A federal district court judge late last month ruled against Manhattan-based Forkosh Development Group, which was sued under the Interstate Land Sales Full Disclosure Act by a buyer seeking rescission at the struggling Solis Resort Spa & Residences in Sunny Isles, Fla., a decision that lawyers say could overturn two recent rulings, in favor of New York developers.
U.S. District Judge Marcia Cooke ruled that the developer, led by chief executive Alexander Forkosh, failed to register the 135-unit property under ILSA law and failed to apply for an exemption before the unit was sold in April 2006, therefore must refund the deposit, plus damages to the plaintiff, who purchased the unit under the name First Global.
“The undisputed facts in this case reveal that at the time [First Global] purchased the condominium unit, no units had been sold with a commitment by Mansiana [the entity that owns Solis] to construct a building within two years,” Cooke wrote in her May 27 decision. “The two-year exemption requires an obligation, not merely an intention to build.”
Under ILSA law, developers are required to file property reports with the U.S. Department of Housing and Urban Affairs, which allows buyers to review the information before they make a purchase. Properties with fewer than 99 units are exempt, unless there is fraud, and also if they pledge to build a property within two years.
“The important factor in my case is that at the time the developer claimed the exemption he didn’t have 99 units built or [have a certificate of occupancy],” said Christopher Leigh, attorney for First Global. “[The developer's expression to build more than 99 units was purely speculative."
Alexander Forkosh was not immediately available for comment and company lawyers declined to comment.
The case is seen by many lawyers as a reversal of the Lola Bodansky case, in which a federal judge in New York ruled against her after she sued Harlem's Fifth on the Park condo under the ILSA law for rescission of her deposit. In that case, the judge ruled that Artimus Construction's Fifth on the Park was exempt from ILSA because the project failed to sell 100 units at the time it received its certificate of occupancy.
The second New York ILSA case where the judge ruled in favor of the developer was at One Hunters Point, a Long Island City condo where Simone Development failed to sell 100 units.
The Florida decision follows a May ruling in the case of Leesburg, Va.-based couple that won their deposit back from a Ritz-Carlton project in Creighton Farms, Va.
"The whole purpose of ILSA is to provide a potential purchaser with as much information [as possible] before he signs the purchase agreement,” said Lawrence Weiner, attorney for Bodansky in the Fifth on the Park ruling.
Dan Ross, the attorney for Fifth on the Park, argued, however, that the Florida case involved different circumstances than his case, and therefore will not change anything, at least until Bodansky’s appeal is heard.