Mortgages first appeared in the English feudal system and have continually served as a means to obtain land ownership without paying for the total price of the land. The mortgage is essentially a contractual relationship creating an interest in land, but it is not a loan as many people often confuse it. Most mortgage agreements involve a promise to repay a debt, but is not a debt in itself, but rather, is evidence of a debt. Essentially, the mortgage is a transfer of either a legal or equitable interest in the land on the condition that the interest will be returned when the terms of the contract are performed. If the borrower fulfills all of the obligations of the mortgage contract, the transfer then becomes void and title automatically passes back to the mortgagor.

The principle generally governing what priority a mortgage is usually first in time, first in right, though modifications to this principle can be made in the course of the process. First in time priority generally belongs to the first party to deliver that specific security instrument for recording, though most states will not enforce this general principle if the person attempting to record has actual knowledge of a previously unrecorded claim. In a minority of states, statutes provide for a true first in time circumstance where the first to record takes priority regardless of knowledge of a previously unrecorded claim. When dealing with the priority of mortgages, it is necessary to check how your particular jurisdiction treats this type of situation. The priority of a mortgage will often be the difference between payment and non-payment, therefore, a firm understanding of jurisdictional differences is critical in obtaining the strongest legal position.

Due to both the increased use of online mortgage applications and the increased solicitation by online mortgage companies, determining the true priority of all liens on a particular piece of property can be a challenging task. Like mortgages obtained from a mortgagor with a true physical office, online mortgages will generally be held to the first in time first in right principle. However, like most mortgages, they may also be subject to any leases involving the land. In the event of a forced foreclosure, when lease was executed before a mortgage, the purchaser of the property in the foreclosure auction would still take subject to the lease. Conversely, if a lease is entered into after a mortgage is recorded, the purchaser of the property would take free of the lease. Specifically, further problems can be encountered when first and second mortgages are applied for close in time to each other, and especially when one of those mortgages was obtained from an online mortgage company.

When faced with potential foreclosure due to financial difficulties, the first step in determining who takes priority when dealing with a combination of leases, first, second and all subsequent mortgages, is to examine where the debt instrument was obtained and, more specifically, when the instrument was effectively recorded. Because online mortgage companies may lack a physical presence in your particular jurisdiction, it may take a significant amount of time to perfect the recording, if it ever. As long as subsequent mortgagees or lenders record the debt instrument without notice of the online mortgage, they will take priority over the unrecorded online mortgage, especially in ‘race-notice’ statute jurisdictions. While not all jurisdictions are first in time, first in line (‘race-notice), most states are, and this specific distinction can determine the priority of any online mortgage application. Whether you represent such an online mortgage company or a consumer subjecting his or her property to various liens and mortgages, it is important to accurately understand the method of record perfection and its relation to establishing priority of a claim. An attorney experienced in real estate and borrowing transactions can be an invaluable tool in determining your rights as a consumer or company attempting to establish the order of lien priorities.

Real Estate Law is a lot more complicated than it has ever been in the past. Now when you sign a brokerage agreement with a realtor instead of 1 page or 2 pages it is 14 pages? That is just for the listing. Why is it so long? Well that is nothing compared to all the other forms involved and they just keep getting bigger due to all the laws, bureaucracy and lawyers. Everyone is so busy trying to cover themselves and their rear ends from every known or potential eventuality.

It is a giant game of 100s of pages of What Ifs. How can you have time to read it all? Well you need to make the time and it also makes sense to not allow yourself to be forced into doing anything too fast out of social conditioning. Such as thinking you might look stupid if you read it all or that you are wasting the other person’s time. In Real Estate Law you have a right to knowing what you are signing and why.

If you were a business person would you sign an agreement without reading it all the way through? I think not. And realize your home is probably the biggest personal investment you will ever make and it will take you years to pay it off. Is it worth rushing through if you still have questions? Read it, understand it and ask questions and you will be glad you did.

Go buy the book Real Estate Law 4 Smarty Pants’ if you can find that title; if you have to, but please read and understand what you are signing. I certainly hope this article is of interest and that is has propelled thought. The goal is simple; to help you in your quest to be the best in 2007. I thank you for reading my many articles on diverse subjects, which interest you.

1) What is title insurance? How much does it cost? Should I buy it?

Owner’s title insurance protects the Buyer of a property against undiscovered liens or defects in the title prior to the time of purchase. Title insurance insures the record title and protects an owner of property from losses arising from defects occurring prior to the date of the policy. Therefore, it differs from other types of insurance because it is retrospective in nature. It also differs from other types of insurance because there is only a single premium charge for title insurance, but the protection lasts for as long as you own the property. There are different title insurance policies which protect both owners and lenders. Lender’s title insurance performs the same purpose, but only for the lender in a transaction. The fee is typically about $2.50 per $1000 for lender’s coverage and $3.50 per $1000 for owner’s coverage. Lender’s insurance is required and you are strongly encouraged to purchase owner’s insurance for numerous reasons. If you have any questions in this regard or have been given advice that owner’s insurance is not necessary, please contact one of our attorneys to make an informed decision.

Since one’s home is usually the single biggest financial investment, it is highly prudent and wise that a homeowner would want to protect that investment and enjoy the benefits of ownership. An owner’s title policy is that protection.

2) What type of claims are covered by Owner’s Title Insurance?

The owner’s title policy insures against loss or damages sustained by the owner by reason of historical discrepancies such as forgery, undisclosed but recorded prior mortgages, bankruptcies, liens or divorces, deeds not properly recorded, missing wills or heirs, and inadequate property descriptions.

3) Why do I need an attorney for a closing?

An attorney should always be present at a closing to answer legal questions and to resolve disputes. Most lenders require the presence of an attorney at all closings. At our firm, all closings are always conducted by an attorney. In Rhode Island, the buyer has the right to choose the attorney to handle the title search. You should always insist on an attorney instead of a title company, as we will help to resolve the problems which arise, and will not limit our scope to merely searching the title.

4) When do I get my proceeds as a Seller?

The Seller will be given the proceeds from the sale after the deed has been recorded. In our office, we always record the documents the same day if the closing occurs before noon, and within 24 hours of closing in any event, barring weekends and holidays.

5) What happens if the house is not ready for me to move in on the day of closing?

If the house is not in the proper condition to move in at the time of closing, you will need to consult with an attorney. At our firm, if we are handling the closing, we will always strive to help the buyer with the predicament. Options include postponing the time of closing, giving a buyer credit, or escrowing funds from the seller until the property is in the proper condition.

6) Where does the closing take place?

The closing will occur at the attorney’s office for the buyer. Occasionally, the closing may occur at the lender’s office or a real estate agency, but the vast majority close at the attorney’s office.

7) What form of money should I bring to the closing?

Buyers should bring a bank check or certified funds to closing. If one of these options is not available, buyers should make arrangements to wire funds directly to the closing attorney at least one business day prior to the day of closing. If verifiable funds are not present at the time of closing, the recording of the documents will be delayed and the buyer may not be able to move into the new home. Personal checks or cash are acceptable in nominal amounts up to a maximum of $1000.

What other obligations are there as a Seller of property?

The seller is obligated to produce a Smoke Detector and Carbon Monoxide Detector Certificate at the time of closing. To obtain a certificate, the seller or its agent must contact the fire department for the municipality in which the property lies to conduct the inspection.

9) Will I receive a survey of the property at the closing?

No. In Rhode Island, lenders do not require surveys. Unless the buyer requests a survey, no one will physically verify the boundaries of the property. In Massachusetts, a lender may require a plot plan of the property which does not formally locate all of the property boundaries, but it does locate the house in particular vicinity within the boundary lines.

10) Will I receive an appraisal of the property at the closing?

You are always entitled to a copy of the lender’s appraisal if there is a lender involved on your behalf as a buyer. The appraisal is often presented at the closing, or it can be requested in writing.

11) What if my property is in a flood zone?

If the property you are purchasing is in a flood zone as depicted on the government maps, the lender will require you to obtain flood insurance. You should be careful of this whenever the property is near the water as flood insurance is often quite costly.

12) Does a title search or title insurance cover zoning issues?

No. Zoning determinations are completely separate from the title to the property. If you want an attorney to verify the zoning for you, an additional fee would be required.

Many people believe that if they are filing a real estate lawsuit, any attorney will do. The fact is, in order for you to have the best chances for a successful real estate lawsuit, you need an attorney who is experienced with handling real estate litigation.

“Many clients are unaware of the difficulties involved in real estate cases,” says Philip R. Brown, Hawaii real estate attorney. “Many of the cases I have handled have hinged on my experience and knowledge about real estate in this area.”

Real estate lawsuits can be very difficult, and not every attorney is able to handle real estate cases effectively. Not only can real estate claims involve zoning rules, contracts, and insurance companies, but the rules regarding real estate from state to state and even from county to county. When filing a real estate lawsuit in Hawaii, it is important that you have an experienced Honolulu, Hawaii real estate attorney on your side.

Real estate lawsuits can be filed concerning any number of different circumstances, including:

Experience can mean everything during a real estate claim. Real estate litigation involves many unique laws, and an experienced real estate attorney will have the attention to detail and knowledge of how to handle your real estate claim.

Condominiums are not for everybody. There are rules and if you don’t like rules don’t buy a condominium.

No dogs, no bicycles, no glass in pool areas. These are all valid rules which the courts can and will enforce by way of a court order. At Landy Marr LLP we have acted for both condominium corporations and unit owners, in many such disputes. Every condominium is governed by its own unique rules, regulations and by-laws. These are necessary to ensure that condominiums are properly operated and maintained, and to define the rights and obligations of the individual owners.

Some rules regarding the individual owners, condominiums may have restrictions regarding the number of occupants per unit, the age of occupants, pets, noise, and parking and when certain amenities such as the swimming pool, tennis court, etc. may be used.

As well many condominiums have strict rules concerning the alteration of the unit space or its appearance. Additionally, you may have to get the permission from the condominium’s Board of Directors before you do the following: change exterior fixtures, install a satellite dish, put up new colored drapes, install an conditioning unit in one of the windows, and in particular make changes that may affect the premise’s structure or safety.

As an individual condominium owner you may be obliged to attend condominium meetings or serve on condominium boards and committees. Additionally on top of your mortgage condominiums have requirements for the payment of monthly condominium fees. There will also be mandatory charges for a reserve fund in addition to the maintenance fee for unforeseen major repairs to the condominium common elements.

In Ontario every condominium has a Declaration registered on title. Additionally each condominium corporation has by-laws and rules. Before you enter into an agreement to buy a new condominium unit read these documents over. If it is a resale unit and you read them after you sign, it will be too late to change your mind. To avoid disappointment and future problems you should have a lawyer carefully review and consider all rules and obligations when you are considering the purchase of a condominium. They should be available from the unit’s seller / vendor or from the condominium Corporation. The rules will be clearly outlined in the governing documents, and you should become familiar with them prior to purchasing a particular condominium unit.

Legal firms have frequently and successfully gone to Court on behalf of condominium corporations to obtain Court orders against individuals who had pets, who had brought bicycles into the elevators and into their units, who brought a glass into a jacuzzi, and who were tossing their Christmas trees over their balcony.

A condominium is not the same thing as owning a single family home where you are the “king of your castle”. A condominium is in many ways like living in a commune or a kibbutz, where the rights of the individual must be subordinate to the rules governing the building. Individual liberty is not supreme, and unit owners must obey the rules for the collective.

Before you buy make sure you know what you’re buying by reading the Declaration, by-laws and rules. Go see your real estate lawyer before you sign the Agreement of Purchase and Sale. Don’t wait until after you sign, by then it will be too late.

The issue of correctly transferring property can be vitally important, as real property is often a person’s largest and most valuable asset. If you need to transfer the ownership of real property from one person to another, you will need to use a Deed to do so – but which one. That answer depends on what is the reason for the transfer, what goals are intended by the transfer and who is going to hold title to the property after the transfer.

Basically, a Deed acts as the document showing the transfer of a piece of property from one person or party to another. Upon the closing of a real estate transaction, the purchaser of the property will tender the purchase price to the seller who then tender a Deed to the purchaser – who will then file the Deed with the recorder’s office or real estate office in the county where the property is located. In other cases where there is no true “sale” but title to real estate is transferred from one person to another without significant payment (e.g. a mother or father transfers property to a child or other relative), a Deed is also utilized to transfer title and the Deed is filed with the appropriate recorder’s office. In either case, a fee for filing the Deed and transferring the property will usually be required.

On the Deed, the sellers must provide the legal description of the property – this description (which is NOT the address) legally identifies the property. It is CRUCIAL that this information be accurately set forth on the Deed. The seller/grantor (i.e. the person transferring title) must sign the Deed in the presence of two witnesses. The witnesses must both sign and print their names. The purchaser or transferee does not have to sign the Deed. The seller must also have the Deed notarized – meaning that it must be signed in the presence of a notary or the seller must testify to the notary that his/her true and accurate signature appears on the Deed.

TYPES OF DEEDS:

Warranty Deed

A Warranty Deed by definition is a Deed which conveys the title to property whereby the seller makes some guarantee that the title will be good and unencumbered, except as stated on the Deed, and agrees to defend and protect the purchaser against any loss that may arise in the future from any defect in the title at the time of conveyance.

The warranty Deed is the most common type of Deed used to transfer property from one individual or business to another. Warranty Deeds usually require that a title search be conducted to ensure that the property is free and clear of liens or encumbrances. Any lien or encumbrance discovered would effectively “cloud” the title of the property and make warranting the property risky or impossible.

This Deed can be used to conveying property from a seller to a purchaser in a variety of situations – most commonly when a person or couple purchases a house from a homeowner and needs to transfer title; or when a relative desires to name another person as the co-owner of a house or parcel of property that he or she currently owns by him or herself.

Quitclaim Deed

This type of Deed contains no “warranties” that the property is being transferred with good title or without encumbrances except those that are filed on record, nor is any joint tenancy or right of survivorship created. This Deed tells the person accepting the title to the real property that they will be taking whatever rights or interests that the seller or grantor has in the property, nothing more and nothing less. Often, in true arms-length sales of real estate, a buyer should insist on a warranty Deed rather than a quitclaim Deed – since the buyer would want the protections of the warranties that are offered through that kind of Deed.

This Quitclaim Deed can be used to conveying property from a seller to a purchaser in a variety of situations. For example, when one spouse or relative desires to transfer property to another spouse relative, or name another person as the co-owner of a house or parcel of property that he or she currently owns by him or herself, a quitclaim Deed can be uses. Also, when property is transferred from a person to his or her trust, a quitclaim Deed is often used. Further, this type of Deed is often used to transfer property from spouses that become divorced.

Survivorship Deeds

This Deed is a warranty Deed with “survivorship” rights created. This Deed creates a joint tenancy (sometimes called a survivorship tenancy) between two or more grantees (again, the persons taking title to the property), with the grantees each typically owning an undivided interest in the whole of the property. Upon the death of one of the grantees, his/her interest passes in equal shares to the surviving joint tenant(s) – to accomplish this, an affidavit is usually filed in the county Deed records office to evidence the transfer. Since the property transfers to the other grantee, the deceased grantee’s prior interest in the property is not a probate asset, but is included in the estate for state estate tax purposes. Where husband and wife are in title in survivorship, divorce terminates the survivorship tenancy and creates a tenancy in common between ex-spouses – unless the divorce decree specifically provides otherwise.

This Deed is be used most commonly when a person or couple purchases a house from a homeowner and each desires the joint ownership and survivorship features, when a relative desires to name another person as the co-owner of a house or parcel of property that he or she currently owns by him or herself or from one spouse to both spouses. Again, the grantees or purchasers who take title to this property also do so “with survivorship,” meaning that if one of the purchasers dies the other retains title to the property.

CLICK HERE to learn more about creating a Deed without the expense of an attorney.

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A public real estate record can be a realtor’s and a buyer’s best friend. The public real estate record can give the seller and future homeowner information on the house that they may not get otherwise just by looking at it.

Problems – A public real estate record should tell you about certain problems that the house has had such as electrical failure, flooding, or cracking foundation. These are all important and sometimes life threatening problems that every seller and buyer should know about well in advance of buying the home. After all, to the seller, it’s just real estate. To the buyer, it’s a home.

History – When was the house built? What is the history of the land it sits on? How many previous owners have there been? Is there a history of a crime that was committed in the home? Some people may not feel comfortable living a home where someone was murdered or where someone hid out during a crime spree. Some people may not even feel comfortable living in the same neighborhood as a “famous crime house.” These are all very important things that every prospective homeowner should take into account when looking to purchase a home.

Quality – When was the last time the house got painted? Are those the same bricks that were there when the house was built originally? How old are those shingles on the roof? If the quality of the home is not up to par, there is no reason to buy it. Unless of course, you want to buy a fixer upper, this even then could end up as a money pit.

Other – A public real estate record can also show you things like how many mortgages a house has had, tax history, sellers name, property type, location, etc. These are all very important things to take into consideration when looking through a public real estate record.

Remember that not all public real estate records are created equally, as different states may have different requirements for what they each require. Some states, for example, do not have to tell you if there was flood damage at the house or not. Their buyers beware in those states. Do you live in one of those? You had better hope not for you and your family’s safety and security.

There are many people asking the question why has after a step and prolonged rise in the Bangkok property market are prices slowing? There are a number of factors, usually these are attributed to rise in interest rates or slowing of the economy but in the case of foreign buyers these factors hardly contribute to their purchases. In September 2006 the Thai military staged a popular coup to depose the popular but corrupt Prime Minister Mr.Thaksin.

‘The coup caused little stir in Bangkok’s popular tourist districts, where foreigners packed beer bars and cabarets just a few miles from where the tanks were posted’, AP reported

Many thought this would have an effect on foreigners buying property in Thailand but the opposite occurred more deals went through. However many thought the draconian visa rules would be relaxed but they were not, ‘The Thai government on Friday announced new visa regulations for tourists limiting the foreign visitors to a maximum stay of 90 days each every six months in order to ease social problems and crime in the country.MCOP reported. This contributed to buyers lessening but not by much. There were also changes made to the company formation where rules were enforced that made buying a house or land under a Thai company, this shook the popular costal resort market greatly. Another event that caused major confusion was the central bank imposed a 30% rule due to capital inflows that meant you had to park this percentage of your funds with the bank for one year.

The Thai government could install confidence again by offering longer lease to foreigners buying land/house as suggested by various chamber of commerce’s, to increase options for visa status of property owners and of course to institute a new democratically elected government.

Atricle by Chris Heath

Soho Properties.

http://www.soho-properties.com

When assembling a real-estate deal involving other investors sometimes referred to as “syndication”, one must comply with state and possibly federal securities laws. When securities are issued, they must be registered or fit within an exemption. Otherwise the investors later may be able to sue the principals B and the State and – or SEC can impose fines and jail sentences. Frequently an offering is structured to fit within exemptions to the laws that otherwise require registration of the securities. One must weigh the advertising needed, whether financial requirements will eliminate too many investors, whether investors will come from more than one state, etc. to determine the best exemption.

Definition of ASecurities@

The definition of Asecurities@ is quite broad. Under federal law the term Asecurity@ means any A note, stock…evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement…@, etc. The California definition basically tracks the federal one. Note that this definition includes promissory notes secured by real estate, although there are exemptions to the securities laws that can apply in that case.

There are some exceptions to the definition of Asecurities@. General partnership interests are not considered securities, on the theory that general partners each have the authority to exercise meaningful control over the partnership. Limited partnership interests, though, are presumed to be securities.

If the investors are all tenants in common (meaning they are listed on the deed but there is no formal entity), then there are no securities — but the owners all have the same personal liability as if they were general partners. Good insurance coverage is key in that case.

Limited liability company interests generally constitute securities. This is certainly true for manager-managed LLC=s. Still, there is an exception under California law for member-managed LLC= s where all of the members are actively engaged in management of the LLC. The California statute states that Asecurity@ does not mean :

a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company….

As the definition shows, though, the members must be truly engaged in management, and not merely have the right to do so.

It is not yet clear whether there is a similar federal exemption (the cases seem to conflict), so the safer course at this time is to assume that offerings of LLC interests to residents of different states are securities under federal law.

There is also an exemption under California law for certain secured promissory notes. More specifically, there is an exemption for:

A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.

This works where there is just one investor per property. It does not work if there are different investors secured by the same property (unless each investor will have a lien with different priority). This is an unusual exemption in that it does not require any form to be filed with the State.

Also, if the promissory note has an equity (profit) “kicker” (versus just interest), then the note is a security.

Unfortunately, there is nothing comparable on the federal level.

General Rules

Generally the location of the investors (and not the state where the entity was formed) determine what securities laws apply. For example, if you sell securities just in California, then you only need to deal with California securities laws. If you sell in other states as well, you generally must also comply with federal securities laws and the laws of each state where you sell.

Because registering an offering of securities with state and/or federal agencies can be expensive and time-consuming, generally the offering is structured specifically to comply with one or more exemptions from registrations. These types of offerings are frequently called Aprivate placements@.

One of the consequences of using securities exemptions, though, is that B with some exceptions — public advertising is not allowed. Where it is allowed, restrictions on the advertising usually apply.

Another consequence of using the securities exemptions is that many of them impose financial requirements on the investors.

Finally, most securities exemptions require the filing of completed exemption forms with the relevant state/federal securities agencies. Still, this is vastly simpler than formally registering the offering.

California Exemptions

If public advertising is required, then either a 25102(n) offering or a California SCOR offering offering must be used. See How the Securities May Be Sold below for a discussion of what does and does not constitute public advertising.

The California 25102(n) exemption allows up to $5 million to be raised, but only a Atombstone@ (bare bones) ad can be used B though it can be placed on a web site too B and only Aqualified@ purchasers can invest. Complete information about the offering can only be given to those who respond to the tombstone ad and then sign a document verifying that they are a qualified purchaser.

If the entity making the offering is a corporation (versus an LLC), then qualified purchasers for 25102(n) purposes are businesses with more than $5 million dollars in assets, and individuals with either a) a minimum net worth (in conjunction with their spouses) of $250,000 and gross income in excess of $100,000, or b) a minimum net worth of $500,000. The kicker is that the value of the residence must be excluded in both cases. In addition, the amount of the investment by each individual cannot exceed 10 percent of the net worth of the individual.

The 25102(n) exemption can also be used with an LLC, but then the investors have to meet the federal A accredited investor@ standards, which are discussed below.

Another alternative is the SCOR (Small Corporate Offering Registration) offering exemption. This is limited to offerings of up to $1 million. Unfortunately, California makes it much harder to conduct a SCOR offering than do other states. Audited financials are required for Aopen@ offerings (as opposed to those limited to, for example, accredited investors) or for offerings exceeding $500,000. The money raised may only be used for operations, not to retire debt, and California requires a minimum price of $2 per share. In addition, the exemption is limited to corporations (not LLC= s) with one class of stock. Finally, California requires that a SCOR offering be qualified by permit. This means that, unlike with most securities exemptions, the State has to approve the offering before it can be made. As a result, a SCOR offering involving California is usually not particularly attractive.

If public advertising is not required, the California 25102(f) and (h) exemptions are much easier to use.

These two exemptions have a number of similarities. Both have no limit on the dollar amount of the offering. Both are limited to 35 investors, although generally insiders and accredited investors are excluded from the count and spouses count as one investor.

One major difference is that the 25102(h) exemption is limited to corporations with one class of stock; the 25102(f) exemption can be used for all securities. This may be important because LLC= s are often used with real-estate investments, given that a Subchapter S corporation cannot be used if its income from passive investments (such as rents) is more than 25% of its total income for more than three years in a row. Another difficulty of using the 25102(h) exemption is that it does not allowing selling expenses (commissions, discounts to brokers, promotional expenses); the 25102(f) exemption does.

On the other hand, the 25102(f) exemption requires the investors to have a substantive pre-existing relationship with one or more principals of the company or the capacity to protect their own interests (alone or in conjunction with an investment advisor); the 25102(h) exemption has no restrictions on the type of investor. Also, while Ageneral solicitation@ is allowed with neither one, the 25102(h) exemption allows individual personal communications to anyone. In contrast, the 25102(f) exemption allows advertising to be made only to persons reasonably believed in advance to meet the 25102(f) qualifications. What that means is that with the 25102(h) exemption (but not the 25102(f) exemption), letters or emails regarding the offer can be sent to a list of potential investors without knowing anything about them.

Federal Exemptions

If the offering is being made to residents of more than one state, then the federal securities laws apply as well. That means that, with the exception of a federal Rule 506 offering (discussed below), the requirements for exemptions for both the state securities laws and the federal securities laws must be met.

The federal Rule 504 exemption may be attractive if the offering is for $1 million or less, since it allows public advertising and there are no investor qualifications.

If the offering is limited to accredited investors (defined below), there are approximately 40 states that have adopted the Model Accredited Investor Exemption (MAIE) B and no registration is required in those. The MAIE allows public advertising of a tombstone ad for the investment, much like the tombstone ad for the California 25102(n) exemption discussed above (although some states have variations).

The Rule 504 exemption may also be used in conjunction with a SCOR offering or (at least within California) the California 25102(n) exemption.

The federal Rule 505 exemption covers offerings up to $5 million. Although no general solicitation/advertising is allowed, there are no investor qualifications. It might possibly be combined with a California 25102(h) offering if one wanted to send individual offers to lists of individuals without knowing what their qualifications might be. Some other states also allow a Form D/Rule 505 filing rather than requiring their own exemption forms, although there are fewer of these states than those that have adopted the MAIE. As a result, the Rule 506 exemption is usually much more attractive.

The federal Rule 506 exemption allows offerings in unlimited amounts B but only to sophisticated or accredited investors. The big advantage this type of offering has is that it is exempt from all state regulation (although notices have to be filed in some states). In other words, no state is allowed to make any kind of review of the terms of the offering and possibly forbid the offering. For this reason, this exemption is frequently used.

The offering can only be made to individual accredited investors (although sophisticated investors may invest as well as long as there is a substantive pre-existing relationship).

Basically, accredited investors are:

Any organization not formed for the specific purpose of acquiring the securities offered and having total assets in excess of $5,000,000;

Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;

Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of the purchase exceeds $1,000,000;

Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income in the current year.

While the federal Regulation A exemption initially looks attractive because of its A test the water@ provision, the problem in California is that an application for qualification B which is relatively complicated B must be filed with the State first. Moreover, other states= securities laws apply to Reg. A offerings. (Reg. A offerings are also limited to a maximum of $5 million.) In addition, Reg. A Atest the waters@ offering can only be done by a licensed broker-dealer. If the entire offering is being done solely in California, the broker-dealer only has to be registered with California; if the securities are being offered to those in other states, the broker-dealer must also be registered with the SEC. Because of these restrictions, the Reg. A exemption is not very attractive.

Who May Sell the Securities

The general rule is that anyone who attempts to sell securities must be licensed as a broker.

Fortunately, California law states that this does not include an officer or director of the company making the offering or an individual occupying a similar status or performing similar functions (such as the manager of an LLC), assuming that he/she does not receive compensation specifically related to purchases or sales of securities. In other words, they can do it as part of a salary, but not, for example, on a commission basis.

Federal law is virtually the same.

Everyone else must hold a broker= s license. If the offering is being sold only in one state, then the broker needs to be licensed in that state only. If the offering is being sold in more than one state, then the broker must be licensed with the SEC as well.

How the Securities May Be Sold

As discussed above, the rule with many private placements is that public advertising is not allowed.

What you can do in those offerings is individually contact potential investors you reasonably believe meet the requirements of the securities exemption. (This often includes potential investors who have a substantive pre-existing business or social relationship with one or more of the principals.) You can contact them by letter, phone, email, etc. as long as the communication is targeted to them individually. What you cannot do is run a newspaper ad, set up a web site, pass out flyers, etc. offering to sell the securities. You also cannot send offers to sell to people on a list if you have no idea whether they meet the qualifications to be an investor. On the other hand, if, for example, you are making a Rule 506 offering, you can purchase a list of investors from a reputable company if the company warrants that it has pre-screened the investors and had a licensed broker determine that they are accredited investors; in that case, you can contact the potential investors on the list individually.

In addition, companies can provide information about themselves to the public as long as the information does not constitute an offer. In other words, as long as there is not an attempt to sell B or attempt to solicit an offer to buy B securities, you can provide information about what the entity is doing or plans to do.

For example, a company can have a web site that generally describes what the company is doing and says something like AFor more information, click here.@ (The web site itself, of course, cannot offer to sell any securities or elicit offers to buy the securities.) That link must then lead to an investor questionnaire/certification and a statement that it should be completed and returned to the company. That questionnaire/certification must then be reviewed a determination made as to whether the person is qualified. If and only if the person reasonably appears to be qualified, then offering materials may be sent and/or a password given to a special section of the web site that contains offering materials.

Another option is to hold Aeducational@ seminars where you present what the company is doing. The seminars, of course, cannot make or solicit any offer to invest. You can, though, pass out investor questionnaires and tell people that if they want more information about the company they need to complete the questionnaire and return it. Alternatively, you can mail or email the questionnaires to the attendees. The forms that are returned can then be reviewed to determine which investors qualify for the offering. You can then make an offering aimed solely at those who reasonably appear to be qualified.

Although the SEC is reconsidering the issue, if a federal securities exemption is being used (because not all the investors are from one state), then only a licensed broker can make the determination that a potential investor is qualified (unless the potential investor has a substantive pre-existing business or social relationship with one or more of the principals so that the principal reasonably believes the potential investor is qualified). This is not the case if the offering is being made only to potential investors in California.

Note that you cannot just ask potential investors if they are qualified to invest. Instead, you must use an investor questionnaire and have the answers reviewed to determine if the investor is qualified or not.

The foregoing article constitutes general information only and should not be relied upon as legal advice.

Now that you have bought your property in the Languedoc,and are thinking of turning it into a Gite, you may consider having a swimming pool to attract more income and more clients into your Gite. Here are the laws surrounding swimming pools.

Everyone should be aware of the law governing pool security in France. It is the law and despite many arguments against it, all in-ground pools in France must now have one of the four approved methods of security system in place. The fine for not complying with the law is €45,000.

Above-ground or semi in-ground pools are not affected by the law and normally just rely on a security ladder or one that gets taken away when the pool is not in use.

The law has been specifically put in place to protect children under five years old but anyone with children will understand that no security device, no matter how well approved can replace the vigilance of a responsible adult at all times.

The law was originally passed on Jan 1 2003. To comply with the law, the standards for pool security systems have been set by AFNOR (the body responsible for French safety standards) so that any method of security fitted must conform to the specifications set out in each category of security device.

There are four types of approved security system:

1. Security Barriers, AFNOR standard: NF P 90-306.

2. Pool Alarms, AFNOR standard: NF P 90-307.

3. Pool Covers, AFNOR standard: NF P 90-308.

4. Pool Abris, AFNOR standard: NF P 90-309.

Any security device can either be self certificated by the manufacturer who declares that it has made the system in accordance with the AFNOR standard, or certificated by the manufacturer and also certified and tested by the LNE (Laboritoire National d’Essai). Any device tested by the LNE will be given its own certification number, it’s considered to be homologated (agreed to) and will carry the NF mark.

1 Security barriers

There are dozens of types of pool security fencing now available in France. There are flexible mesh barriers, metal barriers, UPVC barriers, Perspex and transparent PVC panelled barriers and wooden fences. Although not everyone’s cup of tea, a barrier is one of the best options for pool security.

Note that no natural boundaries can be considered as a security barrier eg: hedges, banks, ditches etc. Neither will any other sort of fencing not specifically made as a pool security system, no matter how impenetrable it is.

For collective usage pools (pools used by more than one family) particularly gites, campsites and so on, there must be a self-closing, self-latching gate which opens outwards away from the pool. Most systems available have this type of gate as standard.

For private pools a barrier system can be fitted with a manually operated gate, but it makes sense if you are going to have a go, to fit a child-proof latch, as high as you can out of reach of little ones.

The main advantage of a barrier is that it needs very little maintenance or testing, so once it’s installed you can pretty much forget about it. As long as any gate fitted is tested occasionally, it doesn’t rely on anyone else doing anything apart from opening the gate.

Another option for a barrier is of course, a wall. There are important parts of the standard that must be adhered to, the most important of these is the barrier must be further than 1m from the edge of a pool, and be over 1.10m high. There must also be no foot holds so natural stone walls are not legal, but a smooth rendered wall is quite acceptable.

The AFNOR standard also states that the barrier must not be so far away from the pool so as to be ineffective, in other words if you fit a wall all around your property it won’t be deemed as secure as the house is inside the protected area. This all gets very complicated and in many cases the best thing to do is protect the pool area only and make it a designated area for swimming only.

Another great advantage of a wall is that it will keep a lot of debris out of the water and it really does define the pool area.

One disadvantage is that it does reduce visibility from outside the pool.

2 Pool alarms

Alarms come in two main types, immersion detector or perimeter alarm. The immersion detector senses a fall into the pool and then must activate within 12 seconds. The perimeter alarm works by infra red beams, when broken the alarm sounds. These systems, although approved, are not the best option for pool security and are best used in conjunction with another approved device.

There are many downsides to using an alarm system: some alarms require wristbands or keys to be worn by swimmers, others need a code to be entered which disarms the alarm while people swim. They don’t work under a cover so need to be removed if you want to winterise your pool.

There are also some grey areas. Alarms must be tested monthly, they are susceptible to false alarms and the AFNOR standards state that a responsible adult must be able to respond to an alarm in less than three minutes. Although a five year old should have an adult with them at all times, if they don’t and there is a fatality, ultimately the responsibility lies with the pool owner.

The only benefit is cost. But the cheapest option is very rarely the best one.

3 Pool covers

As with the other options, there are lots of different security covers available, so the main thing to remember is that whichever sort of cover you choose, it must be put back on whenever your pool is left unattended, so a cover which is easy to put on and take off is important, especially if you expect anyone else using the pool to put the cover on when they aren’t using it.

Any cover used to winterise your pool must also be AFNOR approved (unless you have an alternative form of security),so if your cover is more than three years old the chances are that it won’t be approved and will need changing.

There are covers which do the job of a security system, summer and winter cover and are even available solar or mains powered so all you have to do is turn a key to operate them.

4 Pool abris

An abri looks a bit like a greenhouse and they are available in many shapes and sizes, fixed or telescopic. Apart from the price, (this is about the most expensive option) there are many advantages. As well as it being an approved security device, it will help heat the water in your pool, keep out debris, reduce chemical usage and evaporation, and if you heat your pool, it effectively turns it into an indoor pool you can use all year round.

The main disadvantage to fitting an abris is the cost. A low fixed abri, although cheaper, doesn’t give a lot of room underneath and some people find them claustrophobic: high abris, normally up to 3m tall give plenty of space but also need a great deal of room to install them.

Whichever system you choose, it should be practical and easy to use, and your local pool professional should be able to advise you on the pros and cons of each system and discuss the suitability of each system in your particular application.

(You are advised to get Professional opinion on the Law for swimming pools in France)