Appeal notice filed in closely watched Harlem ILSA case

New York /
Feb.February 23, 2010 04:57 PM

Condominium buyers at A Luxury Harlem Project Filed Court papers yesterday to begin an appeal of a recent decision that was the first ruling on the Interstate Land Sales Full Disclosure Act, or ILSA, in New York state in the last two decades.

Buyers of two condo units at Uptown Partners’ 5th on the Park, the 160-unit condo development at 1485 Fifth Avenue at 120th Street, filed a notice of appeal in Manhattan Federal Court yesterday, the filing shows.

They sought to overturn a decision issued Jan. 30 by federal judge Denise Cote who ruled that the developers of the project were exempt from the ILSA statute, thereby rejecting buyers’ efforts to break their contracts and get their deposits back.

The federal ILSA law requires that developers who have divided land into 100 or more units, file a property report with the U.S. Department of Housing and Urban Development. Buyers must also be given a report before signing their contract. The little-known law has been used in dozens of cases in New York City where buyers are trying to back out of their contracts.

There are scores of ILSA cases pending in federal court, including at projects such as Extell Development’s the Rushmore at 80 Riverside Drive and Parkview Developer’s the 505 at 505 West 47th Street. But it was not immediately clear how the 5th on the Park ruling would impact these cases.

The judge said the 28-story Harlem development was exempt because fewer than 100 units of the development had gone into contract before the building was completed.

Lawrence Weiner, a partner with Wilentz, Goldman & Spitzer, who is representing the buyers as well as five other ILSA cases with similar situations in the building, played down last month’s loss, saying it only pertained to a limited number of the scores of cases pending.

“The trial level decision is not binding on other trial level courts,” he said. But he added the decision would harm the interests of buyers because, “[it] defeats the purpose of ILSA, which is to provide purchasers with as much information [as possible] prior to purchasing a condominium unit.”

The case is important because it appears to be the first ILSA decision delivered by a federal judge in New York since 1990.

Lewis Futterman, president of Uptown Partners, said the decision had already enticed a half-dozen buyers who had been involved with legal action or were waiting for a decision, to begin talking with the sales agents again about buying their units.

“We feel vindicated. Buyers’ remorse… is not a good reason for people to be able to get out of a deal,” he said.

The case could have an impact on other ILSA cases, 5th on the Park attorney Daniel Ross, a partner with Stroock & Stroock & Lavan, said. He said similar cases had ruled against the developer in Florida. But he was reluctant to claim the case was precedent-setting.

“This is clearly going to have an impact on other properties in New York,” he said, noting similarities to a development called One Hunters Point at 5-49 Borden Avenue in Long Island City, where court records show there are ILSA cases pending on eight units.


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