Jankus Part I - Decision appears to extend recovery period for purchasers under the ILSFDA


Contact - Aaron Eidelman 

Jankus v The Edge Investors, L.P., 2009 U.S. Dist. LEXIS 29110 (S.D. Fla. Apr. 8, 2009)

 

The plaintiff signed a purchase agreement on July 6, 2005 to purchase a condominium unit that received its conditional certificate of occupancy on June 27, 2007. Plaintiff filed suit on February 5, 2008, alleging the developer failed to provide notice of a right to rescind and to complete construction within the required two-year period to be eligible for the Improved Lot Exemption. Other courts have held that a buyer must give notice of rescission within two years after he signs the sales contract (and then has another year in which to file suit) to comply with the ILSA.

 

Here, the plaintiff did not exercise his right to rescind until his February 5, 2008 lawsuit. On the timeliness issue, the court rejected decisions stating the buyer must comply with the two-year window for invoking its right to rescind and three year statute of limitation from the seller’s refusal to honor the rescission demand. The court held “a developer’s failure to give the statutorily mandated notice of rescission rights under 1703(c) extends the buyer’s rescission period until two years after the disclosure is correctly made.” Further, the court explained that if the disclosure is never made by the developer, “the buyer’s rescission period runs the full length of the three year statute of limitation.” The court acknowledged the applicability of ILSA’s damages § 1709(b) but declared it inadequate in this instance.

 

As for the two-year completion exemption, the court found that the obligation to construct in the sale contract was illusory and the purchaser’s remedies were improperly limited because the developer could cancel the contract and return the deposit as a sole remedy if it did not sell 80% of the units in the condominium. Consequently, the exemption failed, and the contract was subject to ILSA’s registration requirements.

 

The “savings clause” striking any contract provisions that would defeat ILSA exemptions was not effective because both the offending language and the construction obligation were in the same provision, and the language creating the exemption and destroying it would both have been struck (implying if the construction obligation had been in a different provision, the contract might have been acceptable to the court.)

 

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 Jankus decision is:

Jankus v The Edge Investors, L.P., 2009 U.S. Dist. LEXIS 29110 (S.D. Fla. Apr. 8, 2009)

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

2009-04-15 00:00:00