3.7 REGULATION OF LAND SALES

Just as the sale and use of property within a state are controlled by state and local governments, the sale of property in one state to buyers in another is subject to strict federal and state regulations.

National Interstate Land Sales Full Disclosure Act

The U.S. Congress created the federal Interstate Land Sales Full Disclosure Act to facilitate regulation of interstate land sales and to protect consumers from fraud and abuse in the sale or lease of land. The act required land developers to:

1. register subdivisions of 100 or more non exempt lots with HUD and
2. to provide each purchaser with a disclosure document called a property report.

The property report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement.

The report must disclose specific information about the land, including:

• the type of title being transferred to the buyer,
• the number of homes currently occupied on the site,
• the availability of recreation facilities,
• the distance to nearby communities,
• utility services and charges, and
• soil conditions and foundation or construction problems.

Right of Rescission
Under the act, the purchaser has the right to revoke any contract to purchase a regulated lot until midnight on the seventh day after the contract was signed.

If the purchaser or lessee does not receive a copy of the property report before signing the purchase contract or lease, she may bring an action to void the contract within two years after signing it.

Exemptions
The act provides a number of exceptions. For instance, it does not apply to:

• subdivisions consisting of fewer than 25 lots or
• to those in which the lots are of 20 acres or more
• Lots offered for sale solely to developers
• lots on which buildings exist or where a seller is obligated to construct a building within two

Misrepresentation or failure to comply with the act’s requirements subjects a seller to criminal penalties (fines and imprisonment} as well as to civil damages.

State “Subdivided Land” Sales Laws
The sale or promotion within Illinois of subdivided land is regulated by the Illinois Land Sales Registration Act of 1999. This act regulates the offering, sale, lease, or assignment of any improved or unimproved land divided into 25 or more lots and offered as a part of a common promotional plan

Under this legislation,

• subdividers must register with the state
• file a full disclosure report containing information on the land, location, tax status, financial arrangements, and liens associated with the offering.

As in the federal statute, in Illinois a purchaser who receives the report prior to signing a contract or agreement may cancel the contract or agreement by giving notice to the seller any time before midnight of the seventh day following the signing of the contract or agreement.

A purchaser in Illinois who does not receive this report before a contract or agreement is signed may cancel the contract or agreement anytime within two years from the date of signing.