Elected officials, led by Congresswoman Carolyn Maloney, have introduced a bi-partisan bill, the Interstate Land Sales Disclosure Act Update 2012, to give condominium developers and their lenders some clarity about federal disclosure requirements as the economy continues to recover.
Enacted in 1969, the Interstate Land Sales Act (ILSA) was created to protect consumers of undeveloped land, mostly out-of-state buyers, from false advertising and provide a right of action to rescind contracts. ILSA was not intended to regulate built developments and high-rise unit sales.
ILSA was not applied to high-rise condominiums until 2008 when the real estate market crashed and purchasers’ lawyers looked for ways to escape new condo development contracts. Cases were filed in New York, Florida and throughout the country claiming technical violations of ILSA and demanding full rescission of contracts. Judgments in favor of purchasers were devastating to developments and the real estate industry.
This proposed legislation would amend ILSA so that condominiums sales are distinguished from other types of land sales, recognizing the unique conditions under which these units are sold in today’s market.
REBNY (Real Estate Board of New York) supports this bill which would not have been introduced without the leadership of Rep. Carolyn Maloney (D-NY). Reps. Patrick McHenry (R-NC), Jerrold Nadler (D-NY), and Michael Grimm (R-NY)
The support from both sides of the aisle speaks volumes on the importance of this legislation and the need to get it passed.
The struggling residential construction market is starting to move again and passing this bill gives developers more certainty with new projects by removing the heavy burden of unnecessary, duplicative and expensive regulations whenever possible. It would clarify developer’s disclosure responsibility and prevent purchasers of legitimate condominium sales from walking away from deals and having a “free option” on new developments.
It is important to note that although the bill will exempt condos from ILSA’s registration requirements, it will maintain all protections for consumers who will still have the right to rescind contracts in cases of fraud. Furthermore, developers would still be required to comply with state laws that require specific disclosures.
This legislation would ensure that ILSA will work as intended, without impeding new construction projects and encourage growth in our great city.