectus:
(a) The prospectus or other document used in
connection with the solicitation or sale must be filed with the
Director;
(b) The prospectus shall
be in a form required by the Director and may also include such information as
would make it acceptable under the real estate laws or regulations of any state
in which the offering is to be made;
(c) The prospectus shall contain a facsimile
of an engineer's survey and report of architect's certificate concerning the
condition of the project in a form prescribed by the Director.
(7) Authority of Director: The
Director may amend these rules if, in his discretion, it is determined to be in
the public interest and appropriate for protection of investors.
Stat. Auth.: ORS
59
Stats. Implemented: ORS
59.065