Taking a new concept to the general public is one of the major milestones in any residential real estate project. Marketing a new subdivision, condominium, or build-to-rent community almost always involves digital outreach—websites, email campaigns, social media ads, even text messages. But what many developers don’t realize is these marketing tools can trigger federal and state land sales laws designed to protect consumers.
Violating these rules isn’t just a technical slip. It can lead to civil penalties, forced buy-backs of sold property, and, in extreme cases, criminal charges. Developers can lose profits or even their investment when buyers use these laws to rescind contracts and demand full refunds—sometimes years after a sale.
A Quick Primer on the Interstate Land Sales Act (ILSA)
The Interstate Land Sales Full Disclosure Act applies whenever real estate is advertised, marketed, or offered across state lines.
- It covers any technology crossing state borders: websites, emails, social media ads, telephone calls, online portals, print advertising in newspapers and magazines, and even targeted mailers.
- The law is triggered whether you’re selling or leasing lots or units. Pre-leasing an apartment building still counts.
- Developers are responsible for compliance even if marketing is handled by brokers or third-party teams.
In other words, if a buyer in New York can see your Georgia project online or contacts your sales team by email, ILSA likely applies.
Exemptions Are Narrow
Many projects fall under ILSA, but there are some exemptions that may apply:
- Completed residences with a certificate of occupancy are often exempt.
- Small projects or isolated single-property sales may also qualify, but the criteria are technical and vary by jurisdiction.
Because the exemption rules are complex, early legal review is critical. An attorney helps determine whether your project qualifies and to structure a deal to meet an exemption, if applicable.
Compliance Basics
If no exemption applies, developers must:
- Register the property with the appropriate federal agency and, in some cases, individual states.
- Prepare a property report (disclosure document) detailing financials, construction plans, utilities, and other key facts.
- Align all marketing materials, including websites, brochures, and social media with federal and relevant state disclosure requirements.
Failing to register while marketing across state lines can give buyers a two-year right of rescission, forcing you to refund purchase money and take back property—often at a loss.
Common Pitfalls
- “Typical” marketing can create liability. Launching a website or email campaign before checking the law is one of the most frequent mistakes.
- Team members share the risk. Brokers and sales agents can face real estate license suspension if marketing violates consumer-protection statutes.
- Generational knowledge gaps. After the last recession, many seasoned developers retired and newer teams may be unaware of ILSA’s reach and requirements.
Proactive Steps for Developers
- Seek counsel early. An upfront legal review is far cheaper than dealing with rescissions or penalties later.
- Identify your audience. Know where potential buyers or tenants are located and what state laws may apply.
- Control your marketing. Require your sales and marketing teams to clear all advertising and websites through legal review before launch.
- Consider gating your website. Some developers use contact forms to capture a visitor’s state of residence and display disclaimers when inquiries come from states where registration hasn’t been completed.
The Cost of Waiting
During the last recession, developers who skipped registration faced devastating losses when buyers invoked their right to rescind. In several cases, developers had to repurchase lots at peak prices while the market collapsed, creating unsellable inventory and triggering bankruptcies.
In one project I was involved with, the developer failed to register and didn’t qualify for an exemption. When market conditions shifted, buyers exercised their rescission rights, forcing the developer to refund purchase monies and repurchase property at the original, and now inflated, lot prices. The unexpected buybacks wiped out profits and left the developer with inventory worth far less than what had been paid, a financial hit that nearly sank the project.
This kind of scenario underscores why it’s critical to address ILSA before marketing begins. A single overlooked requirement can snowball into millions in losses.
Key Takeaway
The Interstate Land Sales Act is a consumer-protection law with serious consequences for non-compliance. Don’t wait until a buyer complaint or federal regulator forces your hand.
Before you market your project—whether it’s a subdivision, condo development, or build-to-rent community—consult with a trusted real estate attorney to review exemptions, registration requirements, and marketing strategies.If you’re planning a multi-unit development or large-scale rental project, Williams Teusink can help your development team evaluate plans and avoid costly surprises. To learn more about how we can assist, click here.
