Daily Development for Friday, January 16, 2004 
by: Patrick A. Randolph, Jr. 
Elmer F. Pierson Professor of Law 
UMKC School of Law 
Of Counsel: Blackwell Sanders Peper Martin 
Kansas City, Missouri 
dirt@umkc.edu 
INTERSTATE LAND SALES FULL DISCLOSURE ACT; 
AGENCY: Delivery of marketing material alon is insufficient to make 
builder the developer's agent under the Interstate Land Sales Full 
Disclosure Act. 
Tomlinson v. Village Oaks Development Company, LLC, 2003 U.S. 
Dist. LEXIS 8488 (S.D. Ind. 1003) 
Purchasers bought a lot and home from Builder in a subdivision 
developed by Developer. Prior to purchase, Purchasers had received 
promotional and marketing materials for the subdivision through the mail 
at their residence in West Virginia. The materials named by the Builder 
and the Developer. The case does not indicate which party prepared the 
materials. Included in these materials was information about residential 
covenants, including minimum price and size restrictions, and the 
statement that these restrictions would both benefit and bind the 
purchaser's lot. 
Later, Purchasers concluded that Developer was selling properties to 
builders who were not building on conformance with the restrictions. 
The restrictions contained language that exempted Developer from 
liability to lot owners for failure to enforce the restrictions, but 
Purchasers elected to try to run around this restriction by bringing suit 
under the Interstate Land Sales Full disclosure Act (the "Act) They 
claimed that the failure to register the lot under the Act was a breach 
warranting rescission and return of their money. In a second count, they 
claimed further that permitting sales of the lots with smaller, cheaper 
homes was a failure of consideration also justifying rescission and 
damages. In this count, they argued that the waiver of liability contained 
in the Declaration was unconscionable. But, of course, they wouldn't 
have to reach that issue if they could make a case for failure to register 
under the Act. 
The Act provides the buyer of a residential lot a cause of action against a 
developer or the developer's agent for violation of the Act's registration 
and disclosure provisions. The plaintiff must demonstrate that plaintiff 
purchased the lot from the developer or agent. The cause of action under 
the Act alleged that Developer had violated the Act by failing to register 
with the Interstate Land Sales Office, failing to provide the various 
notices required by the Act, and failing to provide a printed property 
report as required by the Act. 
Sales of lots to builders who then resell to buyers are exempted from the 
Act's requirements. Here, the purchaser bought their lot directly from 
the builder. In trying to impose liability under the Act on the Developer, 
purchasers did not allege that Builder was Developer's agent at law, but 
rather that the promotional materials about the development were 
provided by the Builder as part of a "common promotional plant" as 
defined in the Act. An agent is defined under the Act as a "person who 
represents or acts for or on behalf of, a developer in selling or leasing or 
offering to sell or lease any lots in a subdivision." (15 U.S. C. 1701 (6). 
But the Act goes on to say that participation in a "common promotional 
plan" renders a party an agent of a developer. 
The court noted that the language of the Act defines a "common 
promotional plan" as a "plan undertaken by a single developer or group 
of developers acting in concern, to offer lots for sale or lease; where such 
land is offered for sale by such a developer or group of developers acting 
in concert . . ." 
The court concluded that there was no evidence that Builder in this case 
was a developer of the project, but simply a party who bought a lot and 
marketed the developed lot. The fact that the Builder elected to 
distribute information provided to it by the Developer did not make the 
Builder the agent or the co-participant in a marketing plan with the 
Developer. 
Comment 1: The Interstate Land Sales Full Disclosure Act is one of 
those federal laws that's particularly scary because it is so easy to lose 
track of. It applies when undeveloped land is marketed across state lines. 
In many parts of the country, it is not uncommon for the target market for 
undeveloped property, particularly resort or vacation property, to be 
residents of a nearby metropolitan area that happens to be in another 
state. Further, it is not uncommon for the urban fringe of cities to cross 
over the state line into another state. Suddenly, we no longer have 
"business as usual," but we're in a federally regulated area. 
If you're representing residential lot developers, you need to become 
expert on this land. The circumstances triggering compliance 
responsibility are going to arise sooner or later. Reading the Act is not 
enough. Go to a seminar, get the manuals. Any federal law has plenty of 
expensive traps for the unwary. Sooner or later your client will have an 
unhappy customer who'll find their way to an aggressive plaintiff's 
lawyer and you'll be off to the races. 
Comment 2: As consumer oriented laws are often interpreted very 
broadly to benefit the consumer, and as here the alleged liability was that 
of the target developer, not the exempted builder, it is safe to say that the 
Developer deftly dodged a bullet here. If their lawyers also get around 
the argument that the waiver of liability in the CC&R's is 
unconscionable, then their counsel will be worth whatever they were 
paid.