Bodansky v. Fifth on the Park Condo, LLC - New York ILSA Decision


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Bodansky v. Fifth on the Park Condo, LLC, 2010 U.S. Dist. LEXIS 7577 (S.D.N.Y. 2010)

 

In Bodansky v. Fifth on the Park Condo, LLC, purchasers sought to rescind their  contracts based on the developer’s failure to provide documents required under ILSA.  The developer admitted that it was unaware of the provisions of ILSA.  Nevertheless, it argued that by “stacking” the 100-Lot Exemption, under 15 U.S.C. §1702(b)(1), and the Improved Lot Exemption under §1702(a)(2), it was exempt from the Act's registration and disclosure requirements.  The developer argued that because it had sold fewer than 100 unfinished units in the Condominium as of the date that the Temporary Certificate of Occupancy was issued for the entire building, and because the remaining units were currently completed and thus qualified for the Improved Lot Exemption, the 100-Lot Exemption applied to the remaining units.  The purchaser argued that the 100-Lot Exemption did not apply because the developer had 160 units offered for purchase at the time of the sale.  

 

The court, referring to its view that the relevant ILSA language was clear, explained that the purchasers could point to nothing in the text of ILSA to suggest that the determination of a developer's eligibility for the 100-Lot Exemption must be determined at the time of sale of any particular lot.  Further, the court noted there is no textual support for the purchasers’ suggestion that a developer must have some sort of formal “plan” in place at the time any particular unit is sold in order to qualify for the 100-Lot Exemption. According to the court, the text of the statute does not limit the availability of the 100-Lot Exemption only to subdivisions in which the developer offers for sale fewer than 100 non-exempt lots from the outset.  The court rejected the interpretations of Grove Towers, Inc. v. Lopez, 467 So.2d 358 (Fla.Dist.Ct.App.1985) and other Florida state court decisions holding that ILSA requires that eligibility for the 100-Lot Exemption be determined at the time the purchase agreement is executed.  

 

Bodansky holds that if a developer had not sold more than 99 units, it could piggyback the § 1702(a)(2) and the § 1702(b)(1) exemptions together, regardless of sequence and in so doing declared  that the  Florida decisions requiring that a developer have a "plan" to combine these two  exemptions were not binding on the New York court. The developer’s ignorance of the requirements of the ILSA appears to have been a non-issue to the court.

 

This article does not constitute legal advice or the formation of an attorney-client relationship.  Republication of this article without express permission of Carmel & Carmel P.C is prohibited.

 

The citation for the Bodansky decision is:

Bodansky v. Fifth on the Park Condo, LLC, 2010 U.S. Dist. LEXIS 7577 (S.D.N.Y. 2010)

Please contact Aaron Eidelman at aeidelman@carmel.us if you have any comments or questions in regards to this article.

2010-02-11 01:27:00