Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Are Condo Hotels Subject to SEC Regulations?
The latest real estate trend in the hospitality industry, across the country and around the world, is the “condo hotel.” A condo hotel resembles, and is managed and operates as, a traditional hotel, except that certain hotel rooms are offered for sale as condominium units to individual buyers. In addition, unit owners usually have the option of placing those units in a reservation system or rental program and sharing in any associated fees. The proliferation of the condo hotel is largely the result of the benefits that condo hotels afford developers, lenders, and buyers. For a developer, the condo hotel provides the opportunity to turn a quick profit upon sale of condominiums as opposed to the incremental profits traditionally associated with the cyclical hotel industry. Lenders are also more likely to support developers as a result of the potential return on investment realized with condominium sales (even prior to construction). Finally, the condo hotel is attractive to buyers seeking a residence that includes all the amenities associated with traditional hotel stays. Condo hotel purchases and sales also raise new and unresolved legal issues, particularly whether the sale of a condo hotel unit constitutes the sale of a security requiring registration and compliance with federal securities laws.
Although generally the offer for sale of real estate does not involve the offer of a security, as explained below, because a condo hotel unit is associated with a rental or management program, it can, in certain circumstances, be deemed a security. If so, unless the sale is exempted, the sale must be registered with the SEC and comply with the SEC's rules and regulations, including its anti-fraud provisions. Accordingly, developers or brokers could face serious criminal and civil liability repercussions. In addition, condo hotel sellers could be deemed securities brokers or dealers within the meaning of the Securities Exchange Act and may be required to be registered as such. Finally, if a condo sale is considered that of a security and that sale is not registered, the buyer could void the sales contract.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
The DOJ's New Parameters for Evaluating Corporate Compliance Programs
The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.
Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.