## Facts

- Ninety-eight purchasers bought condominium units in the Legacy Dunes project in Kissimmee, Florida, after an apartment-to-condominium conversion organized through entities associated with Development Resources Group, LLC.
- Units were marketed primarily to out-of-state investors through workshops and promotional materials that emphasized rental income potential and minimal owner effort.
- The condominium documents and purchase agreements provided for fee simple ownership of individual units and included provisions limiting reliance on oral statements and requiring buyers to accept the condominium declaration and existing leases.
- For about one year beginning June 27, 2006, long-term leasing for certain owners was subject to an exclusive long-term leasing agent arrangement; addenda also disclosed a short-term rental option and a time-limited rental guarantee.
- After the initial period, owners could lease their units themselves, retain a management company of their choosing, or sell their units.
- Control of the condominium association transferred to unit owners on September 30, 2006.
- After purchase, some owners experienced reduced rental income and depreciation in unit values.
- Purchasers sued under federal securities laws and state-law theories, alleging the transactions were investment contracts because profits were expected from defendants’ rental and management efforts.

## Issues

1. Whether sales of fee simple condominium units, together with related rental/management arrangements and promotional activity, constituted “investment contracts” under the Howey test and therefore “securities” under federal law.
2. Whether summary judgment for defendants on the federal securities claims was proper when owners had individual unit ownership and only limited, time-bound leasing restrictions.

## Decision

- The Eleventh Circuit reviewed summary judgment de novo.
- The court affirmed summary judgment for defendants on the federal securities claims.
- The court held the condominium transactions were not investment contracts and therefore not securities.
- Because no federal claim remained, the district court’s decision declining supplemental jurisdiction over state-law claims was left undisturbed.

## Legal Principles

- An investment contract requires (1) an investment of money, (2) a common enterprise, and (3) an expectation of profits to be derived primarily from the entrepreneurial or managerial efforts of others.
- Fee simple real estate sales generally do not become securities absent a meaningful common enterprise or investor dependence on promoters for profits.
- The “common enterprise” element is not met where owners’ returns are tied to their individual units and rental income is not pooled or shared through a profit-sharing structure.
- A temporary, non-pooled leasing or management arrangement—especially where owners can later self-manage, choose other agents, or sell—does not by itself establish profit expectation from others’ efforts for Howey purposes.
- Courts give substantial weight to written transaction documents defining owners’ rights and obligations; marketing statements do not override clear contractual disclosures and limitations on oral representations.

## Conclusion

The court treated the Legacy Dunes transactions as traditional condominium purchases rather than securities offerings because owners held fee simple interests, lacked pooled profit arrangements, and were not committed to ongoing promoter-controlled management sufficient to satisfy Howey’s common-enterprise and reliance elements.


Alunni v. Dev. Res. Grp., LLC, 445 F. App’x 288 (11th Cir. 2011)