In a major break-through for condominium developers, on September 18, 2014, the United States Senate voted unanimously to adopt an amendment to the Interstate Land Sales Full Disclosure Act (often called “ILSA”) that will exempt condominiums from the registration and disclosure requirements of the Act. The House of Representatives passed an identical bill in September 2013. Now the legislation heads to the White House, and the bill will take effect 180 days after President Obama signs the amendment into law.

ILSA was enacted in 1968 to protect consumers from land sales scams. The law generally requires a real estate developer who offers subdivision lots for sale to either register the offering with the federal regulators, and to provide every prospective buyer with a property report describing the property and related amenities and nearby communities in extensive detail, or to qualify for one of the Act’s exemptions from the registration and disclosure requirements. A developer’s failure to provide the required property report gives rise to substantial remedies for a buyer, including the right to rescind the purchase contract within two years after signing.

Over the years, the federal regulators and the courts adopted the position that ILSA should apply to condominiums under construction, as well as vacant land, even though in many instances, the projects were governed already by extensive local laws in urban areas and other developed communities.

The exemptions from registration available under ILSA include an exemption for the sale of lots or condominium units in a development containing fewer than 100 lots or units, and an exemption for the sale of a condominium unit under a contract obligating the developer to build the unit within two years after the buyer’s execution of the contract. However, reliance on those exemptions has proved risky in light of complexities in the Act’s rules and case law. More recently, developers have suffered aggressive and successful court challenges by buyers seeking to rescind their purchase for properties that proved to be disappointing investments in the recession.

This new amendment offers relief for developers with a simpler exemption for condominiums, no matter how small or large the project, and no matter how long the timetable for construction. The result should be a welcome measure of certainty for condominium developers and their investors and lenders, and a new boost for the recovering real estate market.