§ 338. Inspection power of department of state; unlawful practices;
penalties. 1. The department of state may cause an investigation and an
inspection to be made of any subdivision of vacant land proposed to be
offered for sale or lease in this state pursuant to this article and may
make a report of its findings thereon.

2. Where an inspection is to be made of subdivided lands, situated
outside of the state of New York and being offered for sale in this
state, the statement required by section three hundred thirty-seven-a
shall be accompanied by the filing fee and in addition there shall be
remitted to the department of state an amount equivalent to the cost of
travel from New York to the location of the project and return, as
estimated by the department of state, and a further amount estimated to
be necessary to cover the additional expenses of such inspection, not to
exceed fifteen dollars a day, for each day consumed in the examination
of the project.

3. It shall be unlawful for the subdivider or his or its agent, to
change the financial structure of such offering after the submission
thereof to the department of state without first notifying the
department in writing of such intention.

4. Where the vacant lands to be subdivided shall be subject to a lien
or encumbrance securing or evidencing the payment of money other than
taxes or assessments levied by public authority, or where the interest
of the owner and subdivider or his or its agent be held under option or
contract of purchase or in trust, it shall be unlawful to sell any
vacant land in such subdivision unless provision in such lien,
encumbrance, option, contract or trust agreement, or in an agreement
supplementary thereto, enables the vendor to convey valid title to each
parcel so sold or leased free of such lien, encumbrance, option,
contract or trust agreement, upon completion of all payments and
performance of all the terms and conditions required to be made and
performed by the vendee under the agreement of sale. Where the
consideration price for the lot or lots sold has been amortized to an
extent that the balance due and owing thereunder equals in an amount
required to release such lot or lots from any existing lien,
encumbrance, tax, assessment, option contract or first agreement, and
the initial cost for said vacant land has not been paid for by the owner
or subdivider, that in such event all moneys thereafter received by the
owner or subdivider from the purchaser of said lot or lots shall be
segregated and kept in a separate account and be impressed with a trust
which shall be applied towards the clearance of title to the vacant land
thereafter intended to be conveyed to the purchaser. After default
shall have occurred in the payment of any tax or assessment levied and
assessed against the premises or after default shall have occurred under
and pursuant to the terms of any contract, mortgage lien, charge or
encumbrance, all moneys received by the owner or subdivider from the
purchaser of said lot or lots shall be segregated and kept in a separate
account and be impressed with a trust which shall be applied towards the
clearance of title to the vacant land thereafter intended to be conveyed
to the purchaser. Certified or verified copies of documents containing
such provisions shall be filed with the department of state prior to the
sale or lease or offer of sale or lease of any part of the subdivision.

5. (a) Every person, officer, director, agent or employee of a
company, partnership, association or corporation who or which knowingly
offers to sell or to lease, or sells or leases subdivided lands prior to
the filing of the offering statement and the verified statement required
by this article shall be guilty of a felony.

(b) Except as provided in subdivision (a) hereof, every person,
officer, director, agent or employee of a company, partnership,
corporation, or association who or which knowingly authorizes, directs
or aids in the publication, advertisement, distribution or circulation
of any device, scheme or artifice for obtaining money or property by
means of any false pretense, representation or promise concerning any
vacant land or lands or subdivision thereof, offered for sale or lease,
and every person, officer, director, agent or employee of a company,
partnership, corporation or association who or which shall have made or
attempts to make in the state fictitious or pretended purchases or sales
of vacant lands, or who, in any other respect, wilfully violated or
fails to comply with any of the provisions of this article, or knowingly
omits or neglects to obey, observe or comply with any order, permit,
decision, demand or requirement of the department of state under the
provisions of this article, is guilty of a misdemeanor and, if a
licensee under article twelve (a) of this chapter, the department of
state also may revoke or suspend his license in the manner provided in
such article. The commission of a single act prohibited by this article
shall constitute a violation thereof. All courts of special sessions,
within their respective territorial jurisdiction, are hereby empowered
to hear, try, and determine such violations without indictment, and to
impose the punishments prescribed by law therefor.

6. It shall be the duty of the attorney-general to prosecute all
violations of the provisions of this article; such prosecutions may be
instituted upon the written request or demand of the department of
state. In all criminal proceedings, the attorney-general may appear in
person or by his deputy before any court of record or any grand jury and
exercise all the powers and perform all the duties in respect of such
actions or proceedings which the district attorney would otherwise be
authorized or required to exercise or perform; or the attorney-general
may in his discretion transmit evidence, proof and information as to
such offense to the district attorney of the county or counties in which
the alleged violation has occurred, and every district attorney to whom
such evidence, proof and information is so transmitted shall forthwith
proceed to prosecute any corporation, company, association, or officer,
manager or agent thereof, or any firm or person charged with such
violation. In any such proceeding, wherein the attorney-general has
appeared either in person or by deputy, the district attorney shall only
exercise such powers and perform such duties as are required of him by
the attorney-general or the deputy attorney-general so appearing. The
attorney-general shall, upon a conviction for a violation of any
provision of this article, and within ten days thereafter, make and file
with the department of state a detailed report showing the date of such
conviction, the name of the person convicted and the exact nature of the
charge.

7. Any false statement contained in any statement or supplemental
statement filed with the department of state pursuant to the
requirements of this article, or in any affidavit attached thereto,
shall constitute a violation of this article.

8. Any person, partnership, corporation, company or association
representing in any manner that the state, the department of state, or
any officer thereof has recommended or acquiesced in the recommendation
of the purchase of any subdivided lands offered for sale or lease, in
advertising or offering such subdivided lands for sale or lease, shall
be guilty of a misdemeanor punishable by a fine of not more than one
thousand dollars, or imprisonment for not more than one year or by both
such fine and imprisonment.