A Legal Remedy for Home Buyer’s Remorse

From the New York Times by CHRISTINE HAUGHNEY.

In May 2008, a few months before the financial industry’s meltdown, the shipping executive Vasilis Bacolitsas signed up to buy a $3.4 million apartment at the Brompton, a luxury condominium tower being built on the Upper East Side.

The building went up as the real estate market went down, and Mr. Bacolitsas and his wife sought a $600,000 reduction in the purchase price. When they did not get it, they decided they did not want the apartment anymore. Their contract, like all real estate contracts, required that they surrender the $510,000 deposit.

But last month, a judge ruled that the couple could walk away with their money. It is one of a series of recent rulings in New York and other states that has enraged developers and given an escape hatch to buyers who signed contracts at the worst possible time, before one of the biggest real estate meltdowns in decades.

The buyers — some wealthy, some not — are successfully using a 1968 federal law intended to protect buyers of out-of-state land from unscrupulous developers or brokers. But in many of these cases, the properties have been built as advertised.

Instead, attorneys for the buyers are finding fault in wording that technically violates the law in contracts or other paperwork — language that few developers or lawyers paid much attention to during the long real estate boom. Lawyers have won back deposits for errors as simple as failing to give buyers a legal description of the property or to register the building with the Department of Housing and Urban Development, a basic requirement that many companies nonetheless overlooked. …

In Mr. Bacolitsas’s case, the court ruled that his contract violated the law because it stated that the contract could not be filed with the city register, where property transactions are recorded. The law requires contracts to be recordable in city or county registries. …

Robert M. Chasnow, a partner at Holland & Knight who has been advising developers on ILSA for 30 years, said that, at first, courts were not receptive to buyers’ claims. Nationwide, until the last couple of years, roughly 10 to 20 ILSA court decisions came out, he said, but last year there were 69, and there have been 50 this year. “There’s been an explosion of ILSA cases,” he said. …