A judge's ruling that a Fairfax County couple can cancel their contract to buy a $600,000 home and get back their $28,475 deposit may make thousands of similar contracts in Virginia non-binding, legal experts said this week.

The decision by Fairfax Circuit Court Judge Johanna L. Fitzpatrick has sent shock waves through the state's home building and real estate industries because the ruling said the contract Leslie and Harold Frank signed, a document similar to those used by most real estate agents and builders, does not comply with state law.

"This makes a whole lot of contracts voidable," said Gary G. Peterson, general counsel for the Northern Virginia Association of Realtors.

As a result, many lawyers and real estate companies said they are hurrying to amend the language of contracts they will use.

A little-known and long-ignored Virginia statute says a sales contract that does not require the seller to deliver a house within two years can be canceled by the buyer at any time unless the contract meets other conditions.

The contract would have to be recorded in the court clerk's office and the consumer safeguards would have to be explained in writing to the buyer.

Few standard Virginia real estate contracts contain such statements, however, real estate industry officials said.

The Franks' attorney, Steve A. Mandell, and other lawyers said they have not found any record of other cases previously filed testing the law's provisions.

"A lot of consumers need to know about it," Mandell said.

The document signed by the Franks and many standard contracts now in use do not contain provisions that require a builder to complete and deliver a house to the buyer, he said.

Russell E. Sherman, Tipco's attorney, said he plans to appeal Fitzpatrick's April 16 decision to the Virginia Supreme Court and expects the court to accept the case.

In his arguments before the circuit court, Sherman said the obscure statute cited by the Franks' lawyers was meant to protect "institutional lenders and purchasers in open-end contracts, contracts for deed, land contracts and/or options."

He said state legislators did not intend the law to be applied to residential sales contracts.

While lawyers, builders and real estate industry officials argued over what the Virginia General Assembly meant when it passed the law in 1977, the Franks' lawyers said the legislators' intent was clear.

The Franks sued Tipco Homes Inc., a large Northern Virginia home building company, last December, nearly a year after they signed a contract to buy a house that Tipco planned to build in a new subdivision near Tysons Corner. They said the contract they signed did not comply with Virginia law.

Fitzpatrick agreed and ordered Tipco to return the couple's $20,000 deposit and $8,475 they paid for extra features in the home.

The Franks, who have three children, signed the contract on Jan. 16, 1989, and were told the house would be ready for occupancy by last October, Mandell said.

The roof and exterior walls had not been finished by October and the home still is not completed, the attorney said.

When the couple decided to buy the house, they applied for a loan from Lenders Financial Corp. in McLean at the suggestion of Tipco, according to the court records.

Within a few weeks they were "verbally informed" that the loan was approved and that a letter confirming the approval was sent directly to Tipco, the court records said.

Although the Franks asked several times for a copy of the letter, they never received it, and in October they got a letter from Tipco saying there was no legally binding "written mortgage commitment."

"It seemed as though {Tipco} was looking for ways to extend the period" for finishing the house, and refused to give the Franks or their attorneys a new target date for completing the home, Mandell said this week.

With the house still under construction, the Franks have decided they no longer want it, he said.

Leslie Frank, a pharmacist, said she and her husband, an orthodontist, were "greatly disappointed" when they learned the house would not be finished by the October target date or by the end of the year and "that the developer felt he was under no obligation to complete the house by any particular date, even in 1990."

Tipco's "opinion that any number of things could result in ever continuing delays greatly disrupted our lives" and the Franks decided to sue after the developer refused to rescind the contract and return their deposit, she said.

The house the Franks once wanted to buy is for sale again, said David Counts, head of Tipco.

Counts said he could not comment on the case because "we're still in court" with an appeal. The money has yet to be returned to the Franks.

"This is a consumer protection statute and it reflects a realistic appraisal of how the real estate industry works," said Michael L. Goldberg, an attorney with the firm representing the Franks.

The industry relies heavily on financing schemes, which, though not illegal, are often unusual. Building and selling real estate is "complicated and many things can go wrong" and it is during the months while a house is under construction that the buyer is most vulnerable, he said.

Virginia legislators were "obviously looking" at these factors and believed it was not unreasonable to require builders to finish a house within two years after the contracts are signed, he said. "It's a very reasonable expectation."

Charles R. Swartz, a Richmond lawyer and past chairman of the Virginia Bar Association's real estate section, said: "Builders don't like to be obligated to perform at a specific time {and} purchasers like to make time of the essence if they possibly can. What happened here is you had so much flex built into this contract that the purchaser used it to his advantage."

Swartz said the two-year deadline provision for turning a house over to a buyer is not needed in contracts for typical new house sales. But he said he believes the provision "is not harmful as long as everybody knows about it and can modify their forms accordingly."

The Northern Virginia Association of Realtors disagreed and will ask the state legislature to change the law during its next session in January, Peterson said.

The law "has been substantially ignored" since it was passed and most attorneys were not even aware of its existence, Peterson said.

But since the Tipco decision, real estate companies are getting letters and phone calls from buyers inquiring about the validity of their contracts, he said.