The Interstate Land Sales Full Disclosure Act: You Sold Me Swamp Land – I Want Out!


Considering selling some swampland to out of state investors marketed as prime real estate?  Probably not; however, it has been done and scam artists have raked in millions.  Thus, in 1968 the Federal Government was forced to step in and protect buyers of out-of-state land with what is commonly referred to as ILSA – “Interstate Land Sales Full Disclosure Act.” 

The purpose of ILSA is to provide buyers basic information about the property prior to execution of a contract.  Such information includes the proximity of the project to community facilities (such as schools and hospitals), whether the obligations of the developer have been secured, and additional information that might be relevant to a purchaser when deciding whether to purchase a property.  One of the significant requirements of ILSA is that the developer register the development with the U.S. Department of Housing and Urban Development ("HUD") and furnish a thick "Property Report" to the buyer before he signs the purchase agreement.

So why is this important today?  Because for years developers largely ignored the Act because real estate values were increasing and everybody was making money.  Today fortunes have reversed and the legal system has begun to do what it does best – support attorneys.  Lawsuits are springing up all over the country between developers and out-of-state purchasers of condo’s or vacation homes seeking to void an otherwise enforceable purchase contract.  Not surprisingly this is occurring where property values have significantly declined or the buyer can no longer afford the property. 

How can this occur?  It’s in the details.  Under the Act, if the Developer is marketing in interstate commerce (generally the case with these fancy luxury buildings and the Internet), then they must register the project on a national scale with HUD, and give purchasers a summary of that registration in a disclosure statement called a Property Report before the purchase contract is signed. In the vast majority of cases purchasers are obtaining a rescission based on the developers failure to provide the report, proper legal description, or register the project with HUD.  See the following articles:

  • After Bust, Using ’60s Law to Get Out of Condo Deals
  • News Analysis: Tearing up condo contracts over a 40-year-old law
  • Mega condo finish delayed
  • Cosmopolitan Vegas Condo Buyers Were Misled, Lawsuit Alleges
  • I bring this to your attention for two reasons.  If you are considering engaging in a condo project or land development within the next few years when strength begins to build in the market, it would behoove you to have an attorney carefully scrutinize contracts to ensure the enforceability of your purchase agreements and compliance with the Act.  If you have purchased an out-of-state condo or property and are seeking a means to avoid closing with a return of your down payment then consider bringing and ILSA action. 

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    1. I am holding a lot that we learned afterward is on colluvial soil. Is there a way to check whether the developer, who filed bankruptcy, made the filing, or made it properly? How does ILSA non compliance effect a foreclosure?

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