In an uncharacteristic bipartisan style, the House of Representatives of the U.S. Congress passed H.R. 2600 on September 26, 2013, and almost a year later, on September 19, 2014, the Senate followed by enacting S.2101. These identical bills exempt developers of condominiums from compliance with the filing requirements of the Interstate Land Sales Full Disclosure Act, commonly referred to as ILSA. Both bills passed their respective chambers with a unanimous vote in favor. The legislation was signed by the President on September 26, 2014.
When effective, on March 25, 2015, this legislature will relieve developers constructing new condominiums from compliance with the filing requirements of ILSA. ILSA required developers in most cases to originally file with HUD, and now with the Consumer Financial Protection Bureau, and deliver to prospective purchasers a Property Report. Failure to file such a report with the federal government was the source of much of the rescission litigation arising in 2009 and thereafter.
Although originally enacted as consumer protection legislation, its main effect was to provide condominium purchasers with a way to recover their contract deposits when the market collapsed. Were this legislation effective prior to the downturn beginning in 2008, it would likely have prevented much of the onslaught of rescission lawsuits that followed.
This new legislation releases developers from ILSA’s filing requirements, but not from the anti-fraud provision of ILSA.