The Interstate Land Sales Full Disclosure Act (the “Act”) was originally enacted in 1968 as a way to protect purchasers from buying inaccessible, un-developable, and remote property from a developer who claimed the property would be a good investment. Since then, the Act has evolved into a consumer protection statute with many applications.
The details of the Act are often misunderstood by developers, purchasers, their counsel and even the judiciary, in large part because of the many sources of authority for the Act. To properly interpret the Act, one must examine the statute (15 U.S.C. §§ 1701-20), the Regulations (24 C.F.R. 1710-20), the Guidelines (61 Fed. Reg. 13595-611), HUD Advisory Opinions and case law. Holmes Firm PC has experience representing both developers and purchasers in sales under the Act.
When a property is covered by the Act, the Act provides the purchaser of the land or condominium additional rights to cancel his contract with a developer. The Act requires the developer to either provide lengthy disclosures about the project or comply with exemptions from the Act for all lots or units in the project. Further, if the developer has not fully complied with the Act, a purchaser may cancel his contract for the property for any reason or no reason at all, as long as the purchaser does so within 2 years of the date that he signed the contract for the property (although some cases have allowed a purchaser to cancel a contract up to 3 years after he signed).
Strict compliance with the Act is required for developers, but strict compliance is not easily achieved because of the many sources and recent case law interpretations of the Act. For a consumer, this may be an opportunity to “get out” of a real property purchase (before or after Closing). For a developer, the Act is a tangled web that is not easily unraveled.
The Act’s broad definitions of “developer”, “subdivision” and “common promotional plan” may cause a project to be governed by the Act when it would otherwise appear to be exempt. A developer should consult with an attorney early in the development process to determine how the Act will affect the project. The Act may impact the project’s financing, marketing and purchase contracts.
This article does not constitute legal advice or the formation of an attorney-client relationship, and is not for re-publication without express permission of the Holmes Firm, PC.