Will Never Sing? the Fat Lady C oncerned about schemes to sell resurgence of litigation under ILSA. In actions by the U.S. Department of Hous- undevelopable swampland, des- the fjrst six months of 2009 alone, buy- ing and Urban Development (HUD), ert scrub, and property lacking ers sought a right of rescission under the enforcement agency for ILSA. The roads, utilities, and other basic infra- ILSA in more than 40 reported state litigation under ILSA generally focuses structure to unsuspecting consumers, and federal cases. The law has become on one or more of four basic issues: Congress in 1968 passed the Interstate a battleground for alleged violations in whether ILSA applies to the transac- Land Sales Full Disclosure Act (ILSA), cases brought by speculators who do tion, whether the transaction is exempt 15 U.S.C. §§ 1701 et seq., “to deter or not claim to have been defrauded or from ILSA, whether a partial exemption prohibit the sale of land by use of the misled. Under applicable circumstances excuses the developer from register- mails or other channels of interstate the right of rescission is automatic, even ing a statement of record with HUD commerce through misrepresentation if the developer’s violation bears no re- and providing a property report to the of material facts relating to the prop- lation to the reason the buyer invokes it buyer, and whether a limitations period erty.” H.R. Rep. No. 1785 (Conf. Rep.), and the severity of the remedy is out of bars the suit. This article takes a look at as reprinted in 1968 U.S.C.C.A.N. vol. 2, all proportion to the harm (if any) done these issues. at 3066. ILSA was written with a fairly by the violation. So long as the remedy The Structure of ILSA broad brush, however, and in the ensu- for a developer’s guessing wrong about ing 40 years it has been used in an ever- the availability of an exemption or the ILSA, which is patterned after the widening context, including by buyers acceptability of certain contract provi- Securities Law of 1933, does three basic seeking to avoid purchase contracts for sions is rescission, plaintiffs’ lawyers things with respect to sales and leases of condominium units in high-rise build- will test the boundaries of ILSA’s pro- property in interstate commerce. First, it ings that have been completed with full tective umbrella. generally prohibits fraud and misrepre- utilities, roads, and amenities. The technicalities of ILSA have sentation. 15 U.S.C. § 1703(a)(2). Second, Every real estate downturn brings a become so complex that after four it requires certain consumer-favored decades the courts are in confmict about provisions in purchase and lease agree- Max Licht Richard C. Linquanti is a shareholder its requirements and developers are ments. Id. § 1703(d). Third, it requires in the Tampa, Florida, offjce of Carlton uncertain about how to avoid its pitfalls. the developer to register non-exempt Fields, P.A. Most cases are private suits rather than property with HUD and to give a A Brief Survey of Continuing Issues with the Interstate Land Sales Full Disclosure Act By Richard C. Linquanti 46 P ROBATE & P ROPERTY j N OVEMBER /D ECEMBER 2009
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