Florida Condominium Litigation Lawyers / FL Real Estate Attorneys
 

Condominium Laws

INTERSTATE LAND SALES ACT
FEDERAL SECURITIES AND EXCHANGE ACT
FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT
REAL ESTATE SETTLEMENT PROCEDURES ACT
FLORIDA CONDOMINIUM ACT
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INTERSTATE LAND SALES ACT, 15 U.S.C. §§1703 et. seq.

The Interstate Land Sales program protects consumers from fraud and abuse in the sale or lease of land. In 1968 Congress enacted the Interstate Land Sales Full Disclosure Act, (“ILSA”) which is patterned after the Securities Law of 1933 and requires land developers to register subdivisions of 100 or more non-exempt lots with HUD and to provide each purchaser with a disclosure document called a Property Report. The Property Report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement. The purchaser of property in a nonexempt transaction from a developer who has not registered under the ILSA has the option to revoke their sales contract at any time within two years after the date of the contract. Other remedies for violation of the ILSA include disgorgement of related profits, fines, injunctive relief, and criminal prosecution for willful violations.

There are a significant number of exemptions under the ILSA. One of exemptions under the ILSA that has broader application is the so-called “100 lot exemption.” Under this exemption, the sale of property is exempt from the registration requirements of the ILSA if the development or subdivision contains fewer than 100 units, exclusive of units that are otherwise exempt under other statutory exemptions to the ILSA. In determining the number of units within the project, include all units within related projects that are marketed pursuant to a “common promotional plan” and any garage stalls or storage areas created as separate units within the CIC. It should be noted that the 100-lot exemption is only a “partial” exemption from the ILSA in that a development qualifying for this exemption is still subject to the antifraud provisions of the ILSA. As a result, sales personnel should be advised accordingly and purchase agreements used for the sale of units under the 100-lot exemption should include language which warrants to the buyer that all utilities, common element roadways, and other amenities have been or will be completed.

 The most common exemption is the “improved property” exemption or the “two-year rule”, which exempts the sale of completed units and units that are not complete but will be completed within a period of two years from the date of the purchase agreement. The form of purchase agreement used must expressly obligate the seller to complete the unit purchased within the two-year period. In addition, the purchase agreement cannot prohibit or limit the purchaser's remedies if the seller does not complete the unit within two years, except in the case of pre-sale contingency clauses conditioning completion of construction within a stated period of time generally not to exceed 180 days.

Certain of the ILSA exemptions can be used contemporaneously. The most common application of this approach is that the 100-lot exemption and the two-year rule can be applied in combination to exempt a project containing 100 or more units in certain instances. However, it is important to note that the determination of whether a project is exempt (under single or multiple exemptions) is made on an all or nothing basis. For example, the sale of more than 99 units in transactions not covered by another available exemption has the effect of nullifying the 100-lot exemption for all prior and future sales within the project. As a result, developers of projects containing in excess of 99 units must assure themselves that all units in excess of 99 will be sold in exempt transactions (for example, the two-year rule) or risk the consequences of noncompliance with the ILSA.

FEDERAL SECURITIES AND EXCHANGE ACT, 15 U.S.C. §§ 77a, et. seq.

The Federal Securities Act of 1933 was enacted in the aftermath of the 1929 Stock Market crash. The Act has two basic objectives: (1) requiring that investors receive significant (or “material”) information concerning securities being offered for public sale; and (2) prohibiting deceit, misrepresentations, and other fraud in the sale of securities.

Underlying the 1933 Act is the idea that a company (i.e., an “issuer”) offering securities should provide potential investors with sufficient information about both the issuer and the securities to make an informed investment decision. To assist in achieving its objectives of informing potential investors and fostering fair dealing in the securities markets, the 1933 Act requires issuers to disclose significant information about themselves and the terms of the securities.

Disclosure of relevant information is accomplished through the registration of securities with the Securities and Exchange Commission (“SEC”). The SEC is the principal federal agency responsible for oversight of the securities markets and enforcement of the federal securities laws. In general, securities offered or sold to the public in the U.S. must be registered by filing a registration statement with the SEC. The prospectus, which is the document through which a company’s securities are marketed to a potential investor, is generally filed in conjunction with the registration statement. In addition to making these diclosures to the SEC, the seller of securities must make certain disclosures to the investor. The Act also makes it illegal to commit fraud in conjunction with the offer or sale of securities. A defrauded investor can sue for recovery under the 1933 Act.

 The primary issue with regard to the sale of condominium units is whether it actually constitutes the offer or sale of “securities.” The SEC has held that the offer or sale of condominium units in a real estate development coupled with an offer or agreement to perform or arrange certain rental or other services for the purchaser of the condominium constitutes a “security” for purposes of the federal security laws. While there are numerous situations where condominium arrangements may constitute securities under the federal securities laws, the SEC has noted three types of arrangements that are deemed securities:

Condominiums with any rental arrangement or other similar services that are offered or other similar service that are offered and sold with emphasis on the economic benefits to the condominium purchaser to be derived from the managerial efforts of the promoter or a third party designated or arranged by the promoter, from the rental of the condominium units;

The offering or participation in a rental pool arrangement; and

The offering of a rental or similar arrangement where the condominium purchaser must hold the condominium unit available for rent for any part of the year, must use an exclusive rental agent or is otherwise materially restricted in the occupancy or rental of the condominium unit.

In light of the aforementioned, the SEC has frequently found condominium offerings that use advertising, sales literature or representations focusing on the economic benefits to the purcahser to be derived from the managerial efforts of the promoter, or a third-party designated or arranged by the promoter in renting the condominium, will constitute securities.

 In addition to enforcement by the SEC, the Securities Act contains a private enforcement mechanism allowing investors to sue for violations of the Act. Liability under the Securities Act flows not only to the seller of the units, but to individuals who “directly or indirectly” engage in the offer or sale of unregistered securities. The test for liability is whether a potential defendant was a “necessary participant” or a “substantial factor” in the offering or selling of the unregistered securities.

FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT, Fla. Stat. §§ 501.201, et. seq.

The Florida Deceptive and Unfair Trade Practices Act (FDUTPA), passed in 1973, serves as Florida's version of the Federal Trade Commission Act (FTCA), which is designed to protect businesses and consumers from unfair competition and unfair or deceptive acts in the conduct of any trade or commerce. The Act defines “trade or commerce” as the “advertisement, solicitation, offering, or distribution by sale, rental or otherwise, tangible property.” It is well-settled that this broad definition includes the sale and purchase of real property, including condominiums. Real estate fraud cases are frequently litigated under FDUTPA.

FDUTPA somewhat broadly forbids "[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce." FDUTPA does not contain a definition or "laundry list" of just which acts can be "deceptive," "unfair," or "unconscionable." There is no specific rule or regulation required to find conduct unfair or deceptive under the statute.

The Florida Deceptive and Unfair Trade Practices Act contains a private enforcement mechanism enabling both consumers and businesses to pursue relief in litigation seeking redress for FDUTPA violations.

Most states have similar Consumer Protection Acts that afford aggrieved condominium purchasers a private right of action for deceptive or unfair acts and practices.

REAL ESTATE SETTLEMENT PROCEDURES ACT, 12 U.S.C. §§ 2601, et. seq.

The Real Estate Settlement Procedures Act (RESPA) is a federal consumer protection statute designed to help homebuyers be better shoppers in the home buying process. The Act is enforced by HUD but also contains a private civil action provision. RESPA contains two primary requirements. The first, RESPA requires that borrowers receive disclosures at various times. Some disclosures spell out the costs associated with the settlement, outline lender servicing and escrow account practices and describe business relationships between settlement service providers.

RESPA was designed to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services. Section 8 of RESPA prohibits a person from giving or accepting any thing of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed. Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service. Section 9 of RESPA prohibits home sellers from requiring home buyers to purchase title insurance from a particular company.

Any private civil suit must be brought within one (1) year to enforce violations of Section 8 or 9. A person may bring an action for violations of Section 6 within three years. Lawsuits for violations of Section 6, 8, or 9 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred.

FLORIDA CONDOMINIUM ACT, Fla. Stat. §§ 718.101 et. seq.

The Florida Condominium Act is a state version of the Interstate Land Sales Act. The purpose of the Florida Condo Act is to establish procedures for the creation, sale, and operation of condominiums in the State of Florida. This includes requirements for the establishment of condominiums, the establishment of the Condo Owners Association and its board of directors, to what portions of the common property are owned by unit owners. The Florida Condo Act includes the same causes of action as ILSA and affords purchasers the same remedies. Almost every state with large numbers of condominium owners have similar statutes.

TOOLS

Florida Administrative Code, Chapter 61B, Condominiums

Condominium Act, Ch. 718, F.S. - relating to the development, sale, ownership, and operation of residential condominium units.

Cooperative Act, Ch. 719, F.S. - relating to the development, sale, ownership, and operation of residential cooperative units.

Florida Mobile Home Act, Ch. 723, F.S. - relating to the rental of mobile home lots to mobile home owners.

Florida Vacation Plan & Timesharing Act, Ch. 21 - relating to the development, sale, ownership, operation, and management of timeshare plans.

Florida Uniform Land Sales Practices Law - relating to the regulation of the disposition of any interest in subdivided lands.

State Condominium Laws - pertinent Condominium Laws for each state.

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