State and federal disclosure requirements for condominiums not built in Nevada

The requirements for a valid Public Offer Statement are found in Nevada Revised Statutes 116.4100 et seq. titled “For the Protection of Buyers”. Under NRS 116, et seq., sellers of unbuilt condominiums must provide a prospective buyer with a Statement of Public Offering, which must meet the requirements of NRS 116, et seq. In the event that a Statement of Public Offering is not provided to prospective buyers prior to purchasing an unbuilt condominium unit, then the buyer is entitled to rescission and/or other remedies, as follows:

NRS 116.4108 Buyer’s right to cancel.

1. A person required to deliver a public offer statement pursuant to subsection 3 of NRS 116.4102 shall provide the buyer with a copy of the current public offer statement no later than the date an offer to purchase becomes binding on The buyer. Unless Buyer has personally inspected the unit, Buyer may, by written notice, cancel the purchase contract up to midnight of the fifth calendar day following the date the contract was entered into, and the purchase contract must contain a provision to that effect. .

2. If a buyer elects to cancel a contract pursuant to subsection 1, the buyer may do so by personally delivering notice to the offeror or by sending notice by United States mail prepaid to the offeror or its agent for service of process. Cancellation is without penalty and all payments made by the buyer prior to cancellation must be refunded immediately.

3. If a person required to deliver a public offering statement pursuant to subsection 3 of NRS 116.4102 fails to provide a current public offering statement to the buyer to whom a unit is transferred, the buyer is entitled to actual damages, rescission or another type of repair. but if the buyer has accepted the alienation of the unit, he has no right to rescission.

Unbuilt condos look like unregistered securities. Although unbuilt condominium units are classified as real estate interests, they are not like common parcels of real estate that can be personally developed, managed, and improved, and for this reason are often considered akin to securities, requiring the registry values ​​due to dependency. on the management of third parties who are responsible for the rise or fall of the investment. In this sense, unbuilt condominium units have often been said to be a hybrid interest, requiring more disclosure than the sale of a parcel of land that can be inspected. When unbuilt condominium units are sold as “investments,” they come even closer to being an unrecorded value than a typical interest in real estate.

Recognizing the need to protect unsophisticated buyers of unbuilt condominium units, federal and state laws were enacted to protect inadvertent buyers from condominium developers with superior bargaining power, sophisticated experience, and endorsement contracts.

NRS 116, Section 4101, et seq. is entitled For Buyers Protection. Clearly, these provisions are important and developers must adhere to them. When they do not comply, it is at their own risk, because buyers can terminate. These provisions appear to recognize the dual, if not hybrid, nature of an unbuilt condominium unit, and appear to be offered to the public rather than require value registrations for unbuilt condominium units.

The federal government has also recognized a significant need to regulate sellers of unbuilt condominium units, resulting in the passage of the INTERSTATE LAND SALES FULL DISCLOSURE ACT, which requires sellers to provide adequate disclosure, including Property Reports and Public Offer Statements, unless exempt. The most common exemption is sought by developers who claim they do not have to comply with the ILSFDA if they unconditionally commit to building the units in question within 24 months of signing a purchase agreement. Often developers assume they are entitled to the 24-month exemption and therefore fail to provide the required disclosure, only to find out later that they were unable to complete and deliver the unit in question within 24 months as promised. . This situation gives rise to litigation, in which purchasers of unbuilt units are allowed to rescind if the developer has not filed the Tender Offer and Property Report and does not have a valid waiver.

Buyers of unbuilt condominium units should be careful because many times they are buying a unit that will not be built within 2 years, if at all. If the developer promises to deliver within 24 months, but fails to deliver, the developer most likely also failed to provide full disclosure under the ILSFDA without an appropriate waiver and the buyer has the right to terminate and receive a full refund of the entire guarantee money. deposits. If the developer is in financial trouble, as is often the case, and the development is either executed or purchased, there are other grounds for termination as well. In such cases, a buyer should contact an attorney who is an expert in these mysterious and often contradictory and confusing areas of the law.

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