On September 18, 2014, the U.S. Senate approved, by unanimous consent, the same Bill that the House of Representatives previously passed on September 27, 2013 clarifying how the Interstate Land Sales Full Disclosure Act (“ILSA”) applies to the sale of condominium units. H.R. 2600 clarifies that the registration and disclosure requirements of ILSA do not apply to the sale or lease of a condominium unit that is not otherwise exempt from the ILSA.
ILSA was enacted in 1968 to protect consumers from unscrupulous developers engaged in land sale scams including selling swampland to buyers who did not visit they property they were buying. ILSA requires developers selling residential property within certain developments to register the development and make various disclosures to purchasers in the form of a “property report”. In addition, the sales contracts for such property must comply with the requirements of ILSA.
During the real estate downturn, real estate contract holders on new condominium units increasingly looked for escapes from what they perceived as undesirable purchase and sale agreement as a result of market downturn and decreasing values. During this time the Act, which the courts held applied to the sale of condominium units, was used by buyer’s as a weapon to cancel contracts and receive returns of deposits, even after closing. In effect, ILSA was used by buyers for economic reasons, an unintended consequence of the law.
Court decisions caused an uncertainty in the law and the application of ILSA. H.R. 2600 provides clarity by distinguishing condominium sales from other types of land sales. If H.R. 2600 is signed by the President, the sale of condominium units will be exempt from the registration and disclosure requirements of ILSA. The sale of condominium units will still be required to comply with Florida’s Condominium Act, however, at a time when the housing industry is recovering, the onerous registration and disclosure requirements of ILSA will not apply, providing stability to developers and resulting in easier sales of condominium units. If signed by the President, H.R. 2600 will be become law 180 days after the date it is signed by the President.