New Federal Decision Provides Pro-Buyer Reading Of The Federal Interstate Land Sales Full Disclosure Act (ILSA)

A new opinion from the Middle District of Florida, Bush v. Bahia Sun Associates Ltd., 2008 WL 516825 (M.D. Fla. Feb. 22, 2008 ) is relatively short, but the result could be sweet for real estate buyers looking to cancel their contracts and obtain refunds of their preconstruction deposits.

In Bahia Sun, the plaintiffs brought a claim seeking rescission of their purchase agreement, arguing that it did not comply with 15 U.S.C. section 1702(d), a provision of the federal Interstate Land Sales Full Disclosure Act (“ILSA”).  The developer defendant responded by arguing that the statute did not apply because the transaction was exempt from ILSA, specifically under the exemption by which the seller is obligated to construct a residence/condominium on the sold lot within two years from the date that the buyer signs the purchase agreement.  (I have written more in depth on the so-called “improved lot” or “two-year” exemption here and here.)

The Court disagreed with the defendant’s position, however, and denied the defendant’s Motion to Dismiss.  Here is the part of the opinion which could be read as a boon to buyers looking to avail themselves of remedies under ILSA:

“Plaintiffs have asserted that they can, and will be able to, produce facts and circumstances attendant to the Contract sufficient to prove that the Contract was not intended by Defendant . . . to be a binding commitment for construction of Plaintiffs’ residence within the two-year time frame justifying the relevant ILSA exemption. . . .  Notwithstanding some Contract language favorable to the Defendants, under the applicable standard of review at this stage of the litigation, the Court must accept the Plaintiffs’ allegation [under ILSA] as true.”

As such, the Court looked beyond the bare language in the contract and allowed the Plaintiffs’ allegations that the developer never intended to build within two years, regardless of what the contract stated, to defeat the Motion to Dismiss.  The takeaway point here is that under Bush, a purchase agreement which may appear to be perfectly ILSA-compliant on its face might still ultimately be found to be revocable under the statute, if the buyer can produce the right sort of evidence.

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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