The Interstate Land Sales Full Disclosure Act’s Two-Year Completion Exemption From the Condominium D
The truth of the adage “a little bit of knowledge is dangerous” manifests itself for many real estate practitioners and their condominium developer clients that encounter the Interstate Land Sales Full Disclosure Act (ILSA or the act).1 The act presents practitioners with a plethora of choices (and a wide range of potential penalties for choosing incorrectly): determining whether to register a subdivision with the Department of Housing and Urban Development (HUD) or whether to rely on one or more of the act’s exemptions, and pinpointing which exemptions apply to a particular client. The purpose of this article is to review the act to the extent it impacts condominium developers particularly, focusing on ILSA’s prohibitions and requirements, exemptions and exclusions, and penalties for violation. Specifically, the “two-year completion” exemption, frequently utilized by developers, will be addressed in detail in conjunction with Florida case law interpreting this exemption. The case law analysis discusses at length one of the most recent reported cases construing the two-year completion exemption, Hardwick Properties, Inc. v. Newbern, 11 So. 2d 35 (Fla. 1st DCA 1998), which discusses a developer’s ability to contractually limit a purchaser’s remedies for the developer’s breach of contract, yet remain subject to the two-year completion exemption. Finally, this article examines the implications of Hardwick and prescribes practice and contract drafting suggestions following the uncertainty the case creates.
ILSA and its Prohibitions and Requirements
Florida case law and HUD guidelines have propounded and clarified the purposes and objectives of ILSA. According to HUD, the enforcer of ILSA and its corresponding regulations, ILSA’s purpose is consumer-protection oriented in nature and its goal is full disclosure of information, to insure prospective purchasers and lessees (this article may refer only to “purchasers” or “sales” transactions, and such references should be interpreted to apply to “lessees” and “lease” transactions, as applicable) have obtained adequate disclosure of facts about a particular subdivision so that an informed decision relative to a potential purchase can be made.2 Congress’ initial intent in promulgating the act was the protection of purchasers from unscrupulous developers selling undeveloped home sites that were, in fact, undevelopable.3 A review of the act’s provisions reveals the requirement for submission to HUD of in-depth, detailed information about a developer and its particular offering in question.
A developer is best advised to examine the act’s terms and determine whether its project is subject to, or exempt or excluded from, the act’s requirements before commencing any sales or marketing activity of the applicable units. In brief summary, ILSA prohibits a “developer” from selling or leasing any “lot” in a “subdivision,” through the use of interstate commerce, unless it complies with ILSA or falls within an applicable exemption or exclusion.4 Each of the terms in quotations are terms of art specifically defined in the act, and are addressed separately below.
The definition of “developer” is extremely broad, so many individuals and entities will fall within its parameters. A developer is defined as any person or entity who, directly or indirectly, sells or leases, or offers to sell or lease, or advertises for sale or lease, any lot in a subdivision.5 Note that this definition contemplates not only the act of conveying a unit, but also all related marketing and sales promotional efforts, a significant distinction if a subdivision must be registered, thus precluding any marketing activities until an effective registration is issued by HUD.
The definitions of “lot” and “subdivision” are as equally broad, with the effect of creating far-reaching jurisdiction for ILSA. ILSA defines a lot as any portion, unit, or undivided interest in land located in any state or foreign country if the interest includes the right to the exclusive use of a specific portion of the land.6 Applicable Florida and federal cases, as well as specific ILSA regulations, have confirmed that a condominium unit is considered a lot and, therefore, is subject to the act’s requirements (the terms “unit” and “lot” will be used interchangeably throughout this article).7 Because a subdivision is defined simply as any land located in any state or foreign country divided or proposed to be divided into lots, whether or not contiguous, for the purpose of sale or lease as part of a “common promotional plan,”8 many proposed condominium projects will fall within these definitional parameters. In fact, a developer must be alert and cognizant that two or more of its projects may be construed together by HUD as a “common promotional plan,” defined in ILSA as any plan undertaken by one developer or a group of developers acting in concert to offer lots for sale or lease.9
The primary potential result of HUD’s construction of one or more of a developer’s condominium projects as a common promotional plan is to preclude the use of certain exemptions from ILSA, particularly exemptions based upon a certain maximum number of lots in a subdivision, discussed more specifically below. HUD provides further clarification of what constitutes a common promotional plan, by specifying such plan is presumed to exist if the land is contiguous or advertised as a common development or by a common name, and by delineating the following characteristics indicative of such a plan: 1) common sales agents; 2) common sales facilities; 3) common advertising; and 4) common inventory.10 A developer and its counsel must thoroughly analyze each of the act’s definitions to determine whether a given project meets the threshold requirements for subjection to ILSA.
Once a developer determines its condominium does or may fall within the act’s jurisdiction, it needs to understand the requirements of developers dictated by the act. Initially, ILSA obligates a developer to register a subdivision with HUD’s Office of Interstate Land Sales Registration by filing a document referred to as a statement of record, which includes a variety of extremely detailed information pertaining to the developer and the property being offered, ranging from title status of lots to be conveyed, land use requirements, utilities, access, infrastructure conditions, local services available, subdivision characteristics, and financial conditions and monetary obligations of the developer.11 Only after HUD has approved a statement of record and issued an effective date may a developer sell and market lots, assuming compliance with ILSA’s other requirements, including its antifraud provisions.12
Another requirement of ILSA pertains to disclosure to potential purchasers, and constitutes the core purpose of the act. After a developer has received an effective date from HUD and commences sales and marketing activity, it must deliver a property report, the content and format of which is derived exclusively from the statement of record, to each prospective purchaser or lessee in advance of his signing any sales contract or agreement.13 HUD has memorialized its concern that the property report be delivered to purchasers in a timely, overt manner by explicitly prohibiting, for example, the attempted concealment of a property report or the use of such document in a language other than that in which the sales campaign has been conducted.14 HUD imposes additional requirements on developers subject to ILSA, including compliance with antifraud provisions that prohibit fraudulent or misleading sales practices or representations,15 and post-effective date requirements of 1) filing an amendment with HUD in the event of any change in any representation of material fact to information referenced in a statement of record, within 15 days of such change,16 and 2) filing an annual report of activity with respect to any effective registration, within 30 days of the anniversary of the effective date for the statement of record.17
An additional, important provision of ILSA grants an unconditional right of rescission to prospective purchasers, and specifies that with respect to the sale of any nonexempt lot, a purchaser may revoke the applicable contract for a period of seven days following the signing or for any longer period applicable by state law.18 A developer should note that this rescission right applies even though a developer may have successfully complied with each of ILSA’s registration provisions.
ILSA also specifically excludes certain situations from its coverage. Reservation agreements, frequently used by condominium developers to gauge marketability of a project, or nonbinding agreements in which a potential purchaser expresses an interest in prospectively buying a unit, but which require future affirmative action to create a binding obligation, are not within the act’s purview.
19 In addition, the sale by a developer of any undivided property interests that do not have appurtenant to them the right to exclusive use of a specific lot or unit, such as a coextensive camping site, are not within ILSA’s jurisdiction.20 A developer must familiarize itself with all of the act’s requirements, whether registration in nature or otherwise, to ensure that sales to purchasers will not subsequently be subject to rescission rights (in addition to the seven-day rescission right), penalties imposed by HUD, or remedies elected by such purchasers, as described below.
Exemptions or Exclusions for Condominium Developers
Several exemptions from ILSA’s requirements may be available for developers of condominium projects, including the following: 1) the “25 lot” exemption; 2) the “sales to builders” exemption; 3) the “100 lot” exemption; 4) the “12 lots-12 months” exemption; 5) the “two-year completion” exemption; and 6) the “improved lot” exemption. Each of these exemptions is self-determining by a developer or its counsel, and no prior approval process from HUD is necessary to implement these exemptions,21 unless uncertainty exists as to their applicability, an issue that will be addressed below.
HUD exempts from ILSA’s requirements the sale or lease of lots in a subdivision that contains 25 or fewer lots.22 As with certain other ILSA exemptions, this particular exemption contains nuances that will act to increase or decrease the actual number of lots that HUD will consider for purposes of allocating the exempt lots. For example, if a subdivision contains 25 or more lots, but fewer than 25 are offered under a “common promotional plan” as discussed above, such lot sales would be exempt, effectively permitting a subdivision containing more than 25 lots to be completely exempt, to the extent the lots remaining after deducting the noncommon promotional plan lots number fewer than 25.23 Thus, a developer may be permitted, in limited circumstances, to conduct separate marketing efforts in an attempt to prevent construction of a 25 or more lot subdivision as a common promotional plan in order to avoid the act’s terms.
Resale of units are not counted toward the 25 lot sales limit, as the exemption is based on the number of lots, not the number of sales;24 Therefore, this may “free up” lot sales a developer otherwise may have thought applied to the exemption limit. The converse situation, however, applies as well. To the extent a group of fewer than 25 units are construed by HUD as commonly promoted with any additional units, totaling in excess of 25, the exemption would be nullified for a developer.25
In a similar vein, HUD has promulgated the 100 lot exemption, which exempts the sale of lots in a subdivision containing fewer than 100 lots. The same qualifications discussed with respect to the 25 lot exemption and resales and common promotional plan construction apply to the 100 lot exemption, as well.26 The ILSA regulations specifically contemplate “piggybacking” exemptions onto the 100 lot exemption, to the extent a subdivision contains more than 99 lots, which excess lots could be construed as exempt based on any other one or combination of ILSA exemptions, except for the 25 lot exemption, which may not be aggregated.27
Two other miscellaneous exemptions that may be applicable to a particular condominium project are the “sales to builders” exemption and the “12 lots-12 months” exemption. The former exempts from ILSA’s coverage the sale or lease of lots to any person or entity acquiring them in order to engage in the business of constructing residential, commercial, or industrial buildings or for resale or lease of such lots to persons engaged in such business.28 The effect of this exemption is to exclude from ILSA’s boundaries those transactions that do not directly result in sale to the end-user of a residential unit. The “12 lots-12 months” exemption exempts from ILSA’s terms the sale or lease of lots in a subdivision if no more than 12 lots are sold in a 12-month period, commencing with the first sale, and any subsequent sales of up to 12 lots are also exempt if sold within the subsequent anniversary dates of such initial 12-month period.29 Developer’s counsel should note that if lot sales exceed 12 in the second or any subsequent year, the exemption terminates on the sale of the 13th lot and may not be reinstated.30
Perhaps the most frequently relied on exemption by condominium developers is the two-part “improved lot” exemption, which exempts the sale or lease of 1) land under a contract obligating a developer to erect a building within two years from the date the contract was signed by the buyer, also referred to in this article as the “two-year completion” exemption,31 and 2) any improved land on which there already exists a residential, commercial, condominium, or industrial building.32 The subtleties and requirements of the two-year completion exemption have been frequently litigated and addressed by HUD as well. For purposes of obtaining an understanding of this exemption, however, it is important to note that, for the exemption to be effective, the sales contract or lease must specifically obligate the developer to complete the building within two years,33 which two-year period usually begins on the date the purchaser signs the sales contract,34 and that “complete” means the unit must be ready for occupancy and have all customary utilities extended to it.35 It is HUD’s position that any presale periods cannot extend the overall two-year obligation to construct.36 In addition, HUD has determined that a contract that conditions construction upon acts of a buyer will not exempt the sale.37 The intricate contracting and other requirements imposed on a developer with respect to this exemption will be addressed later in this article, along with specific drafting considerations.
Existing Exemptions and Obtaining Confirmation
In the event a developer is unable to definitively determine if its project is exempt from ILSA registration, it may elect confirmation from HUD through three separate alternatives. First, a developer may seek an exemption order from HUD, which is granted in the discretion of the Secretary of HUD, on the basis that the particular subdivision or sale substantially meets the requirements of one or more of the exemptions available under ILSA, and is consistent with the intent of the exemption.38 To be considered for the exemption, a developer must submit information to HUD, including the form of sales contract, which must specify the developer’s and purchaser’s obligations with respect to infrastructure and maintenance, among other obligations, including buyer inspection requirements, the obligation of a developer to deliver a warranty deed within 180 days from the date of contract, free from encumbrances, and the developer must submit a detailed statement describing how the offering substantially meets the exemption eligibility requirements.39 The purpose of an exemption order is to permit exemption of projects that do not technically comply with the act’s exemption provisions, but that meet the basic intent and legislative history of the exemption; if HUD subsequently believes exempt status is not in the public interest, the exemption order may be terminated.40 Developers should note that an exemption order has no retroactive effect and applies only to sales made after the date of the order.41
Another alternative available to a developer unsure of its exemption under ILSA is to request an advisory opinion from HUD.42 This request procedure requires submission of a thorough description of the offering, an explanation and citation of the exemption claimed, and how the project satisfies the exemption.43 Additional information, specific to the applicable exemption desired, also is required to be submitted, such as a plat or the form of contract of sale.44
A developer also has the option of requesting a no-action letter from HUD to determine eligibility for an ILSA exemption. In essence, a no-action letter confirms that, although a subdivision normally would be subject to registration requirements because it does not fall within the parameters of any applicable exemption, HUD has determined no affirmative action is needed to protect the public interest or prospective purchasers and, therefore, no registration will be required.45 To initiate the request procedure, a developer must submit a thorough description of the transaction and the property involved, and an explanation of why no registration should be required.46 A developer should note, however, that a no-action letter does not retroactively apply to past sales, and all purchasers will continue to have all remedies available under ILSA, including the two-year rescission right, even if a no-action letter is issued.47 In the event of uncertainty, a developer should elect any one of these three exemption confirmation devices available directly from HUD, in order to avoid violating ILSA and incurring its attendant penalties.
Penalties for ILSA Violations
ILSA provides for a range of remedies available to HUD and purchasers for a developer’s violation of the act’s terms, ranging from criminal liability to fines, equitable actions, and civil suits. For willful violations of ILSA or willful misstatements in a statement of record, a developer may be subject to a fine by HUD of up to $10,000, five years imprisonment, or both.48 For a developer’s knowing or material violation of the act, HUD may impose a penalty of up to $1,000 per violation, not to exceed $1,000,000 for any one-year period; HUD also may seek injunctive relief against a developer, preventing its operation in violation of ILSA.49 A purchaser’s remedies against a developer directly are proceedings at law or in equity for violating ILSA’s registration requirements,50 or contract revocation rights for two years from the date of signing if a developer fails to provide a prospective purchaser with a property report before a sales contract is signed.51 Assuring compliance with ILSA is essential in light of the variety of penalties available against an errant developer.
Florida Precedent Interpreting Exemption
The terms of the two-year completion exemption, specifically construction of what HUD considers to be an obligation to construct a building within two years, has been subject to varying and incremental interpretation by Florida courts. In one of the earlier Florida cases addressing this issue, Hamptons Dev. Corp. of Dade v. Sackler, 522 So. 2d 1035 (Fla. 3d DCA 1988), the Third District Court of Appeal confirmed that a developer’s contract must contain an “unconditional commitment” to complete construction of a unit within the two-year time frame, and may not contain limiting language such as the developer’s inability to “guarantee the firm completion and availability date within the two-year time frame.”
In another case confronting this issue, Dorchester Dev., Inc. v. Burk, 439 So. 2d 1032 (Fla. 3d DCA 1983), the Third District Court of Appeal determined that, in order for a developer to qualify for the two-year completion exemption, the applicable sales contract may not limit a purchaser solely to the right to the return of his deposit and cancellation of the contract if the condominium unit is not delivered within the two-year period; the purchaser must be able to “affirm the contract and seek damages.”52 In dicta, the court cited Florida and foreign jurisdictions’ cases indicating that the sum of a purchaser’s damages should equal the difference between the contract price and the reasonable cost of completion of the unit, plus delay damages, measured by lost rental value during the term of the delay.53
Building on this holding, the Second District Court of Appeal in Marco Bay Associates v. Vandewalle, 472 So. 2d 472 (Fla. 2d DCA 1985), held that a contract that is silent as to a buyer’s ability to seek damages or specific performance does not negate such rights and, therefore, does not condition the completion guarantee.
In 1990, the Florida Supreme Court, in Samara Dev. Corp. v. Marlow, 556 So. 2d 1097 (Fla. 1990), expanded Dorchester by holding that in order for the sale of a condominium unit to be eligible for the two-year completion exemption, the sales contract must not limit the buyer’s remedies of damages or specific performance, so that the obligation to construct is not “illusory,” and “unconditionally obligates the developer.”54 In Samara, the sales contract at issue limited the buyer’s remedies to specific performance or a return of the deposit.55
A Florida case addressing the “developer obligation” aspect of the two-year completion exemption, Hardwick Properties, Inc. v. Newbern, 711 So. 2d 35 (Fla. 1st DCA 1998), further modified the Samara and Dorchester holdings, but in doing so created uncertainty for developers and practitioners with respect to drafting contractual remedies provisions. In Hardwick, the First District Court of Appeal held that the trial court erred in ruling that, as a matter of law, contract restrictions that preclude the recovery of special and consequential damages render a developer’s contractual obligation to construct a unit within two years illusory and, therefore, prevent exemption from ILSA pursuant to the two-year completion exemption.56 The purchase agreement at issue provided that in the event of a default by the developer, the purchaser could elect to terminate the contract and receive a refund of the deposit, or pursue any other remedies available to it at law or in equity, excluding, however, consequential or special damages.57
Interpretation and Limitations of Hardwick
Despite the superficially favorable holding for developers, the Hardwick holding is limited in that it reversed the trial court’s summary judgment in favor of the purchaser and remanded the case for determination of whether the general damages that were provided for under the contract were “so insubstantial under the circumstances” to render the contract illusory.58 The court ruled only that the exclusion of consequential or special damages from a buyer’s remedies available under a contract of sale may not, as a matter of law, nullify the two-year completion exemption.59 The Hardwick court further limited its analysis to and based its holding on Florida contract law to determine whether the sales contract at issue rendered the developer’s two-year build obligation illusory.60 Such limitation appears to comport with HUD guidelines which provide that HUD’s interpretation of what constitutes an obligation to construct a building relies on general principles of contract law, and that purchaser remedies clauses are matters to be decided by the parties to the contract under the laws of the jurisdiction in which the construction project is located.61 Therefore, the seemingly pro-developer holding of Hardwick actually permitted a remand to the trial court and allowed for attendant factual determinations to be made into adequacy of damages.
Hardwick dictates an intensive, fact finding analysis at the trial court level to determine whether a developer is actually bound contractually to construct a unit within a two-year time frame and, therefore, creates uncertainty for developers’ counsel in drafting contract remedy provisions. Specifically, the court’s analysis contemplates that a trial court will examine real estate market and other economic conditions and extrinsic factors specific to a particular developer to determine whether general damages are a sufficient deterrent to a developer’s breach.62 The holding states specifically that if a “developer remains exposed to damages for breach which are sufficient to constitute a substantial economic risk under the circumstances,” the developer’s obligation is real rather than illusory.63
Incidentally, the Hardwick court defined general damages as those reasonably arising in the usual course of events from a breach,64 and special damages as those peculiar to the nonbreaching party that would not ordinarily be incurred by another party similarly situated.65 In contrast, Hardwick identified consequential damages, such as lost profits, as those incurred by the nonbreaching party in its dealings with third parties, which are the proximate and reasonably foreseeable result of the breach.66 The effect of the court’s holding is to greatly expand the evidentiary standard that will be required to be met by a purchaser/plaintiff claiming that the two-year completion exemption is inapplicable, by requiring submission of factual information as to the amount and type of general damages the plaintiff has suffered, as well as whether such damages are insufficient in amount so as to render the developer’s risk of loss so negligible as to permit it to breach at will. This holding may ultimately result in a costly, time intensive effort required of a purchaser to obtain and present evidence, perhaps even expert witness testimony, of economic conditions applicable to the real estate market (such as, for example, increased real estate prices subsequent to the applicable contract date), and of the individual developer’s financial position and strength at the time of the breach. Therefore, Hardwick has increased the burden on purchasers attempting to prove a violation of ILSA’s two-year completion exemption requirements by requiring, in essence, as a condition precedent, proof that a developer’s subjectivity to contractual damages was insufficient to deter a breach of the two-year requirement.
Another effect of the Hardwick holding is to prevent a developer from being able to unilaterally exclude special and consequential damages from a buyer’s contractual remedies and still remain certain of its compliance with the two-year completion exemption, even if it successfully completes construction of a unit within the applicable two-year period.
Hardwick leaves open the possibility for a purchaser’s recovery of extensive consequential and special damages against a developer for breach of the two-year completion requirement, when the subjective, developer-specific standard of “sufficient damages under the circumstances” is taken into account, vis-à-vis an individual purchaser’s actual losses from a breach. In many cases, a buyer’s general damages, such as lost rental income and the two-year rescission option, will not be sufficient to counteract the increased cost to a developer of the accelerated completion of a project that is behind schedule, or to deter a developer from intentionally breaching when demand for a project has exceeded presale estimates, thus resulting in higher post-construction prices. Because at the time of publication of this article, Hardwick’s review by the trial court as result of remand was still pending, the type and extent of analysis regarding damages determination a trial court will undertake has yet to be determined. Therefore, developers’ counsel will remain uncertain of how to completely protect their clients’ interests in drafting remedies provisions.
Drafting and
Practice Suggestions
The uncertainty Hardwick has created in advising clients and drafting sales contracts remedies will likely continue even after the trial court’s post-remand findings. The highly individualized, developer-specific evidence that the Hardwick court contemplates being presented may ultimately provide little, if any, guidance to other developers not similarly, financially situated, as the “sufficiency of damages” test is individualized to a given developer. The following drafting options may be available to developers attempting to rely on ILSA’s two-year completion exemption:
1) Attempting to limit a buyer’s special and consequential damages remedies under a sales contract, as in Hardwick, and accepting the attendant possibility that such limitation may ultimately prevent the developer’s exemption from ILSA, and result in rescission rights for prior purchasers, as well as penalties from HUD or civil actions from prior purchasers, based on exposure to the economic risk analysis suggested by Hardwick ; such provision may state, for example:
If Seller fails or refuses to perform this Agreement, Buyer may seek specific performance or elect to terminate this Agreement by written notice to Seller, in which event the deposit shall be returned to Buyer upon demand, with any interest accrued thereon, and Buyer may commence an action to recover only actual and direct damages (out-of-pocket amounts actually paid by Buyer to third parties). Under no circumstances may Buyer seek or be entitled to recover any special, consequential, punitive, speculative or indirect damages, all of which Buyer specifically waives, from Seller for any breach by Seller of its obligation under this Agreement or any representation, warranty or covenant of Seller hereunder;
2) Drafting the buyer’s damages recovery provision of the sales contract generally to provide only, in accordance with Samara, that a buyer is entitled to seek damages, with the attendant possibility that a court may broadly construe the term “damages;” such provision may state, for example:
If Seller fails or refuses to perform this Agreement, Buyer may seek specific performance or elect to receive the return of Buyer’s deposit without thereby waiving any action for damages resulting from Seller’s breach.
3) Drafting the buyer’s remedies provision in a manner that does not specifically exclude any right of the buyer, but thereby not attempting to limit the developer’s exposure to losses in the event of a civil action; such provision may state, for example:
If Seller refuses or fails to perform this Agreement, all deposits shall be returned to Buyer upon demand, together with any interest earned thereon, and Buyer shall not thereby waive any right or remedy he may have because of such failure or refusal.
A developer uncertain whether its sales contract’s remedies provision violates the two-year completion exemption requirements may seek an advisory opinion (or the other alternatives discussed above) to determine if the exemption applies, submitting the proposed form of sales contract with the request. However, such opinion may provide little comfort or resolution, as HUD’s guidelines specify that, because of variations in applicable state contract law, HUD may condition its advisory opinion regarding exemption on representations by counsel as to the current status of state law with respect to the relevant issues.67 In other words, HUD may look to a developer’s counsel for a legal opinion that the two-year completion obligation is not rendered illusory by the remedies provision, the very issue about which counsel would be seeking a definitive answer from HUD.
Pending receipt of definitive guidance from HUD, and the rendering of post-Hardwick appellate and trial court opinions addressing this issue, a developer’s election in drafting contract remedies will depend largely on internal factors and business issues, such as the assets exposed to risk in the event consequential or special damages are awarded against a developer, and the ability to withstand financially a post-sale determination from HUD or a court that a project is not exempt.
A condominium developer’s ability to correctly interpret ILSA’s provisions is essential in order to avoid financial exposure to proceedings by HUD and purchasers, most notably, the two-year rescission right, as well as to provide comfort to a construction lender concerned with the act’s ramifications. On a more positive note, however, thoroughly understanding the act’s various exemption provisions, specifically, the two-year completion exemption, can alert developers to exemptions applicable to a given project, enabling the developer to avoid the burden of distributing property reports to purchasers, as well as the related, tedious HUD submissions. With respect to the two-year completion exemption and the impact of Hardwick, a developer (along with its counsel) will need to make an internal business risk decision as to whether the costs of obtaining a valid registration with HUD, are outweighed by the potential financial exposure to special and consequential damages in one or more purchasers’ suits for breach of contract, in the event the two-year completion obligation would be utilized, and then proceed accordingly.
Accurately assessing this issue, prior to the commencement of construction and seeking the financing of the project will be a key risk determinant relative to the project’s completion and (ideally) expedited sell-out. q
1 15 U.S.C. §§1701 et seq. (1998).
2 Winter v. Hollingsworth Properties, Inc., 777 F.2d 1444 (11th Cir. 1985).
3 15 U.S.C. Fed. Reg. 13,602 (1996); Law v. Royal Palm Beach Colony, Inc., 578 So. 2d 98 (Fla. 5th D.C.A. 1978).
4 15 U.S.C. §1703(a) (1998); 24 C.F.R. §1710.3 (198).
5 15 U.S.C. §1701(5) (1998).
6 24 C.F.R §1701.1(b) (1998).
7 Berzon v. Oriole Homes Corp., 497 So. 2d 670 (Fla. 4th D.C.A. 1986); Winter, 777 F.2d at 1449.
8 15 U.S.C. §1701(3) (1998).
9 15 U.S.C. §1701(4) (1998).
10 61 Fed. Reg. 13,602 (1996).
11 15 U.S.C. §§1704–1706 (1998).
12 24 C.F.R. §1710.21 (1998).
13 15 U.S.C. §§1701, 1703 (1998).
14 24 C.F.R. §1715.20 (1998).
15 15 U.S.C. §1703(a)(2) (1998).
16 24 C.F.R. §1710.23 (1998).
17 24 C.F.R. §1710.310 (1998).
18 15 U.S.C. §1703(6) (1998).
19 24 C.F.R §1710.4(d) (1998).
20 15 U.S.C. §1702(a)(1) (1998).
21 61 Fed. Reg. 13,602 (1996).
22 Id.
23 Id.
24 61 Fed. Reg. 13,603 (1996).
25 Id.
26 15 U.S.C. §1702(7) (1998).
27 61 Fed. Reg. 13,603 (1996).
28 61 Fed. Reg. 13,604 (1996).
29 15 U.S.C. §1702(b)(2) (1998).
30 61 Fed. Reg. 13,605 (1996).
31 15 U.S.C. §1702(2) (1998).
32 Id.
33 61 Fed Reg. 13,603 (1996).
34 Id.
35 Id.
36 Id.
37 Id.
38 24 C.F.R. §1710.16 (1998).
39 Id.
40 61 Fed. Reg. 13,609 (1996).
41 Id.
42 24 C.F.R. §1710.17 (1998).
43 Id.
44 61 Fed. Reg. 13,610 (1996).
45 24 C.F.R. §1710.18 (1998).
46 Id., 61 Fed. Reg. 13,611 (1996).
47 Id.
48 15 U.S.C. §1709 (1998).
49 15 U.S.C. §1717 (1998).
50 15 U.S.C. §1709 (1998).
51 15 U.S.C. §1703(c) (1998).
52 Id. at 1034.
53 Id. at 1034, 1035.
54 Id. at 1100.
55 Id. at 1099.
56 Id. at 36.
57 Id.at 37.
58 Id. at 40.
59 Id. at 36.
60 Id. at 38.
61 61 Fed. Reg. 13,603 (1996).
62 Hardwick at 39.
63 Id.
64 Id.
65 Id. at 40.
66 Id.
67 61 Fed. Reg. 13,603 (1996).
William P. Sklar is a partner in the law firm of Foley & Lardner and partner-in-charge of its West Palm Beach office. He is board certified in real estate law by The Florida Bar and admitted to practice in Florida and New York. Mr. Sklar is an adjunct professor of law at the University of Miami School of Law as a member of the faculty of the graduate program in real property development.
Jennifer L. Dolce graduated from Florida State University in 1991, obtaining a B.S. degree in finance, and from Stetson University College of Law in 1995, obtaining a J.D. degree. She is an associate with Foley & Lardner in West Palm Beach, where she specializes in commercial real estate and real property financing transactions.
This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Bruce M. Stone, chair, and Brian C. Sparks and William P. Sklar, editors.
