article, we discussed the general provisions, applicability and implications
of failing to comply with the Interstate Land Sale Full Disclosure Act (ILSFDA
or the Act). The article below details the extensive requirements of the Single
Family Residence Exemption under the Act, which if a Developer complies with ALL
of its requirements, exempts the Developer from the registration requirements
but not the disclosure requirements, of the Act for those sales.
To qualify for the exemption, each of the following two separate subdivision
requirements and eight separate lot eligibility requirements must be satisfied.
- Subdivision Requirements
- The subdivision, or if incremental development is permitted by the
local code only those portions of the subdivision being offered at any
given time, must meet all local codes and standards.
- The promotion plan for the subdivision may not offer, by any
means or instruments of interstate communication, gifts, trips, dinners,
or other inducements to visit the subdivision or purchase lots.
- Lot Requirements (Each lot must comply with each requirement.)
- Each lot meets the minimum standards of development specified by the
local government or state where such lot is located, lots located in
jurisdictions that lack these standards are not eligible for this
exemption. The jurisdictional regulations must include standards for:
- Lot Dimensions
- Plat Approval & Recordation
- Roads & Access
- Water Supply
- Sewage Disposal
- Each lot sold must either be zoned for
single family residence or, if there is no zoning ordinance in effect,
restricted by covenants or restrictions to single family residences
which include manufactured homes, townhouses, and residences for one to
four family use.
- Each lot must be located on a conforming street or highway which is
acceptable to the local jurisdiction, or if the street is incomplete,
the Developer must have posed a bond or other surety with the local
jurisdiction for the full cost of completion.
- The HOA or local jurisdiction must have accepted or be obligated to
accept the maintenance obligation for the street. If the HOA is
obligated to maintain the street, the HOA must provide a good faith
estimate of the maintenance cost for the first 10 years of its
- Water, Sewage and Electricity
- At the time of closing, potable water,
sewage, and electricity must be extended to the property or the
local government must be obligated, by statute or agreement, to
install these utilities within 180 days after closing.
- Subdivisions without Central Water or Sewage
- Developer must provide assurances, which may be from a
hydrologist or the local health department, that there is
adequate year-round access to potable water for the subdivision.
- Developer must provide assurances that each lot is approved,
or will be approved at closing, for the installation of a septic
tank. Failure to secure approvals and close within 180 days
of the contract date puts Developer at risk for losing its
- Contract for sale must have a closing date and close within 180 days
of contract execution, and Developer must convey by warranty deed free
of monetary liens or encumbrances.
- At time of closing a current title commitment, policy, or title
opinion given to the purchaser showing that marketable title to the lot
is vested in the seller and that the lot is only subject to exceptions
approved in writing by the purchaser.
- The purchaser or purchaser’s spouse must personally inspect the lot
prior to contract execution.
Any lot that does not meet ALL of the above requirements and otherwise falls
under the jurisdiction of the Act, must either qualify for another exemption or
comply with the requirements of the Act.
If you have any questions about the provisions of this exemption or the
requirements of the Act, please contact a real estate attorney.
Please contact us if you have concerns or questions. For more information,
Washington-Baltimore Region Transactional Real Estate practice.