Are You Selling Real Estate Or Securities? How Condo/Hotel Owners And Developers Can Avoid Problems

The Supreme Court's refusal in February 2014 to hear the real estate driven Ninth Circuit case, Salameh v. Tarsadia, provided Condo-hotel owners and developers with relatively clear guidelines on how to avoid securities issues and/or litigation when selling Condominium units. The determination of what constitutes a real estate investment versus a security investment were laid out in the Ninth Circuit's decision, and that court's analysis was left standing as legal precedent by the Supreme Court.
 
To bolster the argument that the sale of a unit at a hotel-condo real estate development project is not and should not be treated as a sale of a security, consider these factors:  

•  Timing: Make sure that if a rental management agreement is signed, it is done so well after the sale. The court's ruling found that the 8-15 month gap between buyers signing the sale agreement and the management agreement made it clear that the two were separate transactions, and therefore