Posted Sep 23, 2010 12:18 pm CDT
A federal judge’s decision requiring a New York condo developer to return a $510,000 buyer’s deposit could have a nationwide impact on large condo developments.
U.S. District Judge Kevin Castel cited “an obscure federal law” covering developments with 100 or more units in ordering the cancelation of a contract for a $3.4 million apartment in the Brompton on the Upper East Side, the New York Times reports. The Wall Street Journal (sub. req.). also has a story.
The law, the Interstate Land Sales Full Disclosure Act, requires purchase contracts to be in a form that can be filed with county clerks, the stories say. In the case before Castel, the contract signatures weren’t notarized, making the contract unacceptable for recording.
Lenders that finance developments generally bar developers from issuing recordable sales contracts because they would amount to a lien on the property, giving buyers a claim on a development in the event of a foreclosure.
Adam Leitman Bailey, a lawyer for the buyers, told the Times that the decision “allows every buyer in a newly constructed condominium which has sold more than 100 units within the last three years to obtain a refund of their down payment.”
Jared Beck’s Real Estate Market Crisis Law Report: “The New Wave of ILSA Case Law: A Death Knell for Clever Lawyering?”
ABAJournal.com: “No Recession in Real Estate Litigation, South Florida Lawyers Find”
Updated at 10:45 a.m. to add information on lien concerns.