Spooky for developers! Potential relief for buyers from the Interstate Land Sales Full Disclosure Act

Spooky for developers! Potential relief for buyers from the Interstate Land Sales Full Disclosure Act

The 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.

Besides 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.

Condominium 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.

An 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.

Issues 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.

These 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.

Sandra 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).