As the distress in the real estate market continues in New York, more and more people are turning to their lawyers to carefully review and consider their real estate sales contracts for any “loop holes” available to justify the cancellation of a contract and to win the return of a down payment.
The scenario in a New York City Condo purchase goes something like this. The buyer puts down a boat load of money as a down payment to secure an apartment in the hottest building in Manhattan, or any of the five boroughs. The developer starts having financial difficulties or can’t meet originally intended construction deadlines, and, in the intervening months (or years), the buyer loses interest or a job and can no longer afford the price (which has also declined). As the New York real estate market crumbles, so do these deals, and the buyer wants out.
Recently, some bright and creative New York Real Estate litigators have turned to an ancient, but potentially useful, statute passed in 1968 and known as the Interstate Land Sales Full Disclosure Act, to argue that the down payments should be returned and the contracts voided because the Developer did not comply with the provisions. The Interstate Land Sales Disclosure Act generally applies to developers selling or leasing–through interstate commerce.
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 consumers (buyers) a summary of that registration in a disclosure statement called a Property Report BEFORE THE CONTRACT or agreement is signed. Hence the utility in a litigation situation if the Developer did not follow the regulations.
BEWARE: The Act does not apply to all transactions, or all buildings, so buyers looking to cancel their New York State real estate contract with a developer had better seek counsel versed in the actual contract and the Interstate Land Sales Disclosure Act.
Bottom line– it’s always best to hire local New York State real estate attorneys.