Everything Old Is New Again: Buyers Turn To 40-Year-Old Law To Get Out Of Contracts

by:    Peter J. Gallagher

Buyer's remorse is something everyone experiences at least once in their lifetime.  When it results from an impulse purchase at the mall, it may cause a few hours or days of regret.  But, when it arises out of the purchase of a home, the consequences can be far more dire.  The  New York Times ran the following article After Bust, Using ’60s Law to Get Out of Condo Deals on the increasing use of the Interstate Land Sales Full Disclosure Act ("ILSA") by savvy would-be purchasers (and their lawyers) to address this more serious version of buyer's remorse.  ILSA is now being used to help purchasers get out of contracts that became far less favorable as the real estate market crashed. 

The article notes that ILSA was "intended to protect buyers of out-of-state land from unscrupulous developers or brokers," like Ricky Roma and Shelley "The Machine" Levine in the David Mamet play/movie Glengarry Glen Ross.  However, it is now being used by lawyers to help clients walk away from contracts and keep their deposits.  ILSA "generally lets buyers cancel their contracts within two years and sue within three years if the contract does not include specific legal language."  As a result, lawyers for buyers are now combing over their clients' contracts to find instances where the developer violated ILSA  by, among other things, failing to provide the buyer with a legal description of the property or failing to register the building with HUD.  While claims under ILSA were occasionally filed even when the real estate market was booming, they are increasingly being filed now as buyers look to get out of contracts for property that might be worth far less now than it was when they entered into the contract.  Ultimately, this article presents another example of how the devil is often in the details when it comes to real estate transactions, and emphasizes the importance — for both buyers and sellers — of using painstaking care when entering into such transactions. 

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