Owning a co-op or a condo sometimes feels like living with endless constrictions, from the seemingly limitless power of co-op boards to the specificity of condo contracts. They’re the product of dramatic legal disputes between buyers, board members, developers and other real estate players that have shaped the way we live in these buildings now.
Here, five influential courtroom showdowns in recent history–and what they mean for you.
4. The ILSA cases: A technicality can get you out of a condo contract
Another group of cases started from similar circumstances: when the New York City real estate market bottomed out in 2009, buyers scrambled to get out of their contracts. After all, some had purchased condos that lost 40 percent of their value before even being built.
One legal maneuver, made popular by real estate attorney Adam Leitman Bailey, relied on the Interstate Land Sales Full Disclosure Act, or ILSA, a federal law that protects condo buyers but was almost unknown in New York.
“Most developers do know about this law,” says Stone. “Maybe they misinterpreted it and thought it wouldn’t apply to them. The truth is, before the collapse, nobody cared. The economy was good, nobody was looking to get out of anything.”
These ILSA cases originated with Vasilis Bacolitsas, a Greek shipping executive, and his wife, who put down a $510,000 deposit on a three-bedroom at the Brompton, an Upper East Side tower constructed by the Related Companies.
In theory, when developers are building condos, they must submit a description of the tax lot of each condo in a form “acceptable for recording”–in other words, in a format that becomes part of the city’s official property records. But in practice, condos are often pre-sold before construction, and condos aren’t assigned tax lots until construction is complete. So buyers often sign contracts before a proper description is filed.
Initially, in 2010, a federal court sided with Bacolitsas. But in December 2012, a federal appeals court overturned that ruling, finding that Related did not have to refund his deposit because of ILSA. While the case is still technically ongoing, Bailey says that the “ILSA cases are over. That loophole is closed.”
A bill is currently pending before the U.S. Senate to amend ILSA to make an exception for condos with 99 units or more; it passed unanimously in the U.S. House of Representatives.
The takeway: The main lesson here? Creative and innovative lawyers will always find a solution, no matter how obscure, says real estate attorney Marc Fitapelli of Fitapelli Kurta.