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Full text of "Ponderosa Pines Ranch, a subdivision case study"

333.32 



STATE DOCUMENTS 



Montana Slate Ubrarv 

11:111111 

3 0864 1004 5853 1 



MAR 1 9 1975 



STATE OF MONTANA 
ENVIRONMENTAL QUALITY COUNCIL 
HELENA, MONTANA 



PONDEROSA PINES RANCH 
A Subdivision Case Study 

by 



Kenneth F. Porter 
WICRE Intern 

and 

Tina Torgrimson 
Research Assistant 



January 197^ 



Senator Elmer Flynn 
Chairman 



Fletcher E. Newby 
Executive Director 



MONTANA STATE LiBRARY 
930 Eott Lyndale Avenue 
■'■'•■ xifana 39601 



4 



A Once In a Lifetime Opportunity 
The Best Land Investment Offer 
EVER TO BE MADE AVAILABLE TO GUAM RESIDENTS TO PARTICIPATE 
IN THE LUCRATIVE REAL ESTATE MARKET 

$ $ $ BUY LAND AT THE IDWEST POSSIBLE MARKET PRICE $ $ $ 

We all want to own land for ourselves and for our children. 
Some of us do own land; some of us don't. Do YOU own land 
right now? Can you afford to buy land for your children? 
If your answers are "yes", then you are certainly a very 
fortunate person. If not, then you should certainly read 
this ad (and then see us about it) because this is perhaps 
just what you have been looking for! We are offering you 
a very positive opportunity to become a living part of the 
most lucrative business — real estate investment. At least we 
think YOU should, for the following simple reasons upon 
which the whole concept of real estate investment is premised: 

1. land is the basis of money. If you own land, you 
have money I 

2. 'Hie price of land inevitably escalates, and often 
sky rockets astronomically out of proportion to its 
original cost. Whatever the price of land is today, 
you can be sure that it will be much more tomorrow. . , 



The above is the beginning of an advertisement that appeared 
in the Pacific Daily News, Guam, January 13, 1973. The land it is 
advertising for sale is 13,000 acres of Montana — Ponderosa Pines 
Ranch. It is being sold in Hawaii, Southeast Asia and Japan; none of 
the land is being offered for sale in Montana. 

Ponderosa Pines Ranch is In Gallatin County, adjacent to the 
east side of the Missouri River and extending into the Horseshoe 
Hills. The 13,000-acre ranch is being subdivided into 908 lots of 



10 and 20 acres each. In addition to the immensity of the subdivision, 
this land deal is significant because it exemplifies misleading sales 
tactics and advertising, an absence of land use planning that could 
create countless problems in the future, and an apparent immunity 
from any subdivision or real estate law. 

The ranch is presently being leased and operated by the former 
owner, Mike Quinn, of Boulder. Some of the land is planted in wheat 
and the rest is used to graze horses and cattle. Topography varies 
from steep slopes to meadow land to timber land. 

Quinn said he was approached by Lincoln-Green, Inc., Missoula, 
which offered to buy his Horseshoe Hills ranch. The first document 
filed with the Gallatin County clerk and recorder was for purchaser's 
Interest (the purchaser is in the process of paying for the land, so 
the title remains In the original owner's name until the land is 
completely paid for), from Mike Quinn to Lincoln-Green, Inc. In June 
1972. A transfer dated July 17, 1972 provided purchaser's interest 
from the seller, Lincoln-Green, Inc., to the buyers, Morris and 
Roberta Moche, Honolulu, Hawaii. 

In February 1973, William Smiley, Bozeman, visited Morris 
Moche 's Honolulu office at the request of the Gallatin city-county 
planning director. Smiley posed as an interested buyer. Moche told 
him about hunting (Including buffalo), fishing and skiing but never 
explained whether these were available on the ranch. He told Smiley 
the ranch lies in the center of 35 national parks and adjacent to 
Yellowstone Park and Chet Huntley's Big Sky resort. To say the ranch 

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is in the center of 35 national parks, when the closest are 100-300 
miles away, or that Yellowstone is "adjacent" when it is 100 miles 
away Ls a deceptive ©vwetstemsnt « SK&ley wrote, "He (Moohe) 
talked about boating on Flathead lake and shopping In 3r« a1 Pal Ls ai 

though they were within walking distance." Flatheai is about 250 
miles; Great Palls is about 175. 

A potential purchaser is given a copy of a Montana Highway 
Department brochure about Montana and a public offering statement 
required by Hawaii law. Moche had no brochures about the ranch but 
did have an album of snapshots. Smiley described the sales talk as 
"high pressure tactics" and potentially misleading, especially to 
a person unfamiliar with Montana and its land. For example, Moche 
told Smiley that the Montana Power Company would install gas and 
electricity at no charge. A Montana Power spokesman in Bozeman 
later said that he seriously doubted whether the subdivision could 
get these services free. He said it was unlikely tint one particular 
subdivision could get special services. 

The advertising campaign in Hawaii was widespread. Television 
and newspapers were the most common media. The television advertisement 
script was not available at this writing, but the video portion of the 
advertisement, according to Smiley, was a "big lake with mountains and 
trees." There are no mountains or lakes on the Ponderosa Pines Ranch. 
In fact, there are no known ponderosa pine trees. The advertisement 
also announced plans for a contest and a free trip to Montana. 

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Newspaper advertisements were made In the Japan Times and the 
Pacific Daily News (Guam). They offered escape or lucrative investment, 
Sales prices for lots on the ranch differ depending on topography. 
Prices range from: 

$2,995 for 10 acres of steep slopes, 

$3 j 995 for 10 acres of more gradual slopes, 

$4,995 for 10 acres of still more gradual slopes, 

$5,995 for 10 acres of meadow bottom, and 

$6,995 for 10 acres of timber land. 
Extra costs involved are $175 for a survey trust fund and $7 a year 
for the "general maintenance" of the land. Prices for 20-acre lots 
are not quite double the figures for 10-acre lots. Financing terms, 
for example, for a 20-acre lot are a $595 down payment and a $56.99 
monthly payment for 143 months. 

The land is being sold on a contract-for-deed basis and the county 
has no information on the number of lots under contract or when they 
wil] be deeded to new owners. Immediate questions arise concerning 
the deeding of parkland to the county, the assessment of this land, 
and the difficulties the county may face in collecting taxes from 
owners scattered over such distant areas. On the other hand, if the 
owners choose to occupy their lots the county will suddenly be faced 
with responsibility for a number of public services it may not be 
prepared to provide. 

Moche's stationery letterhead reveals sales outlets in Tokyo, 
Guam and Hong Kong. Moche handles sales in Honolulu and a General 



Investment Corporation (G-I-C) broker handles sales in Tokyo. The 
City Realty, Inc., Agana, Guam has a franchise from G-I-C to sell lots. 

Persons interested in seeing the land are instructed to contact the 
Reely Brothers of Missoula, Montana. The Reely's are John, president, 
and William, vice president, of Lincoln-Green, Inc., the real estate 
corporation that sold the land to the Moches. Their Montana legsl 
counsel is Milton Datsopoulos, Missoula. 

The sales contract for Ponderosa Pines stipulates that the 
"Buyer' agrees that neither the Seller not? assigns shall be held to 
any covenant respecting the condition of any improvements on said 
property, nor to any agreement for alterations, improvements, repairs, 
access roads or utility services, unless the covenant or agreement be 
in writing and duly executed by the parties." 

The contract stipulates that if a monthly payment is late, a 
charge of $3 or 10 percent, whichever is greater, is assessed the 
purchaser. If the payment is late by 30 days or more, the seller has 
the right to resell the land and retain all previous payments. 

The contract gives the purchaser the right to an access easement 
if there is no existing road running to or through the lot. The access 
is to be no more than 30 feet wide and "shall be as close to boundary 
lines as practicable and shall be designated by seller upon the com- 
pletion of the survey of said development." 

Purchasers are given the right to exchange their lots for others 
(some lots are being held off the market for this purpose) if, when 

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they finish payment, the deed to their lots cannot be transmitted 
(there can be a 120-day lag period). If they do not like their lots 
upon inspection, within 36 months of the contract date they may exchange 
them for others. If the exchange lot is of higher value, the contract 
price will be adjusted accordingly. 

The public offering statement required by Hawaii law contains 
a number of potentially misleading statements, especially for persons 
unfamiliar' with the area and Montana in general. 

The description of the land's location is accurate, but the 
statement does not explain whether a straight-line measurement (as 
the crow flies) or a road mileage measurement was used. For example, 
Three Forks may be 10 miles by air, but it is 19 miles by road. Helena 
is about 87 miles by road rather than the 60 reported. Bozeman is 
39 rather than 30. The statement describes the "easy commuting 
distance," yet fails to mention that about 13-15 miles of a Journey 
on any road would be unsurfaced. In addition, the statement suggests 
that the trip to Helena is by freeway, which it is not. 

The statement says "Yellowstone National Park is a little over 
100 miles away, and there are many other state and national parks 
nearby." But the closest other national parks, Grand Teton (200 miles) 
and Glacier (300 miles), are hardly "nearby." 

The discussion of topography is truthful but overly general. 
This excerpt from the "Description of Land" is ambiguous: "These 
areas are divided into lots of a size best-suited to the contour of 
the land." The platting diagram reveals that drainage patterns and 
slope were disregarded in shaping and sizing the lots. Further-mo 1 v , 

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the contours and slopes of the land are not readily understood from 
the platting diagram. Many of the lots appear to Include nothing but 
steep hillsides, which leads to problems with Installing septic tanks 
and erecting buildings. A real estate agent in Gallatin County, Paul 
Dudley, commented, "In inquiring around (about the Ponderosa Pines 
Ranch) , we found that one party — either he was a prospective buyer or 
had already agreed to buy — had visited the ranch and found that his 
particular tract was so steep and hilly that no building could be 
erected." 

The offering statement says, "The ranch contains numerous 
wells, springs, and intermittent and permanent streams." Mike Quinn, 
the former owner, said he knows of only three wells and .just a few 
springs. In August he said no streams were running. The offering 
statement makes it clear the developer will not provide water, power, 
or communication lines to the subdivision. 

Regarding taxes on the land, the offering statement reads, 
"Gallatin County property taxes are less than $1 an acre a year." 
This may be true in some cases, but it is not an accurate assessment 
for developed residential land. The land is being sold "for residential, 
recreational, or agricultural purposes." 

In the "Public Transportation" section, the statement implies 
that railroad service is available in Three Forks. It is not. 
Passenger service is available in Bozeman three days a week. The statement 
mentions that the Burlington Northern Railway runs along the front of 
the ranch. But it does not stop there. Also, the statement mentions 
that two railroads pass through Three Forks. One Is the Burlington 

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Northern that does not stop and the other is a freight service, which 
of course does not provide public transportation. 

The statement asserts that there are "complete shopping facilities 
in Three Forks, 10 miles'.' Three Forks does have some shopping facilities, 
but as a town of 1,200 it could hardly be described as having "complete" 
shopping facilities. 

The statement says "sewage disposal would be the responsibility 
of the individual buyer." Buyers are not informed of the possibility 
that septic tanks might not be allowed. They are not informed about 
Montana's laws concerning sewage disposal and that if sanitary 
restrictions on the land are not lifted, they would not be able to 
build. 

"No new roads are being constructed on the property, and none wil] 
be constructed by the developer," the offering statement reports. A 
county road reportedly runs along the front of the ranch for three miles. 
Numerous trails and small dirt-gravel roads meander tlu>ough the property, 
cutting through the middle of lots in some places. Most of the lots 
presently have no access whatsoever. No estimate is given for the 
cost of installing access roads, though the offering statement says 
easements for roads and utilities will be provided for in each parcel. 

The offering statement is not only misleading but ignores all 
reasons for proper planning. If people do begin moving in, the sei*- 
vices they will require (roads, road maintenance, schools, school 
busing, medical facilities, waste disposal, fire and police protection) 

-8- 



will put a burden on county government , as well as a tax burden on 
other Gallatin County residents, who will end up paying for the 
developer's lack of planning. In addition, there is no assessment of 
or regard for the area environment (water quality and availability, 
soil characteristics, wildlife populations, community impact and best 
use of the land) or of the potential effects such a huge development 
will impose on it. 

Because the current sellers, the Moches, are Hawaii residents 
and are not selling the Ponderosa Pines subdivision in Montana, their 
actions are not regulated by the Montana Board of Real Estate. Since 
the lots are all larger than five acres, the Moches were not required 
to register the subdivision with the U.S. Department of Housing and 
Urban Development under the Federal Interstate Land Sales Act. The 
only regulatory body involved is the Hawaii Department of Regulatory 
Agencies that requires the public offering statement (describing the 
development and its surroundings) to be filed and presented to all 
prospective buyers. The department also regulates advertising to 
some degree. Obviously, the Hawaiian government cannot adequately 
evaluate the accuracy of the offering statement or advertising, much 
less investigate the effects of a subdivision in Gallatin County, 
Montana. 

Apparently, Ponderosa Pines Ranch is not subject to the 1973 
Montana Subdivision and Platting Act, which states: 

"It is the purpose of this act to promote the 
public health, safety, and genera], welfare by 
regulating the subdivision of land; to prevent 
overcrowding of land; to lessen congestion In 
the streets and highways; to provide for adequate 

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light, air, water supply, sewage disposal, parks 
and recreation areas, ingress and egress, and other 
public requirements; to encourage development in 
harmony with the natural environment; and to require 
uniform monumentation of land subdivisions and 
transferring interests in real property by reference 
to plat or certificate of survey." 

According to a recent opinion by Montana's attorney general, Robert 
Woodahl, "the Montana Subdivision and Platting Act does not govern 
the recording of deeds prepared and executed under contracts for 
deed prior to July 1, 1973 > but not present for recording until after 
June 30, 1973 •" The documents filed for purchaser's interest of 
Fonderosa Pines Ranch (essentially the same as contract for deed) were 
recorded prior to the law's effective date, meaning that the division 
of the land occurred before the law went into effect, and would thus 
not be subject to the law. 

Woodahl 's ruling is supported by a 1972 Montana Supreme Court 
decision, which states that the land purchaser (for example, someone 
buying on a contract-for-deed basis) in effect is the "real" owner. 
This would mean that the Moche's were the "real" owners, or titleholders 
of the land before the Montana Subdivision and Platting Act went into 
effect, thus exempting thein. 

The Montana Subdivision and Platting Act is clearly intended to 
control land deals such as the Ponderosa Pines Ranch. It is unfortunate 
that this subdivision, which illustrates many of the reasons the law 
was enacted, is outside the law's jurisdiction. 

-10- 



This case, however, also demonstrates the need for a strong, 
comprehensive land sales practices act that would require registration 
of all lands to bo subdivided, regulation of land sales pracl ' , 
and criminal penalties and hearings for failure to comply. Such an 
act should require that no developnent could offer or dispose of any 
lot or subdivision in Montana without the filing of a registration 
statement and approval of it by the Montana Board of Real Estate. 
The land sales practices act would also regulate advertising and sales 
methods, thus preventing; the misleading of interested purchasers. 

Such an act was introduced in the 1973 legislature, but killed. 
The intent of the law will be included in the ongoing Environmental 
Quality Council land use policy study, which will be presented to 
the V~>7 r; legislature. 

A land sales practices act, coupled with other Land development 
laws, would protect Montana land, Montana people and prospeel Lve 
buyers. In the case of Fonderosa Pines, only the developer will 
profit from a Montana resource, its land. Montanans and buyers are 
stuck with the social and environmental costs. 



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