Interstate Land Sales Act: The Devil is in the Details
Previously we have discussed the use of The Interstate Land Sales Act (ILSA) as an escape mechanism for purchasers trying to walk away from contracts to purchase either homes or condominiums. Today we will examine the Act in greater detail.
In order for the sale of a condominium in Florida to be exempt from the federal act, the contract must unconditionally obligate the developer to complete construction within two years and must not limit the purchaser’s remedies of specific performance or damages. A developer may not claim an exemption under the Act when damages for a violation of a two-year construction provision are limited to the return of the deposit or specific performance.
According to 15A Am. Jur. 2d Condominiums and Cooperative Apartments § 15:
The Interstate Land Sales Full Disclosure Act is applicable to the sales of condominiums. The Act prohibits a developer from selling or leasing land in a subdivision through the use of means or instruments of interstate commerce or of the mails, unless a statement of record is in effect and the developer has furnished each purchaser with a printed property report. This property report must be provided before the purchaser signs any contract for sale or lease of the property. If such a report is not furnished in advance of the transaction, the purchaser has the option of voiding the contract.
The Department of Housing and Urban Development has stipulated that the condominium will come under the Act if the unit will not be completed within two years, or if the significant recreational or other common facilities are being constructed which will not be completed within two years from the time the first purchaser signs a contract. For a condominium unit sale to be exempted from the reporting requirements of the Act, the construction of the condominium must be completed before it is sold, or it must be sold under a contract obligating the seller to erect the unit within two years from the date the purchaser signs the contract for sale. It is immaterial that a condominium may have actually been completed within two years for determining whether the sale is exempt from the reporting requirement, and if there is no specified date of completion in the purchase contract the sale does not come within the exemption provided under Act, and the purchaser may exercise the statutory right to withdraw from the sale.
Under §1702 the following exemptions from the Interstate Land Sales Act are established:
· (a)(2) Sale of land on which there is an improvement or a contract obligating seller or lessor to erect a building within 2 years
· (b)(1) There are fewer than 100 lots
· (b)(2) If in the 12 month period starting with the sale of the first unit not more than 12 units or lots are sold or leased
§1703 Establishes the Requirements Respecting the Sale or Lease of Lots
· (a)(1)(B) Property report must be provided in advance of signing contract for purchase
· (c) When the report is not provided prior to signing the contract for purchase, the contract may be revoked within 2 years from the date of signing
The Interstate Land Sales Full Disclosure Act is a valuable tool in the arsenal of any attorney representing a purchaser seeking to revoke a contract. With the reemergence of the Interstate Land Sales Full Disclosure Act developers must rethink their traditional sales contracts as well as learn about the proper process for registering a project with HUD so that their project is outside the scope of the Act.
