The Interstate Land Sales Full Disclosure Act was enacted in 1968 to protect purchasers from buying inaccessible and undevelopable property from a developer who claimed the property would be a valuable investment. In the intervening years, this act has evolved into a consumer-protection statute with a variety of applications, and the act's details are often misunderstood.
The act covers developers of land, or other individuals offering 25 or more lots for sale, who use any means of interstate commerce, including the U.S. mail, to market the lots.
The federal Consumer Financial Protection Bureau collects and maintains files with information on property covered by the act, including names, addresses and social security numbers contained in property reports; state of title to the land; physical characteristics of the land, and planned availability of roads, services and utilities. Most of the information is public record, with the notable exception of social security numbers.
When a property is covered by the act, the purchaser has additional rights to cancel the contract with the developer. The developer must provide lengthy disclosures or comply with exemptions from the act for all lots or units. If the developer has not fully complied with the act, the purchaser may cancel the contract within two years of the contract signature date.
While strict compliance is required for developers, it's not easy to achieve due to the many sources and case law interpretations. For a purchaser, the act provides a way to get out of a property purchase before or after closing, and the developer must try to navigate all the legal ramifications.
It may appear that a project is exempt from the act at first, only to discover it is actually under its governance. This confusion can occur due to the broad definitions of terms such as "developer," "subdivision" and "common promotional plan."
An amendment introduced in mid-2013 clarified how the act applied to condominiums. Approved by the Senate and signed into law by President Obama, the amendment exempts new construction condominiums from the act's registration requirements after its effective
date of early 2015.
As the act may impact a project's financing, marketing and purchase contracts, it's a best practice to consult with an attorney as early as possible in the proceedings. At Aronoff, Rosen & Hunt, our Real Estate Law Team is among the best in the nation and can provide your project with the guidance to stay within these complex rules.