Buyers can't rescind disputed purchase contracts

Law of the Land

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Jun. 30, 2010

Share this Story:

Law of the Land

Tara-Nicholle Nelson
Inman News

In 2007, Borden East River Realty LLC sponsored the Hunters Point Condominium Development in Long Island City, N.Y.

Borden East filed a New York State Offering Plan with the New York State Attorney for the 132 residential condos, 26 roof terrace units, and 25 parking space units comprising the development, then began selling the unfinished units.

Hunters Point was promoted under a common promotional plan with a neighboring development, Hunters View, that was sponsored by a different developer.

Later in 2007, eight prospective buyers entered into contracts to purchase residential condo units at Hunters Point, and each placed a 10 percent earnest money deposit on the respective units, prior to which each was given a copy of the offering plan, according to court records in Romero V. Borden East River Realty LLC.

Between January and April 2009, the prospective buyers all notified Borden East of their intention to cancel their purchase contracts and demanded the return of their deposit funds.

Each prospective buyer reportedly wrote to Borden East, claiming that Borden East failed to comply with the requirements of the Interstate Land Sales Full Disclosure Act and that Borden East's violation of the act entitled them to both rescind their contracts and recover their deposits.

Borden East acknowledged that it was not aware of the act.

In March 2009, Temporary Certificates of Occupancy (TCOs) were reportedly issued for both Hunters Point and Hunters View.

Based on the number of units that were unsold at the time the TCOs were issued, the developers of the combined Hunters Point/Hunters View project researched the matter and believed the projects to be exempt from the requirements of ILSA under several exemptions provided in the Act, court documents state.

The developers also reportedly requested that the federal Department of Housing and Urban Development issue an advisory opinion on the matter of whether the projects were required to comply with the Interstate Land Sales Full Disclosure Act.

HUD reportedly issued two separate opinions, two days apart.

The buyers all filed suit, and all parties (the buyers and Borden East) moved for summary judgment, requesting that the court issue an opinion as to whether Borden East was required to comply with ILSA.

Under ILSA, the developer of a "subdivision" may not "sell or lease any lot unless a statement of record with respect to such lot is in effect ... (and) a printed property report … has been furnished to the purchaser or lessee in advance of the signing of any contract or agreement by such purchaser or lessee."

Under the act, if the developer does not provide an ILSA-compliant property report prior to the buyer's execution of a purchase contract, the buyer has the right to rescind the contract for up to two years, and the right to the return of his or her deposit monies.

The U.S. District Court for the Eastern District of New York agreed with Borden East's argument that Hunters Point was exempt from complying with ILSA's statement registration and report disclosure requirements.

ILSA's "Improved Lot Exemption" exempts from ILSA's disclosure and registration requirements "the sale or lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years."

Borden East argued -- and the court agreed -- that all lots sold following the issuance of the TCOs were sold as completed construction and, thus, fell under that exemption. Another unit was exempted under a section of the act relating to lots sold for the purpose of resale.

Page: 1 2 |Next
Add to favoritesAdd to Favorites PrintPrint Send to friendSend to Friend

COMMENTS

ADD COMMENT

Rate:
(HTML and URLs prohibited)