Gentry decision frowns upon piggy-backing of ILSFDA exemptions without adequate justification


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Gentry v. Cottages-Stuart, LLLP, 602 F. Supp. 2d 1239 (S.D. Fla. 2009)

 

Plaintiffs sought to rescind their sales agreements for purchase of preconstruction condo units. The developer claimed that the project was exempt because 90 of the units were sold under the 100-Lot Exemption, and that 36 units were exempt because the sales agreements for those units unconditionally obligated the developer to construct a building within two years after the contract dates. The court, noting that ILSFDA is “an antifraud statute utilizing disclosure as its primary tool,” acknowledged that piggybacking exemptions is permissible but that in the context of this case was an intentional attempt to evade the registrations requirements of ILSFDA because the piggybacking had no legitimate business purpose. Consequently, the developer was not entitled to any ILSA exemptions. Note: What the court did was to graft a new requirement on the qualification for piggybacking these two exemptions.

 

Similar to the Murray v. Holiday Isle case, this court held that the plaintiffs’ rescission claim was barred because they did not timely notify the developer of their decision to rescind their contract. However, having determined that the defendant had not complied with ILSFDA’s registration and disclosure requirements, the court noted the plaintiff could recover damages for that violation.

 

This article does not constitute legal advice or the formation of an attorney-client relationship, and is not for re-publication without express permission of the Carmel & Carmel P.C.

 

The citation for the Gentry decision is:

Gentry v. Cottages-Stuart, LLLP, 602 F. Supp. 2d 1239 (S.D. Fla. 2009)

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

2009-03-01 11:15:00