On Sept. 26, 2014, President Barack Obama signed into law the Interstate Land Sales Disclosure Act Update of 2013. The update exempts condominium developments from the registration requirements under the Interstate Land Sales Act (ILSA), but it does not immunize sponsors from liability under ILSA’s anti-fraud provisions. Because of the potential advantages ILSA offers to plaintiffs over New York law, sponsors should prepare for claims brought under its anti-fraud provisions. This article explores the benefits to plaintiffs of ILSA’s anti-fraud provisions over claims under New York law, and discusses potential defenses to such claims including New York’s law of specific disclaimers.
Fraud Liability in New York
In New York, a public offering of securities consisting of participation interests in real estate, including new construction condominiums, is governed by the Martin Act. However, because there is no private right of action (i.e., the attorney general bears sole responsibility for implementing and enforcing the legislation), condominium purchasers seeking to assert a private right of action for fraud must rely on New York common law fraud.