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House Approves Condo Sale Prospectus Bill
HB 470 Provides Protection for Buyers and Confidence to Sellers

(JUNEAU) - Rep. Norman Rokeberg (R-Anchorage) sponsored House Bill 470 in an effort to protect both the developers of common interest ownership structures such as condominiums, and the prospective purchasers of such units, from misunderstandings or expenses possible under current law, he said.

Under current statutes, developers must issue public offering statements (POS) providing legal descriptions of the units offered for sale, and giving prospective buyers a 15-day window of opportunity to withdraw from the sale and receive a prompt refund of any deposits, plus an automatic 10 percent penalty, Rokeberg said.

"The way the statue is drafted now is an impediment to developers getting financing, and it puts a significant risk on the developer of a custom condominium development," Rokeberg said. "A buyer could put a deposit down on a half-million dollar unit, then withdraw at the last minute and pocket a $50,000 penalty."

The problem is that a public offering statement must include a formal legal description of the property, which is unavailable until the construction is completed, he said. Also, banks may be leery of financing construction of high-end properties if prospective buyers can back out almost at will.

HB 470 would allow developers instead to issue a preliminary POS, which provides the reasonably accurate description buyers want about their prospective home, Rokeberg said. The bill also provides for a range of penalties up to 10 percent to be awarded to buyers who do withdraw from such purchases for cause, allowing a court to examine the facts of a situation and assess a level of penalty commensurate with the appropriate level of responsibility.

HB 470 moves next to the Senate for consideration.

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