[Code of Federal Regulations]
[Title 24, Volume 5]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR1710.109]

[Page 30-33]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
 CHAPTER X--OFFICE OF ASSISTANT SECRETARY FOR HOUSING--FEDERAL HOUSING 
 COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (INTERSTATE 
                    LAND SALES REGISTRATION PROGRAM)
 
PART 1710_LAND REGISTRATION--Table of Contents
 
                    Subpart B_Reporting Requirements
 
Sec.  1710.109  Title to the property and land use.

    (a) General instructions. (1) Below the heading ``Title to the 
Property and Land Use'' insert the following introductory paragraphs:

    ``A person with legal title to property generally has the right to 
own, use and enjoy the property. A contract to buy a lot may give you 
possession but doesn't give you legal title. You won't have legal title 
until you receive a valid deed. A restriction or an encumbrance on your 
lot, or on the subdivision, could adversely affect your title.''
    ``Here we will discuss the sales contract you will sign and the deed 
you will receive. We will also provide you with information about any 
land use restrictions and encumbrances, mortgages, or liens affecting 
your lot and some important facts about payments, recording, and title 
insurance.''

    (2) Information to be provided. After the above introductory 
paragraphs provide the information required by the following 
instructions and questions. Follow a general form identical to the 
sample page printed in Sec.  1710.102.
    (b) Method of sale--(1) Sales contract and delivery of deed. (i) 
Will the buyer sign a purchase money or installment contract or similar 
instrument in connection with the purchase of the lot? When will a deed 
be delivered?
    (ii) If an installment contract is used, include the following, or 
substantially the same, language in the disclosure narrative under 
``Method of Sale'':

    ``If you fail to make your payments required by the contract, you 
may lose your lot and all monies paid.''

    (iii) If, at the time of a credit sale, the developer gives the 
buyer a deed to the lot, what type of security must the buyer give the 
seller?
    (iv) If the lots are to be sold on the basis of an installment 
contract, can the developer or the owner of the subdivision or their 
creditors encumber the lots under contract? If so, include the following 
warning in the disclosure narrative under the caption ``Sales contract 
and delivery of deed'':

    ``The (indicate subdivision developer, owner, or their creditors) 
can place a mortgage on or encumber the lots in this subdivision after 
they are under contract. This may cause you to lose your lot and any 
monies paid on it.''

    (2) Type of deed. What type of deed will be used to convey title to 
lots in the subdivision?
    (3) Quitclaim deeds. If a quitclaim deed is to be given to lot 
purchasers insert the below warning, or a warning which is substantially 
the same, in the disclosure narrative below the caption ``Quitclaim 
Deeds''. This particular warning may be deleted at the direction of the 
Secretary if an acceptable attorney's opinion is submitted with the 
Statement of Record which indicates that a quitclaim deed has a meaning 
in the jurisdiction where the subdivision is located which is 
substantially contrary to the effect of this

[[Page 31]]

warning. This warning shall be phrased substantially as follows:

    ``The Quitclaim deed used to transfer title to lots in this 
subdivision gives you no assurance of ownership of your lot.''

    (4) Oil, gas, and mineral rights. If oil, gas or mineral rights have 
been reserved, insert the following statement or one substantially the 
same in the narrative answer under the caption ``oil, gas, and mineral 
rights'':

    ``The (indicate oil, gas, or mineral rights) to (state which lots) 
in this subdivision will not belong to the purchaser of those lots. The 
exercise of these rights could affect the use, enjoyment and value of 
your lot.''

    (c) Encumbrances, mortgages and liens--(1) In general. State whether 
any of the lots or common facilities which serve the subdivision, other 
than recreation facilities, are subject to a blanket encumbrance, 
mortgage or lien. If yes, identify the type of encumbrance (e.g. deed of 
trust, mortgage, mechanics liens), the holder of the lien, and the lots 
covered by the lien. If any blanket encumbrance, mortgage, or lien is 
not current in accordance with its terms, so indicate.
    (2) Release provisions. (i) Explain the effect of any release 
provisions of any blanket encumbrance, mortgage or lien and include the 
one of the following statements that pertains.
    (A) If the release clauses are not included in a recorded 
instrument, insert the following statement or one substantially the same 
in the disclosure narrative below the caption ``Release Provisions'':

    ``The release provisions for the (indicate all or particular lots) 
have not been recorded. Therefore, they may not be honored by subsequent 
holders of the mortgage. If they are not honored, you may not be able to 
obtain clear title to a lot covered by this mortgage until we have paid 
the mortgage in full, even if you have paid the full purchase price of 
the lot. If we should default on the mortgage prior to obtaining a 
release of your lot, you may lose your lot and all monies paid.''

    (B) If the developer or subdivision owner states that the release 
provisions are recorded and that the lot purchaser may pay the release 
price of the mortgage, the statement shall be supported by documentation 
supplied in Sec.  1710.209. If the purchaser may pay the release fee, 
state the amount of the release fee and inform the purchaser that the 
amount may be in addition to the contract payments unless there is a 
bona fide trust or escrow arrangement in which the purchaser's payments 
are set aside to pay the release price before any payments are made to 
the developer.
    (C)(1) If there are no provisions in the blanket encumbrance for 
release of an individual purchaser's lot from a blanket encumbrance, 
include the following warning or a warning substantially the same, in 
the disclosure narrative under the ``Release Provisions'' caption:

    ``The (state type of encumbrance) on (indicate all or particular 
lots) in this subdivision does not contain any provisions for the 
release of an individual lot when the full purchase price of the lot has 
been paid. Therefore, if your lot is subject to this (state type of 
encumbrance), you may not be able to obtain clear title to your lot 
until we have paid the (state type of encumbrance) in full, even though 
you may have received a deed and paid the full purchase price of the 
lot. If we should default on the (state type of encumbrance) prior to 
obtaining a release, you may lose your lot and all monies paid.''

    (2) If the provisions for release of individual lots from the 
blanket encumbrance may be exercised only by the developer insert the 
following statement, or one substantially the same, in the disclosure 
narrative under the ``Release Provisions'' caption:

    ``The release provisions in the (state the type of encumbrance) on 
(indicate all or particular lots) in this subdivision may be exercised 
only by us. Therefore, if we default on the (state type of encumbrance) 
before obtaining a release of your lot, you may lose your lot and any 
money you have paid for it.''

    (d) Recording the contract and deed--(1) Method or purpose of 
recording. (i) State what protection, if any, recording of deeds and 
contracts gives a lot purchaser in your jurisdiction.
    (ii) If the sales contract or deed may be recorded, so state. Also 
state whose responsibility it is to record the contract or deed.
    (iii) If the developer or subdivision owner will not have the sales 
contract officially acknowledged or if the applicable jurisdiction will 
not record sales contracts, state that sales contracts

[[Page 32]]

will not be recorded and why they will not be recorded.
    (iv) If at, or immediately after, the signing of a contract, the 
contract or a deed transfer to the buyer is not recorded by the 
developer or owner or if title to the lot is not otherwise transferred 
of record to a trust, or if other sufficient notice of transfer or sale 
is not placed of record, then the developer shall include the following, 
or substantially the same, warning in the disclosure narrative under the 
caption ``Method and Purpose of Recording'':

    ``Unless your contract or deed is recorded you may lose your lot 
through the claims of subsequent purchasers or subsequent creditors of 
anyone having an interest in the land''.


The reference to contracts shall be deleted from the above warning if 
the answer to paragraph (d)(1)(i) of this section indicates that 
recording of a contract in the subject jurisdiction does not protect the 
purchaser from claims of later purchasers or creditors of anyone having 
an interest in the land.

    (2) Title insurance. If the developer does not deliver a title 
insurance policy to the buyer, state that the purchaser should obtain an 
attorney's opinion of title or a title insurance policy which will 
describe the rights of ownership which are being acquired in the lot. 
Recommend that an appropriate professional should interpret the opinion 
or policy.
    (e) Payments--(1) Escrow. If purchasers' deposits, down payments, or 
installment payments are to be placed in a third party controlled escrow 
or similar account, describe the arrangement including the name and 
address of the escrow holder or similar person. If there is no such 
arrangement, insert the following statement in the disclosure narrative 
under the caption ``Escrow'':

    ``You may lose your (indicate deposit, down payment and/or 
installment payments) on your lot if we fail to deliver legal title to 
you as called for in the contract, because (they are/it is) not held in 
an escrow account which fully protects you.''


The questions regarding an escrow agreement or similar protection may be 
answered affirmatively only if the money is under the control of an 
independent third party, allowing a purchaser to receive a return of all 
money paid in the event of the developer's failure to convey title or 
the developer's default on any obligation which would otherwise result 
in the purchaser's loss of that money.
    (2) Prepayments. Explain any prepayment penalties or privileges in 
everyday language.
    (3) Default. What are the developer's or subdivision owners' 
remedies against a defaulted purchaser?
    (f) Restrictions on the use of your lot--(1) Restrictive covenants. 
(i) Have any restrictive covenants been recorded against the land in the 
subdivision? If so, do they contain items which require the purchaser to 
secure permissions, approvals or take any other action prior to using or 
disposing of his lot (e.g., architectural control, developer's right of 
first refusal, building deadlines, etc.)? If any of these or similar 
items are included, explain their meaning and effect upon the purchaser.
    (ii) If any restrictive covenants are to be used and if they have 
not been recorded, how will they be imposed? Include a statement to the 
effect that the restrictive covenants have not been recorded; that there 
is no assurance they will be applied uniformly; that they may be changed 
and that they may be difficult to enforce. If no restrictive covenants 
will be imposed, include a statement to the effect that, since there are 
no restrictive covenants on the use of the lots, they may be used for 
purposes which could adversely affect the use and enjoyment of 
surrounding lots.
    (iii) If there are restrictive covenants, whether recorded or 
unrecorded, the following statement shall be made: ``A complete copy of 
these restrictions is available upon request.''
    (2) Easements. (i) Are there easements which may have an effect on 
the purchaser's building or lot use plans (e.g., large drainage 
easements along lot lines, high voltage electric transmission lines, 
pipe lines or drainage easements which encroach upon the building area 
of the lot or inhibit its use)?
    (ii) Is the subdivision subject to any type of flood control or 
flowage easements?

[[Page 33]]

    (iii) If the answer to either (2)(i) or (2)(ii) is in the 
affirmative, identify the affected lots and state the effect upon the 
use of the lots.
    (g) Plats, zoning, surveying, permits and environment--(1) Plats. 
(i) Have the subdivision plans and plats of specific units been approved 
by the regulatory authorities? If the approvals have not been obtained, 
include a warning to the effect that regulatory authorities have not 
approved the proposed plats; that they may require significant 
alterations before they will approve them and they may not allow the 
land to be used for the purpose for which it is being sold.
    (ii) Have plats covering the lots in this Report been recorded? If 
so, where are they recorded? If they have not been recorded, is the 
description of the lots given in this Report legally adequate for the 
conveyance of land in the jurisdiction where the subdivision is located? 
If it is not, include a statement to the effect that the description of 
the lots is not legally adequate for the conveyance of the lots and that 
it will not be until the plat is recorded.
    (2) Zoning. For what purpose may the lots be used (e.g., single 
family homes, camping, commercial)? Does this use conform to local 
zoning requirements and the restrictive covenants?
    (3) Surveying. Has each lot been surveyed and is each lot marked for 
identification? If not, and the purchaser is responsible for the 
expense, state the estimated cost.
    (4) Permits. Must the purchaser obtain a building permit before 
beginning construction on his lot? Where is the permit obtained? Are any 
other permits necessary to use the lot for the purpose for which it is 
sold or for construction in connection with its use?
    (5) Environment. Has there been any environmental impact study 
prepared which considers the effect of the subdivision on the 
environment? If a study has been prepared, summarize any adverse 
conclusions and refer the lot buyer to the proper State Clearinghouse 
for complete information. If a study has not been prepared, include a 
statement that ``No determination has been made as to the possible 
adverse effects the subdivision may have upon the environment and 
surrounding area.''

(If the developer does not know whether an environmental impact study 
has been prepared, or the name and location of the Office where any 
study made can be found, inquiry should be made to the State or Area 
Clearinghouse established under the authority of title IV of the 
Intergovernmental Cooperation Act of 1968.)