ILSA Case Law Alert: Southern District Of Florida Holds That A Violation Of The Interstate Land Sales Full Disclosure Act Is Also A Per Se Violation Of The Florida Deceptive And Unfair Trade Practices Act

A hat tip goes out to Tim O’Neill, who brought a brand new and crucial opinion interpreting the federal Interstate Land Sales Full Disclosure Act (ILSA) to my attention.  The case is Trotta v. Lighthouse Point Land Company, LLC, 2008 U.S. Dist. LEXIS 10559 (S.D. Fla. Feb. 2008), which was handed down less than two weeks ago by Judge Daniel Hurley in the Southern District of Florida.  The growing crowd of “ILSA buffs” — which these days includes many condo and home buyers looking for bases to rescind their purchase agreements, developers who are getting hit with lawsuits from such buyers, and the lawyers representing buyers and developers — should be aware of Trotta and read it closely.

In Trotta, the plaintiff was a condo buyer who sued to recover his deposit monies, after closing on the condo, for failure of the transaction to comply with ILSA.  Judge Hurley ultimately agreed with the buyer.  The reason: the condominium development contained between 25 and 100 units, but the purchase agreement failed to comply with the requirements of 15 section 1703(d).  For more information on why this is a basis to rescind a contract under ILSA, one needs to look at two earlier decisions — Pugliese v. Pukka Development, Inc., and Meridian Ventures, LLC v. One North Ocean, LLC — about which I have written previously, here and here.

There are some more intriguing aspects to the opinion than its result, however.  For one, the plaintiff tried to argue that the development actually contained more than 99 lots; had the plaintiff been successful, then the court could also have found an ILSA violation on the basis of the failure to register the condo with the U.S. Department of Housing and Urban Development and failure to provide a Property Report, in addition to the lack of complaince with section 1703.  But the Court disagreed with the buyer on this point.  While the buyer argued that the condominium contained 126 lots because it had 67 condo units plus 59 storage units, the Court found that “storage spaces are not lots within the meaning of . . . ILSA.”  As far as I am aware, Trotta is the first court to rule on this issue.

Second, the buyer tried to argue that the development contained more than 99 lots because units in two other developments should be combined as all three developments were “designed and marketed pursuant to a common promotional plan.”  Again, the Court sided with the developer, noting that the three developments in question “are on separate sites, maintained separate sales offices, conducted separate advertising campaigns, and filed separate Prospectuses with Florida regulatory authorities.”  Once again, the case law on what constitutes a “common promotional plan” for purposes of ILSA is sparse, so this language from Trotta will become important for courts faced with deciding the same issue in the future.

The third key aspect of Trotta is a clear victory for buyers.  In addition to his ILSA claim, the plaintiff brought a claim under a Florida state statute called the Florida Deceptive and Unfair Trade Practices Act, which is commonly known as “FDUTPA.”  With respect to the FDUTPA claim, Judge Hurley held that:

“A violation of any ‘law, statute, rule, or ordinance whch proscribes unfair methods of competition, or unfair, deceptive, or unconscionsable acts or practices’ is a per se violation of the FDUTPA.  Fla. Stat. § 501.203(3)(c).  Because ILSA generally proscribes certain unfair and deceptive trade practices . . . a violation of ILSA is a violation of the FDUTPA as well.” (emphasis added). 

The holding that a violation of ILSA is also a violation of FDUTPA has a very important implication.  As I have noted previously, the statute of limitations for certain claims under ILSA seeking rescission of a purchase agreement is 3 years running from the date the buyer signed the contract.  FDUTPA, however, has a longer statute of violations than ILSA — 4 years running from the date of the violation.  See, e.g., S. Motor Co. of Dade County v. Doktorczyk, 957 So. 2d 1215 (Fla. 3d DCA 2007).  Accordingly, the strongest impact of Trotta could be an effective one-year extension of the statute of limitations for ILSA claims brought under Florida purchase agreements, because such claims may also be pled as claims under FDUTPA.

As always, please stay tuned for more ILSA and Florida condo case law updates in the near future, and please continue to send me your comments, questions, ideas, and suggestions!  In addition, as loyal readers can probably tell, this blog has undergone a re-design.  As such, please scroll to the bottom of this page for the blog archives, top and past articles, blogroll and other outside links, and additional features.

By Jared H. Beck, Esq.

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 author.

Mr. Beck has a law degree from Harvard Law School, and practices law in the courts of South Florida. His law firm, Beck & Lee Business Trial Lawyers in Miami, is dedicated to the practice of business and real estate litigation. A significant portion of Mr. Beck’s practice is devoted to issues arising under condominium and other real estate purchase agreements. He can be reached at 305-789-0072 or jared@beckandlee.com

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