Federal Appeals Court Rules Favorably For Developers; Rejects Condo Purchasers' Attempt To Invoke Federal Law To Back Out Of Bad Deal

In Miami, Florida, the Daily Business Review reports:

• Bucking the Florida Supreme Court, a federal appellate panel waded into the battle between condo developers and buyers over the use of a consumer protection law to void contracts. The 11th U.S. Circuit Court of Appeals sided with developers in a Sept. 30 decision, giving them wide latitude in claiming an exemption from the Interstate Land Sales Full Disclosure Act, better known as ILSA.(1)

***

• Judge Ed Carnes, who wrote the 18-page opinion for the unanimous panel, said buyers have used ILSA disingenuously, changing their minds on what morphed into a bad real estate investment once the market turned. [...] “After the housing bubble burst, the Steins had second thoughts about their decision to purchase the condominium unit,” Carnes wrote. “Wanting out of their contract, they seized onto the Interstate Land Sales Full Disclosure Act, a federal statute that has become an increasingly popular means of channeling buyer’s remorse into a legal defense to a breach of contract claim.”(2)

For more, see Developers win in fight to enforce contracts.

For the ruling, see Stein v. Paradigm Mirasol, LLC, No. 08-10983, 2009 U.S. App. LEXIS 21512 (11th Cir., September 30, 2009).

(1) The story states that the ILSA was passed in 1968 to protect consumers from unscrupulous swampland salesmen, and that the plaintiffs' bar seized on the law when the real estate bubble burst as a way to get their clients out of their purchase contracts with developers and get back deposits. Go here for HUD's description and summary of the law, and here for the statute - 15 U.S.C. 1701 et seq.

(2) The condo purchaser's attorney Joseph Stern at Saraga & Lipshy of Delray Beach said the appellate court was clearly biased against the buyers. “They talk about our clients having buyer’s remorse. Statements like that have no place in the opinion. Those statements weren’t part of the record,” he said. Stern said he will ask the full 11th Circuit to hear the case en banc.