Judge Allyne R. Ross quoted the other recent ILSA case — decided January 29, 2010, and too fresh to have much precedential weight — which said, literally, that, "the Hundred Lot Exemption can still apply to a subdivision containing one hundred or more lots...." The reasoning? Because the developers combined it with the Improved Lot Exemption, and nothing in the law said they couldn't use that tactic. So: If the 100th-and-up lots, even though uncompleted and thus unimproved land, are planned to be sold as improved land within two years, they're exempt — and so don't count toward the 204-unit total.
The court is essence gave the developers a magic crystal ball. Despite the uncertainties of the real-estate market, despite a history of contractors and developers taking longer than planned to complete buildings and despite contractors and developers going bankrupt and never even completing buildings, the court interpreted the law to say, Well, they're predicting the future and there's no way that their predictions won't come true. Sorry, you're out of luck.
The courts also ruled that even though the defendants conceded that each roof terrace and parking space unit is registered as a separate block and lot, and that they're taxed separately from any residential unit, that because they're not sold independently of residential units that they're not "lots" for purposes of the Hundred Lot Exemption. The U.S. Department of Housing and Urban Development (HUD), which oversees ILSA, had issued two contradictory advisory opinions on whether the roof terrace and parking units were lots, and since HUD didn't give analysis and reasoning in the either, the law allows a judge to give those opinions minimal consideration.
There's a disturbing kicker to all this. Both sides agreed that neither Bordon East nor Simone had ever even heard of ILSA when the offerings plans were filed on September 11, 2007. That's right: Two experienced, high-end real-estate firms, and all the attorneys advising them, never heard of a major federal law that's been in place for over 40 years.
Aside from the suspicious issue of how do you prove a negative, one would think that ignorance of the law is no excuse. Yet the court bought the reasoning that since they didn't know about ILSA — which they should have — then they weren't trying to evade it, which would have triggered the anti-fraud loophole on the consumers' side. But you can try to evade the thing that a law is about, even if you purportedly don't know there's a law covering it.
The plaintiffs attorney, Lawrence C. Weiner of Wilentz, Goldman, and Spitzer, has said he will appeal. For condo buyers in the here and now, however, make sure your attorney asks about ILSA, make sure you see the property report, and make sure you go in with the full knowledge that even if a development has more than 100 units, that the courts have given developers a new exemption: The Crystal Ball Exemption.
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