If you are involved in the design or construction of a green building there are a plethora of legal issues which you should be considering. The best known issue is how to define who is responsible for achieving certification if the building is pursuing LEED certification. Traditional contract documents such as the AIA forms do not adequately address the nuances of green design and construction, a problem which was partially brought to light in the Shaw case as discussed by Stephen Del Percio. It is important that as a designer or contractor you seek legal counsel regarding the potential litigation that can arise if a building does not achieve certification. As Chris Cheatham has explained at GBLU there are currently no available mechanisms to ensure certification. In addition to the issue of certification the following issues should also be addressed:
- Does the design professional have adequate insurance coverage considering the green nature of the project?
- Will product warranties and guarantees be voided by green construction procedures or installation methods?
- How will long term performance goals be delegated amongst future building occupants?
- Are there intellectual property infringements from copying installation methods or designs from other green buildings?
- What is the availability of green building materials and their cost of replacement? Will a traditional insurance product cover the rebuilding to green standards if a loss occurs?
Previously we have discussed the use of The Interstate Land Sales Act (ILSA) as an escape mechanism for purchasers trying to walk away from contracts to purchase either homes or condominiums. Today we will examine the Act in greater detail.
In order for the sale of a condominium in Florida to be exempt from the federal act, the contract must unconditionally obligate the developer to complete construction within two years and must not limit the purchaser’s remedies of specific performance or damages. A developer may not claim an exemption under the Act when damages for a violation of a two-year construction provision are limited to the return of the deposit or specific performance.
According to 15A Am. Jur. 2d Condominiums and Cooperative Apartments § 15:
The Interstate Land Sales Full Disclosure Act is applicable to the sales of condominiums. The Act prohibits a developer from selling or leasing land in a subdivision through the use of means or instruments of interstate commerce or of the mails, unless a statement of record is in effect and the developer has furnished each purchaser with a printed property report. This property report must be provided before the purchaser signs any contract for sale or lease of the property. If such a report is not furnished in advance of the transaction, the purchaser has the option of voiding the contract.
The Department of Housing and Urban Development has stipulated that the condominium will come under the Act if the unit will not be completed within two years, or if the significant recreational or other common facilities are being constructed which will not be completed within two years from the time the first purchaser signs a contract. For a condominium unit sale to be exempted from the reporting requirements of the Act, the construction of the condominium must be completed before it is sold, or it must be sold under a contract obligating the seller to erect the unit within two years from the date the purchaser signs the contract for sale. It is immaterial that a condominium may have actually been completed within two years for determining whether the sale is exempt from the reporting requirement, and if there is no specified date of completion in the purchase contract the sale does not come within the exemption provided under Act, and the purchaser may exercise the statutory right to withdraw from the sale.
Under §1702 the following exemptions from the Interstate Land Sales Act are established:
· (a)(2) Sale of land on which there is an improvement or a contract obligating seller or lessor to erect a building within 2 years
· (b)(1) There are fewer than 100 lots
· (b)(2) If in the 12 month period starting with the sale of the first unit not more than 12 units or lots are sold or leased
§1703 Establishes the Requirements Respecting the Sale or Lease of Lots
· (a)(1)(B) Property report must be provided in advance of signing contract for purchase
· (c) When the report is not provided prior to signing the contract for purchase, the contract may be revoked within 2 years from the date of signing
The Interstate Land Sales Full Disclosure Act is a valuable tool in the arsenal of any attorney representing a purchaser seeking to revoke a contract. With the reemergence of the Interstate Land Sales Full Disclosure Act developers must rethink their traditional sales contracts as well as learn about the proper process for registering a project with HUD so that their project is outside the scope of the Act.
This post can also be found at the author’s other blog here.
As Goethe said “Knowing is not enough; we must apply!” Simply being aware of the Interstate Land Sales Act is not enough, we must learn what It means and then apply that knowledge to rescind contracts or protect ourselves from law suits in the future. Have you heard of the Interstate Land Sales Act? This is a question that developers may soon be facing in courtrooms and arbitrations across the nation.
The Interstate Land Sales Full Disclosure Act 15 U.S.C. §1701 et seq. is being used by home purchasers across the nation but particularly in Florida, Tennessee, Nevada, and New York City as a grounds on which to escape contracts for the purchase of a condominium.
In West Palm Beach, Florida the Palm Beach Post recently announced three lawsuits were filed against the developers of Two City Plaza, City Place South Tower, and City Palms. To date only 166 of the 1.175 units marketed during the height of the Florida real estate craze have closed. The buyers allege that the developers failed to deliver the units within 2 years and are therefore in violation of the Interstate Land Sales Act. Interestingly, several of the plaintiffs said they would have been able to close on the units if they were delivered when promised but due to the current economic situation are unable to do so now.
In Nevada, the Las Vegas Business Press recently reported that a suit has been brought on behalf of 200 homebuyers for condominiums at the Cosmopolitan a 2,998 unit condo-hotel. The Cosmopolitan project which has undergone an ownership change and several interior redesigns is now slated to open in June of 2010, approximately a year behind schedule. The attorneys representing the condo purchasers have amended their complain to include a violation of the Interstate Land Sales Act as the purchasers were never provided a property report as required by the Act prior to signing their purchase contracts.
The Press Register of Alabama has also reported that a condominium project in Orange Beach is now scheduled to open 18 months behind schedule. The developers have obtained extensions from 40 of the 69 owners but are potentially facing a law suit based on the Interstate Land Sales Act. The developers are claiming that they will not be liable under the Act as the units experienced delays due to Hurricane Katrina which destroyed a facility manufacturing pilings for the condo project and that Force Majeure clauses in the contract allow for delays due to an act of God such as the Hurricane. The developers are making efforts to work with the purchasers including partial rebates of the purchase price and $10,000 worth of complimentary upgrades. I will continue to monitor the Phoenix West II project and update my readers if any law suits involving the act are filed.
The Nashville Post has reported several Interstate Land Sales Act law suits against the developers of Ashland City’s Braxton and the Gulch’s Terrazzo and Icon condominium projects. The plaintiffs in these cases allege that the buildings were not constructed within 2 years and that the developer’s failure to provide a property report allows for them to walk away from their contracts with their deposits.
Stay tuned this week for a more in depth discussion of the Interstate Land Sales Act and its various provisions.