Interstate Land Sales Full Disclosure
Act was enacted in 1968 to address developers who sold undesirable - and
often unbuildable - land to unsuspecting consumers. In the forty-plus years
since this law was enacted, this abusive type of land sale has waned. However, compliance with the Act or qualifying for an
exemption has also waned as shown by some developers having been caught in
the crosshairs of consumers aiming to get out of their sales contracts. The
recession turned many contracts involving to-be-built homes into bad deals
since buyers do not want to settle on property that is worth considerably less
than the contract price.
making disclosures regarding the property itself, the Act requires that developers
inform buyers of their right to revoke the contract. While this right is
usually exercisable for seven days, the revocation period enlarges it to two
years for developers of non-exempt properties who fail to provide their buyers
with a property report.
buyers, in particular, have turned to this Act in an effort to get out of their
sales contracts. Recent litigation regarding this Act has often centered on
whether the subject property qualified under the improved lot exemption. When
the property did not qualify, the buyer's revocation period became two years. Failing
to comply or qualify for an exemption under the Act has led to onerous
consequences for some developers. A developer
must refund all moneys paid by the buyer toward the purchase when a buyer
successfully exercises this right of revocation.
apt epigram for these situations is: "Technicalities are the 'safety zones'
from justice." The contracts involved were legitimate sales of real estate. Rather
than accepting a deal that soured in the recession, buyers sought to revoke
their contracts using this Act. Not all consumers succeeded, however, due to their
untimely pursuit of this remedy. But, even in these cases, developers have
incurred costs to defend themselves in the dispute.
of good faith are not present in these cases. Either the developer complied
with the Act or fell within an exemption. When the developer's noncompliance allowed
the contract to be revoked, either the buyer exercised his or her revocation
right in a timely fashion or failed to do so.
cases illustrate the importance of businesses heeding consumer protection laws.
As long as the law is in effect, the statutory remedies can aid a consumer when
the seller fails to adhere to the law.
Bullington, Esq., is a frequent writer on real estate topics and the author of
Section 4A.09, The Interstate Land Sales Full Disclosure Act, which discusses
the Act's requirements - including
remedies, statute of limitations, and exemptions under the Act, in the Real Estate Financing treatise
published by LexisNexis Matthew Bender (available online at Lexis.com).