On September 26, 2013 the US House of Representatives
unanimously pass H.R. 2600, a bill drafted to amend the Interstate Land
Sales Full Disclosure Act (15 USC 1701 et seq.)(the “Act”) to clarify how
the act applies to condominiums. The bill is now pending before the US Senate
and was referred to the Senate Committee on Banking, Housing, and Urban Affairs
but no hearing or committee vote has been scheduled yet.
If passed, the bill would provide some welcome regulatory relief
for developers by exempting condominium developments from the Act. The Act was created to address the sale or
lease of lots in a subdivision through the use of interstate commerce or the
mail. The Act was never intended to cover condominium units, which are legislated
by the state in which the project is located. However, the regulations currently
in place under the Act include a definition of “Lot” that can include a
condominium unit and courts have held the same.
This means, a developer, unless it meets certain narrow
exceptions, has to meet very specific disclosure requirements, both before the
purchase contract is signed and before closing, and must also register the condominium
project with the Consumer Financial Protection Bureau (the “CFPB”), a bureau
created as part of Dodd-Frank. If the
developer doesn’t satisfy the requirements, a buyer would have certain
revocation rights.
If the bill is ultimately passed by the Senate and becomes
law, a lot of developers will be a bit happier. It might also make it a bit
easier to find lenders willing to lend on the purchase of a condominium unit.
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