The Real Deal New York

Judge overturns ILSA ruling at the 505, a victory for 35 buyers

October 04, 2011 02:09PM
By David Jones

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From left: 505 West 47th Street and Ian Reisner and Mati Weiderpass,
co-founders of Parkview Developers

A federal district judge late last week ruled that 35 buyers at the 505 Condominium in Hell’s Kitchen should get their escrow deposits refunded, overturning an earlier verdict for Parkview Developers in this closely watched case involving the Interstate Land Sales Disclosure Act.

In June 2009, 53 buyers filed suit in U.S. District Court alleging that Parkview, led by Ian Reisner and Mati Weiderpass, failed to provide the buyers with property reports at the building, at 505 West 47th Street. Eighteen of the buyers settled with the developers or closed on their purchases before a federal district judge dismissed the case in December 2010.

On Sept. 28, Judge Lawrence McKenna reversed the 35 buyers ruling, citing a reversal earlier this year in the case by Lola Bodansky against the Fifth on the Park condominium. A federal judge in March, overturned a ruling in favor of the Fifth on the Park developers, who claimed they were exempt from ILSA rules because they failed to sell over 99 units at the building, which required under the ILSA law.

The judge in that case ruled that the developers must claim an ILSA exemption based on the number of units being offered for sale before the building goes on the market, and not retroactively if they fail to sell the minimum number of units. The ILSA law, as written, requires new condos larger than 99 units to file property reports with the Department of Housing and Urban Development, but in recent months moved jurisdiction to the new Bureau of Consumer Protection at the Federal Trade Commission.
McKenna’s ruling in the 505 case noted that since the earlier 505 decision was based solely on the precedent set Bodansky case, it would be reversed since the Bodansky was overturned on appeal.

“The undisputed facts in this case seen through the lens of the 2nd Circuit’s Bodansky decision reveal that at the time plaintiffs executed their purchase agreements with the sponsor, none of the 108 units within the condominium were exempt from ILSA’s registration and disclosure requirements,” McKenna wrote in the order.

In December 2010, when the developers first announced the ILSA victory, they said in a statement that 13 units remained for sale and that 75 percent of the disputed units at the building had been resold. The website for the 505 now states that five units remain for sale. Streeteasy.com shows eight active sales listings and five in contract.

Lawyers for the buyers at the 505 said that after several recent decisions following the Bodansky ruling, the courts have established that ILSA does apply to condos in New York.

“I think that that debate is closed at this point,“ said attorney Allan Carlin, who represented more than 20 of the buyers. “The district court decision in Bodansky was an aberration.”

Reisner, managing partner of Parkview Developers, declined to comment, saying he had not yet discussed the ruling with his attorneys.

Starr Associates attorney Andrea Roschelle, representing the developers, said she has not yet reviewed the decision. Officials at Halstead Property, the broker at the 505, were not immediately available for comment.

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