Chapter 2 - § 2.7 • LEASING PROGRAMS

• Jurisdiction: Colorado

§ 2.7 • LEASING PROGRAMS

Various leasing programs are commonly considered to be securities:

• When investors exchange cash and promissory notes to purchase leasehold interests in plates for printing local Scottish postage stamps, this may be a security where the investors are relying on the promoter to realize profits.⁶²
• A rental pool arrangement offered together with the sale of a condominium makes that condominium a security.⁶³ On the other hand, a condominium offered without a contemporaneous rental arrangement is not a security.⁶⁴ In the no-action letter for International Investment Properties, Inc.,⁶⁵ the staff emphasized that the "units should be offered and sold without any emphasis on the economic benefits to purchasers to be derived either from the managerial efforts of others or from the rental of units." The Southern District of California dismissed a complaint with prejudice as not involving a security when it determined that the "[p]laintiffs' allegations do not sufficiently set forth facts indicating they were offered the [condominium] Purchase Contract and Rental Management Agreement as part of a single package" and they represented in the purchase contract that they were not purchasing the condominium units for investment purposes.⁶⁶
• In a response to a no-action letter, the Division of Corporation Finance advised Intrawest⁶⁷ that its sales representatives for a resort condominium development could mention that the developer offered a rental management program "as one of the many services offered to unit owners." Sales representatives would not discuss the economic or tax benefits that an owner may gain from entering into a rental arrangement. Furthermore, the rental program was wholly voluntary and distinct from the sales program. The staff concluded that, under these circumstances, the sale of the condominium units did not require registration.
• An investment in an equipment leasing transaction "describes an investment contract within the scope of the securities laws."⁶⁸
• The staff of the SEC's Division of Corporation Finance found that a program by which a dealer in recreational vehicles sold the vehicles to customers, then leased the vehicles back from customers for rental by the dealer to other customers for 11 months out of the year, was a security.⁶⁹

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Notes:

^[62] Newmyer v. Philatelic Leasing, Ltd., 888 F.2d 385 (6th Cir. 1989).

^[63] Hocking v. DuBois, 885 F.2d 1449 (9th Cir. 1989). In Salameh v. Tarsadia Hotel, 726...