Florida Sunshine

Back in the day, before Woodstock, even, entrepreneurs in the mold of Bernie Madoff were selling retirement home building lots in the Everglades. Except that you couldn’t build on the lots because they were underwater. Most of the buyers were retirees or soon-to-be. Few ever set foot on the land before closing. Enticed by slick-paper ads and telephone calls, they sent their life savings to these con men. Who could resist? The flyers showed waterfront lots, sailboats, lovely homes—everything Americans dream of in retirement.

Likely motivated by a relative’s purchase of swampland, Congress acted. In August 1968 it passed the Interstate Land Sales Full Disclosure Act, or “ILSA” for short. You can look it up at 15 USCA §§1701, et seq. ILSA, as its name suggests, attempted to ensure that purchasers of land sight-unseen would receive enough factual information about their investments to allow an intelligent decision. And so tales of sales of swampland lots grew fewer and fewer until ...

The great recession hits Florida! Imagine the thousands of pre-sold and unsold condominiums, golf course communities, and vacation homes all over the state hardest hit when the real estate bubble began to deflate. Developers couldn’t finish the projects, or couldn’t build the promised golf courses and swimming pools, or stopped after Phase I of seven. Consequently, buyers were locked into contracts for far more than their property was worth, and “early adopters” found themselves upside down on their mortgages almost immediately. Something had to be done to rescue consumers from the clutches of these evil developers.

Some enterprising Florida lawyer thought to blow the dust off Title 15 of the Code and open it to—ILSA! Today, “underwater” has taken on a new meaning. But ILSA still fits, right? Let’s see. A hundred or more units? Check. Advertisement on the Internet? Check. Sales literature mailed to South Carolina? Check. Subdivision registered with HUD and property report furnished to purchasers? Uh, no, not exactly. AHA! Give me my money back and don’t let your presale hit you on the way out.

That’s right. A sleepy little federal law that no one read for a quarter century has provided a bailout to hundreds of would-be purchasers across Florida. ILSA requires a “property report,” in a form and containing information prescribed by CFR, be given to any purchaser prior to contract. If it isn’t, she has two years to rescind the transaction. If the property report is misleading—if its boilerplate doesn’t accurately describe what’s actually on the ground—she may recover damages for misrepresentation. And she doesn’t even need to prove reliance—it’s presumed! But wait, there’s more: if you sue in state court, the defendant can’t remove the case.

The coast of South Carolina isn’t all that different from Florida. Oh, all right, we have better golf courses. But otherwise, this is an ideal species of lawsuit for our great state. Why should Florida—and Florida lawyers—get all the joy? I haven’t seen the tsunami of litigation I expected. We have filed a few ILSA cases over a golf course project here in the midlands. My brethren on the coast don’t seem yet to have discovered the importance of ILSA. Or maybe I’m just too excitable.

For a great blog devoted to ILSA, check out Jared Beck: http://beckandlee.wordpress.com/category/interstate-land-sales-full-disclosure-act/