U.S. District Court Judge George B. Daniels, a federal judge in Manhattan, ruled on Tuesday that a company controlled by property developer Africa Israel, a unit of Israeli-based AFI Group, had to return deposits to three buyers of condos at District at 111 Fulton Street in Lower Manhattan because of inadequate disclosure in the condo's offering plan, according to an article by Craig Karmin in today's edition of The Wall Street Journal.
The judge based his decision on the Interstate Land Sales Full Disclosure Act, or ILSA. The article said that that law was "initially intended to reduce fraud in sales of Florida swampland" and the judge's ruling "was applied for the first time to help dissatisfied buyers of Manhattan condominiums.
"Judges in other states have cited ILSA when ruling on behalf of home buyers," the article said, "but lawyers say this decision marks the first time in New York that a developer hasn't prevailed in an ILSA case. The ruling comes at a time when hundreds of New York condo buyers have been trying to escape contracts signed around the market's peak and whose units have since fallen significantly in value.
"'It's quite significant,' says James Schwartz, partner at Mitchell Silberberg & Knupp, a New York law firm not involved in the case. 'It opens the door for wholesale use of the act to get out of contracts,'" the article continued.
The law requires that buildings with more than 100 units provide buyers with a variety of documents and that "if the developer fails to meet the disclosure requirements, buyers under the act have the right to tear up their contracts and receive refunds on their deposits within two years of their contract signings," the article said.
In previous New York cases, developers have argued successfully in court for exemptions from ILSA, such as saying that even though their buildings were marketed as having more than 100 units, fewer than 100 were actually sold.
The article said that Lawrence Weiner, a Wilentz, Goldman & Spitzer attorney who represented the buyers in the case, said developers had sometimes said that ILSA does not apply to high-rise condominiums, but said that "This case reconfirms that it does apply," adding that he has about nine pending ILSA cases related to New York buildings, involving more than 50 purchasers. He is also appealing two other ILSA-related cases, one in Harlem and one in Long Island City, where the court ruled on behalf of the developers.
The 163-unit Fulton Street building, which is known as District, began selling condos in June 2007, and the three condo owners in the case signed contracts in 2007 and 2008. The building was originally only 7 stories high by was enlarged by three floors by Leviev Fulton Club LLC of which Lev Leviev and Joseph Klaynberg are partners. Mr. Leviev heads Africa Israel.
At one point, the project was being designed by H. Thomas O'Hara and was anticipated to contain 289 apartments, but he was replaced by Karl Fischer and the number of units reduced.
The building is located between Dutch and William Streets and has a center atrium whose floor area was deducted from the existing building and added at the top.
The base of the building has a very attractive "cornice" diamond-shaped pattern of cutouts.
The judge based his decision on the Interstate Land Sales Full Disclosure Act, or ILSA. The article said that that law was "initially intended to reduce fraud in sales of Florida swampland" and the judge's ruling "was applied for the first time to help dissatisfied buyers of Manhattan condominiums.
"Judges in other states have cited ILSA when ruling on behalf of home buyers," the article said, "but lawyers say this decision marks the first time in New York that a developer hasn't prevailed in an ILSA case. The ruling comes at a time when hundreds of New York condo buyers have been trying to escape contracts signed around the market's peak and whose units have since fallen significantly in value.
"'It's quite significant,' says James Schwartz, partner at Mitchell Silberberg & Knupp, a New York law firm not involved in the case. 'It opens the door for wholesale use of the act to get out of contracts,'" the article continued.
The law requires that buildings with more than 100 units provide buyers with a variety of documents and that "if the developer fails to meet the disclosure requirements, buyers under the act have the right to tear up their contracts and receive refunds on their deposits within two years of their contract signings," the article said.
In previous New York cases, developers have argued successfully in court for exemptions from ILSA, such as saying that even though their buildings were marketed as having more than 100 units, fewer than 100 were actually sold.
The article said that Lawrence Weiner, a Wilentz, Goldman & Spitzer attorney who represented the buyers in the case, said developers had sometimes said that ILSA does not apply to high-rise condominiums, but said that "This case reconfirms that it does apply," adding that he has about nine pending ILSA cases related to New York buildings, involving more than 50 purchasers. He is also appealing two other ILSA-related cases, one in Harlem and one in Long Island City, where the court ruled on behalf of the developers.
The 163-unit Fulton Street building, which is known as District, began selling condos in June 2007, and the three condo owners in the case signed contracts in 2007 and 2008. The building was originally only 7 stories high by was enlarged by three floors by Leviev Fulton Club LLC of which Lev Leviev and Joseph Klaynberg are partners. Mr. Leviev heads Africa Israel.
At one point, the project was being designed by H. Thomas O'Hara and was anticipated to contain 289 apartments, but he was replaced by Karl Fischer and the number of units reduced.
The building is located between Dutch and William Streets and has a center atrium whose floor area was deducted from the existing building and added at the top.
The base of the building has a very attractive "cornice" diamond-shaped pattern of cutouts.
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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