Subdivisions: President Signs H.R. 2600 Into Law
On September 26, 2014, developers of condominium projects throughout the country achieved a major victory, as President Obama signed H.R. 2600 into law. When it becomes effective, H.R. 2600 will amend 15 U.S.C. 1702 of the Interstate Land Sales Full Disclosure Act (“ILSA”) to exempt condominiums from the filing, registration and disclosure requirements of ILSA. H.R. 2600 drew wide-ranging, bipartisan support with both the House of Representatives and the Senate unanimously voting to adopt the amendment.
ILSA was enacted in 1968 to protect the home-buying public from fraudulent land sales originally involving undisclosed swamplands. Under ILSA, developers are required to register their for-sale projects with the Federal Consumer Financial Protection Bureau and obtain an Effective Statement of Record that serves as a disclosure report to potential buyers, unless the project qualifies for one of ILSA’s exemptions. Unless an exemption applies, failure to provide a buyer with an Effective Statement of Record prior to entering into a purchase contract affords the buyer significant remedies under ILSA, including a two year right of rescission.
In recent years, reliance on the applicability of any one of ILSA exemptions has proven precarious, particularly because of conflicting court decisions. H.R. 2600 provides much needed clarity for developers of condominium projects, who up until now have been faced with the prospect of registering their projects with the Consumer Financial Protection Bureau under ILSA as well as the California Bureau of Real Estate under the Subdivided Lands Act.
If you have any questions regarding the effect of H.R. 2600 on ILSA, or ILSA in general, please contact the Firm's Subdivisions Department.