Bacolitas v. 86th & 3rd Owner, LLC

Vasilis Bacolitas and Sofia Nikolaidou (collectively, Bacolitas) (plaintiffs) entered into a condominium-purchase agreement with 86th and 3rd Owner, LLC (the owner) (defendant). The agreement provided that Bacolitas was to pay two installments of $340,000 as a deposit. The agreement was later amended to provide that the second $340,000 installment was to be divided into two sub-installments of $170,000. The deposit amount was 20 percent of the purchase price. The agreement had a liquidated-damages clause, which provided that, pursuant to the Interstate Land Sales Full Disclosure Act (ILSA), the owner could sue for 15 percent of the total price of the condominium, or for actual damages, if Bacolitas defaulted. The agreement was not legally acknowledged. Under New York law, sale of real properties had to be acknowledged to be recorded. After Bacolitas provided approximately $510,000 for the deposit, which amounted to about 15 percent of the purchase price, he sought to rescind the agreement. Bacolitas filed an action in federal district court against the owner for the revocation of the agreement on the ground the agreement violated ILSA. Bacolitas argued that the agreement violated ILSA because the purchase agreement had not been recorded and did not contain a liquidated-damages notice as required by ILSA. The district court returned a verdict in Bacolitas’s favor on the ground that the agreement was not recordable because it had not been acknowledged and, therefore, the description of the condominium within the agreement did not meet the requirements of ILSA. The owner appealed. The United States Court of Appeals for the Second Circuit reviewed the case.