[Congressional Record (Bound Edition), Volume 159 (2013), Part 10]
[House]
[Pages 14367-14368]
[From the U.S. Government Publishing Office, www.gpo.gov]




          INTERSTATE LAND SALES FULL DISCLOSURE ACT AMENDMENT

  Mr. McHENRY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 2600) to amend the Interstate Land Sales Full Disclosure Act 
to clarify how the Act applies to condominiums.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 2600

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXEMPTION FOR RESIDENTIAL CONDOMINIUM UNITS.

       (a) Exemption.--Section 1403 of the Interstate Land Sales 
     Full Disclosure Act (15 U.S.C. 1702) is amended--
       (1) in subsection (b)--
       (A) in paragraph (7)(C), by striking ``or'' at the end;
       (B) in paragraph (8)(G), by striking the period at the end 
     and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(9) the sale or lease of a condominium unit that is not 
     exempt under subsection (a).''; and
       (2) by adding at the end the following:
       ``(d) For purposes of subsection (b), the term `condominium 
     unit' means a unit of residential or commercial property to 
     be designated for separate ownership pursuant to a 
     condominium plan or declaration provided that upon 
     conveyance--
       ``(1) the owner of such unit will have sole ownership of 
     the unit and an undivided interest in the common elements 
     appurtenant to the unit; and
       ``(2) the unit will be an improved lot.''.

     SEC. 2. EFFECTIVE DATE.

       The amendments made by this Act shall take effect 180 days 
     after the date of the enactment of this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
North Carolina (Mr. McHenry) and the gentlewoman from New York (Mrs. 
Carolyn B. Maloney) each will control 20 minutes.
  The Chair recognizes the gentleman from North Carolina.


                             General Leave

  Mr. McHENRY. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days within which to revise and extend their remarks 
and to submit extraneous material for the Record on H.R. 2600, 
currently under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from North Carolina?
  There was no objection.
  Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume.
  I want to begin by commending my colleague Congresswoman Carolyn 
Maloney of New York for introducing H.R. 2600 in an effort to clarify 
the intent and purpose of the Interstate Land Sales Full Disclosure 
Act, or ILSA.
  ILSA was signed into law almost a half century ago to regulate fast-
buck operators, who were bilking investors, especially the elderly, 
through blatantly fraudulent sales of raw land often located in swamps 
and deserts.
  It was land sales, not condo units, which were the intended target of 
the ILSA disclosures, which is quite evident in the fact that the 
required disclosures relate to land issues, such as access to roads and 
water supply, and make no sense in the context of more urban vertical 
developments. Nevertheless, in the 1980s, the Federal courts started to 
apply ILSA to vertical condominiums based on HUD's broad interpretation 
and Congress' failure to expressly exempt condominiums.
  The fact is that purchasers of vertical condominium units do not need 
the additional disclosures of that act. To the extent that any of the 
act's disclosures relate to condo developments, they are generally 
duplicative of more extensive information already contained in State-
mandated disclosures to purchasers.
  The private use of ILSA was practically nonexistent for 40 years, 
until 2008, when the real estate market crashed and purchasers' lawyers 
started looking for ways to escape pre-crash contracts. As the 
recession continued, plaintiffs' lawyers began seeking out purchaser 
clients to file lawsuits under that act, demanding the full rescission 
of contracts with such Web sites as ``No-Condo.com.''
  Courts generally acknowledge that ILSA has become ``an increasingly 
popular means of channeling buyer's remorse''; but while courts have 
expressed sympathy for the developers' position, many courts have felt 
compelled to apply the language of the statute literally, allowing 
buyers to escape valid contracts.
  Therefore, I stand in strong support of H.R. 2600, which puts an end 
to the exploitation of ILSA and allows residential condominium sales to 
make a return to the marketplace. I want to urge my colleagues to 
support this bill.
  I want to, once again, commend my colleague on the Financial Services 
Committee both for her great legislative work and her thoughtfulness in 
crafting this legislation.
  I reserve the balance of my time.
  Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield myself such 
time as I may consume.
  I thank my colleague from the Financial Services Committee, Mr. 
McHenry. This is one of many bills that we have worked together on in a 
bipartisan way.
  The Interstate Land Sales Full Disclosure Act, known as ILSA, was 
enacted in 1969 to protect consumers from being cheated in land deals. 
It was originally intended to protect out-of-State buyers who were sold 
land that was not what it was advertised to be and to provide a right 
of action to rescind the contract and walk away from the deal. However, 
due to ambiguities in the original law, courts have ruled over the 
years that ILSA applies to condominiums and that developers are 
required to file redundant paperwork and make disclosures that are 
completely nonsensical when applied to condo units.
  This has led to absurd results. For example, ILSA requires condo 
developers to file a report that discloses, among other things, 
information about the condo unit's topography, how much of the condo is 
covered by water,

[[Page 14368]]

whether there is any soil erosion, and whether the condominium has any 
oil and gas rights.
  I, for one, don't know of any high-rise condo units that are covered 
by water. Requiring condo developers to file these types of nonsensical 
disclosures provides no consumer protection whatsoever and simply 
generates unnecessary paperwork.
  Unfortunately, during the economic downturn in 2008, some buyers used 
the recording requirements of ILSA to rescind otherwise valid contracts 
for economic reasons, an unintended consequence of the act and its 
intent. The law now needs a technical fix to distinguish condominium 
sales from other types of land sales and to recognize the unique 
conditions under which these units are sold in today's market.
  As the author of the Credit Cardholders' Bill of Rights, I am a 
strong supporter of consumer protections. I fully support the consumer 
protections that were enacted through ILSA, and this proposed 
legislation does nothing to affect those consumer protections; but I 
also believe that we need to make distinctions for condos in order to 
allow the condominium development industry to rebound from the 
recession. The bill would only exempt condos from ILSA's registration 
requirements. It will maintain the consumer protections which ensure 
that consumers still have the right to rescind contracts in cases of 
actual fraud. Developers would, of course, still be required to comply 
with State laws that require specific disclosures.
  As we recover in this still very fragile economy, we want to 
encourage, not discourage, buyers and sellers to enter into real estate 
deals responsibly. That is why this bill is important--to ensure 
development and the return of an important industry in our country, 
that of residential condominium sales.
  I urge my colleagues to support this bill, and I reserve the balance 
of my time.
  Mr. McHENRY. We are prepared to close, and I reserve the balance of 
my time.
  Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield 5 minutes 
to my distinguished colleague from the great State of New York, Jerry 
Nadler.
  Mr. NADLER. Thank you to my colleague from New York (Mrs. Maloney) 
for bringing this important issue to the floor today and for yielding 
me the time.
  Mr. Speaker, I rise in support of H.R. 2600, a commonsense 
clarification to the Interstate Land Sales Full Disclosure Act, ILSA, 
to preserve consumer protections while keeping our economic recovery on 
track.
  More than 40 years ago, Congress passed ILSA to prevent real estate 
developers from bilking unsuspecting buyers out of their life savings 
by selling them parcels of land in the middle of a swamp or of a 
desert. ILSA requires sellers to disclose critical information about 
the land being sold, including automobile access to the property, the 
availability of water on a lot, and access for emergency personnel. 
These disclosure requirements are clearly necessary and appropriate for 
individuals who are buying land sight unseen.
  They do not make sense, however, when you try to apply them to 
purchases of condominiums in urban high-rise developments. Clearly, a 
condo in downtown Manhattan or in downtown Dallas will have access to 
water and emergency services, and purchasers do not need to know about 
the risk of soil erosion or about the presence of mobile homes within 
their units on the 15th floor.
  Although common sense would dictate otherwise, courts have 
interpreted the vague statutory and regulatory language of ILSA to 
apply to condo purchases. While that interpretation has been disputed 
and discussed over the years, ILSA was rarely an issue in private condo 
sales until the economy collapsed in 2008; and as mentioned by Mrs. 
Maloney, in facing tough financial times and underwater mortgages, many 
condo and co-op buyers began to use a developer's failure to comply 
with ILSA to void otherwise valid contracts for condo purchases and 
receive full refunds of their pre-cash down payments. These suits 
slowed the housing recovery and left many large developments in New 
York, Florida, and in other States unfinished or unoccupied.
  We can all agree that ILSA provides vital consumer protections for 
land purchasers, but the law should not be used to void valid contracts 
because of buyer's remorse. The bill before us today provides a simple 
clarification to explicitly exempt condominium sales from the law's 
disclosure requirements. To ensure that ILSA continues to provide the 
highest level of consumer protection, condominium developers will still 
be required to comply with the law's antifraud provisions. Developers 
will also be required to continue complying with all State and local 
disclosure requirements for condominiums.
  This bill, Mr. Speaker, is an easy fix to ensure that developers 
continue to comply with strict reporting requirements, that purchasers 
have the information they need to make informed decisions, and that our 
economic recovery remains on track.
  I congratulate Mrs. Maloney for bringing this bill to the floor, and 
I urge my colleagues to vote in favor of it.
  Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I have no further 
requests for time, and I yield back the balance of my time.

 Support H.R. 2600, the Interstate Land Sales Disclosure Act Update of 
                                  2013

       Dear Colleague: The Interstate Land Sales Disclosure Act 
     was enacted in 1969 to protect out-of-state buyers who were 
     sold raw, undeveloped land that was not what was advertised, 
     and provides a right of action to rescind the contract and 
     walk away from the deal.
       Senator Harrison Williams, who introduced the original 
     bill, noted that the land sales that ILSA was intended to 
     address were sales of ``swamps, deserts, high arid plateaus, 
     mountains, remote valleys, and--in some cases--actual jungles 
     or lava beds outside the continental United States.''
       However, due to ambiguity in the statute, courts have ruled 
     over the years that ILSA applies to condominiums, and 
     developers are now required to mate redundant disclosures 
     that make no sense whatsoever when applied to condo units. 
     For example, ILSA requires developers to disclose whether 
     there is any soil erosion in the condo, whether the condo 
     unit is covered by water, and information about the condo 
     unit's oil, gas, and mineral rights.
       During the economic downturn, some buyers have used ILSA to 
     rescind otherwise valid contracts for economic reasons--an 
     entirely unintended consequence of the law and its intent. 
     The law now needs a technical fix to distinguish condominium 
     sales from other types of land sales and to recognize the 
     unique conditions under which these units are sold in today's 
     market.
       H.R. 2600 explicitly exempts condominiums from ILSA's 
     registration requirements, but maintains ILSA's consumer 
     protections by ensuring that condominiums are still subject 
     to the statute's anti-fraud provisions. In addition, 
     developers would still be required to comply with all of the 
     normal state- and local-level disclosure requirements that 
     apply to condo sales.
       As we recover in this still fragile economy, we want to 
     encourage, not discourage, buyers and sellers to enter into 
     real estate deals responsibly. For these reasons, we hope 
     that you will join us in voting for H.R. 2600 later today.
       Sincerely,
     Carolyn B. Maloney,
       Member of Congress.
     Jerrold Nadler,
       Member of Congress.

  Mr. McHENRY. I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from North Carolina (Mr. McHenry) that the House suspend the 
rules and pass the bill, H.R. 2600.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. McHENRY. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this motion will be postponed.

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