President Barack Obama has signed into law an amendment to the Interstate Land Sales Full Disclosure Act of 1968 (ILSA).
The new law, signed by the President on September 30, expands registration exemptions under ILSA to specifically include condominium units.
ILSA was designed to provide consumers protections from fraud and abuse in connection with the sale or lease of land. Prior to the effectiveness of the new law, condominium units were treated as “lots” for purposes of ILSA. Under ILSA, unless a project qualifies for a statutory or regulatory exemption from the registration and disclosure requirements (including, among other things, that the project has fewer than 100 lots or will be completed within two years), prior to the marketing, sale or lease of subdivided land, developers must register with the Consumer Financial Protection Bureau and provide every prospective buyer with a detailed property report describing the property and related amenities.
If a developer fails to comply with the registration and disclosure requirements, the developer risks substantial civil and criminal liability, and the purchase contracts that the developer signs with purchasers may be rescinded.
In the past, compliance with ILSA was a time-consuming and expensive proposition for developers of condominium projects, requiring detailed disclosures to purchasers and contract provisions that could prove harmful to developers. Once effective, the new law will provide much needed relief for developers by providing a specific exemption for condominiums units, regardless of their size. The new law will eliminate the need for condominium developers to file registrations under ILSA or provide condominium unit purchasers with property reports, rescission rights or many other strong contractual protections previously afforded to condominium unit purchasers under ILSA.
The new law goes into effect on March 29, 2015 (180 days after it was signed into law). Until the effective date, however, condominium developers will still need to comply with ILSA’s registration or exemption requirements.
Moreover, please note that ILSA remains in effect, even after the effective date of the new law, for single-family and other non-condominium properties. In addition, condominium developers will still need to comply with state land sales regulations.