On August 10, 2010, the Federal District Court for the Southern District of New York allowed a number of purchasers of condominiums to rescind their contracts based upon the Land Sales Full Disclosure Act, 15 U.S.C. Section 1701 (“ILSFDA”). In that case, An v. Leviev Fulton Club, LLC, Slip Copy, 2010 WL 3291402 (2010 S.D.N.Y.), the Court noted that,
the ILSFDA requires developers to file a statement of record with the Department of Housing and Urban Development (“HUD”), and to provide purchasers or lessees with a printed property report before the signing of any contract. 15 U.S.C. §§ 1703(a)(1)(A), 1703(a)(1)(B). Any contract or agreement for the sale of a lot that does not meet these requirements, and is not exempt under 15 U.S.C. § 1702, may be revoked within two years of signing at the option of the purchaser or lessee. 15 U.S.C. § 1703(c)(d). A purchaser or lessee has a right of rescission and is entitled to the return of his or her deposit. 15 U.S.C. § 1703(e). In addition, “the court may order damages, specific performance, or such other relief as the court deems fair, just, and equitable.” 15 U.S.C. § 1709.
The Court held that since the applicable two year period had expired, and no exemption applied, the contracts of sale could be rescinded. Ironically, the developer defended by taking the position that it was exempt from the law since it had obligated itself to complete the project within two years (in which case the ILSFDA would not have applied). However, the Court found that the defendant had only “anticipated” closing within two years, so there was no binding exemption.
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