New Condominium Exemption to the Interstate Land Sales Full Disclosure Act

The Interstate Land Sales Full Disclosure Act (ILSA) has been amended to exempt condominium units from registration, but they still have to follow anti-fraud rules. This is good news for Florida developers, who were facing a lot of lawsuits from buyers. The amendment helps developers avoid the time-consuming and expensive registration process. Previously, developers used exemptions for completing construction within two years or for developments with 99 or fewer units, but these didn’t work for large projects. Now, the new exemption for condominium units will make things easier for developers. The new exemption for condominium projects is pretty simple for most projects. The developer just needs to include specific details in the contract, stating that they will provide necessary services and amenities. It’s also important to specify in the contract that both the seller and the buyer want the unit to be exempt from ILSA registration for certain business reasons. However, there are still some complicated situations where the rules are not clear, so developers need to be careful. For example, if there is a mix of single-family lots or noncondominium townhomes and condo units, the exemption rules may be different. Developers need to make sure they follow the specific requirements to qualify for the exemption. The biggest ambiguity in the law is whether a “improved lot” refers to the building or the land. If the requirement is for the condominium units to have certificates of occupancy, then it’s clear that they are improved. But if a unit is sold “designer ready,” it’s not so clear. The courts will probably look to local laws to decide if the unit is considered improved. Another interpretation is that “improved lot” refers to the land and not the building. This would mean any improvements needed to support a building, like access roads and utilities. This would mean that even a vacant lot could be considered improved. However, it’s not clear if the law was meant to apply to a vacant lot with no building. The new amendment to the law about selling condos may cause confusion for projects that were registered or exempt before March 25, 2015. The Consumer Financial Protection Bureau (CFPB) will not accept any new filings for these projects after March 26, 2015. However, a court recently said that the new amendment can’t apply to projects that were already registered before that date. So, developers should keep filing the required reports and amendments and keep the records if CFPB rejects them. This will show they acted in good faith. Fortunately, ILSA doesn’t require giving buyers any new documents after they already signed a contract. The CFPB has not given clear instructions for developers of condo projects registered before March 26, 2015. They have a few options, like ignoring the new rules and continuing to give out property reports, or claiming an exemption and not registering at all. If the CFPB won’t accept updates to the registration, the developer could also try to cancel their existing registration. For developers with projects not yet registered, they can wait to sell units until after March 26, 2015 or register before that date and start selling. They could also try to add a provision to their registration that only covers units sold before March 26, 2015. Hopefully, the CFPB will provide clearer guidance soon. In the next two years, it’s unlikely there will be big issues with the real estate market. The interest will likely be in cases where developers try to push the limits of the requirement for an “improved lot.” The Interstate Land Sales Full Disclosure Act (ILSA) has rules for selling or leasing land with buildings, and there are exemptions for certain types of sales. The Consumer Financial Protection Bureau is in charge of ILSA. In simple terms, two lawyers, Richard and William, are experts in real estate law and teach at law schools. They wrote an article about a law called the Interstate Land Sales Full Disclosure Act. The law is about making sure people know the facts before buying or selling land.

Source: https://www.floridabar.org/the-florida-bar-journal/new-condominium-exemption-to-the-interstate-land-sales-full-disclosure-act/