HARSHIT
RERA SOLUTIONS TO THE PROBLEMS OF THE ALLOTTEE
HARSHIT BATRA 11 Aug 2020

RERA SOLUTIONS TO THE PROBLEMS OF THE ALLOTTEE

RERA SOLUTIONS TO THE PROBLEMS OF THE ALLOTTEE

 

The Real Estate (Regulation and Development) Act (hereinafter referred to as the Act) came into force in 2016 with an objective to regulate the capital intensive market of the Real Estate Sector. It establishes an authority (Real Estate Regulation Authority) (hereinafter referred to as the Authority) to keep the check and balances along with a central advisory council and an appellate tribunal thus providing for adjudication. Though the act protects the interests of the allottees, the promoter, and the agent as well, it majorly affects the allottees who have systematic and reliable management to fall back to. Among other things, the act mandates certain obligations on the promoters, not following of which attracts hefty liability and penalties in the name of the promoter. These obligations bring a sense of comfort to the allottee because of the transparency they provide. It also promotes accountability and thus helps not only the allottee but the bonafide builder as well and helps in carrying out the process smoothly with several checkpoints. While these provisions are a boon for the bonafide promoter, they are a bane for the malafide ones. Before the implementation of the act, the corrupt, malafide, and unlawful practices of such promoters went unchecked due to lack of proper mechanism, however, the same cannot be said to be true now. Nonetheless, even with the strict provisions for transparency, accountability, and liability unlawful activities still continue to take place - with a decreased quantum, if not with the same intensity as before the implementation of the Act. There is a varied range of disputes that may arise in the contractual relationship of the builder and the buyer, as per Section 11(4) of the Act, the promoter is responsible for all obligations, responsibilities, and functions under the provisions of this Act or the rules and regulations made thereunder or to the allottees as per the agreement for sale, or to the association of allottees, as the case may be, till the conveyance of all the units to the allottees, or the common areas to the association of allottees or the competent authority. However, in case of a structural defect or any other defect, this responsibility extends beyond the execution of the conveyance deed. Since a violation can arise only where there exists an obligation, this article puts forth the solutions to the anticipated violations as per the varied responsibilities of the promoters:

 

WITH RESPECT TO THE ACT

1. Registration: The act mandates the promoter to register the real estate project and disclose the documents relating to brief details of his enterprise, projects, an authenticated copy of the approvals and commencement certificate, the sanctioned plan, layout plan and specifications of the proposed project or the phase thereof, and the whole project as sanctioned by the competent authority, the plan of development works, location details of the project, proforma of the allotment letter, agreement for sale, and the conveyance deed proposed to be signed with the allottees, the number, type, and the carpet area of the units, details of real estate agents, contractors, architect, structural engineer and other people associated with the development of a project, an affidavit confirming legal title to the land, that the land is free from all encumbrances, due date of completion, separate account, and other prescribed documents by the state authority. If the same is not done by the promoter, the aggrieved allottee can file a complaint under section 4 of the Act. The penalty can also be imposed on such a promoter under sections 60 and 61 of the Act.

 

2. Advertisement: The The act mandates the promoter to register the real estate project before advertising, marketing, booking, selling or offer for selling, or inviting persons to purchase in any manner the unregistered unit in an ongoing the project, the allottee can file a complaint about a violation of Section 3 of the Act. The penalty can also be imposed on the promoter under section 59 and 61 of the Act.

 

3. Obtaining insurance and other documents: The promoter has to obtain and thereafter transfer the insurance documents and other documents like title documents, construction documents, etc to the allottee. It is also the promoter’s responsibility to pay the premium and charges in respect of such documents. If the promoter does not obtain or transfer or pay for such documents to the allottee, the aggrieved allottee may file a complaint under section 16 and 17(2) of the Act.

 

4. Advance amount: Executing a written agreement for the sale is extremely pertinent and before such an agreement for sale is executed between the promoter and the allottee, the promoter cannot accept more than 10% of the total sale consideration as advance money. If a sum of more than 10% of total sale consideration is taken from the allottee, the aggrieved allottee can file a complaint about a violation of section 13.

5. Structural change: The promoter is obligated to follow the sanctioned plans, layout plans and specifications and the nature of the fixtures, fittings, amenities and common areas, of the units as approved by the competent authorities. Any addition/alteration in the same can only be made by previous consent of the allottee or two-third of the allottees and the concerned authority. Minor additions/alterations, on the other hand, can be made as may be required by the allottee, or such minor changes or alterations as may be necessary due to architectural and structural reasons duly recommended and verified by an authorized Architect or Engineer after proper declaration and intimation to the allottee. These minor changes exclude the structural change including an addition to the area or change in height, or the removal of part of a building, or any change to the structure, such as the construction or removal or cutting into of any wall or a part of a wall, partition, column, beam, joist, floor including a mezzanine floor or other support, or a change to or closing of any required means of access ingress or egress or a change to the fixtures or equipment, etc. If any change is made without the consent of the allottees or if any minor change is made without the intimation to the allottee or without appropriate permissions, as stated above, the aggrieved allottee can file a complaint about a violation of section 14 of the Act.

6. Completion certificate and occupancy certificate: The promoter is obligated to obtain the completion certificate and the occupancy certificate and hand over the same to the allottee at time of transfer of possession. If the promoter fails to do so, the possession is not deemed to be lawful and the aggrieved allottee can file a complaint about violation of section 11(4)(b).

 

7. Lease certificate: If the development is done on a lease hold land, the promoter has to give a lease certificate to the allottee or the association of allottee certifying that all dues and charges in regard to the leasehold land have been paid. If the promoter fails to do so so, the aggrieved allottee can file a complaint about a violation of section 11(4)(c ) of the Act.

 

8. Association of allottee: The promoter has the duty to form the association or a co-operative society or a federation of the allottees under the local laws or within a period of three months of the majority of allottees having booked their respective units. If the promoter fails to form the same, the aggrieved allottees can file a complaint about violation of section 11(4)(e ) of the Act.

 

9. Conveyance deed: The the promoter is responsible for the execution of a conveyance deed in favor of the allottee along with the undivided proportionate title in the common areas to the association of allottees or competent authority as per the time limits of local laws or in their absence, within, within three months from date of issue of occupancy certificate. If the promoter fails to do so, the aggrieved allottee can file a complaint for violation of obligations under sections 17 and 11(4)(f).

 

10. Payment: The promoter is responsible to pay all outgoings including land cost, ground rent, municipal or other local taxes, charges for water or electricity, maintenance charges, including mortgage loan and interest on mortgages or other encumbrances and such other liabilities payable to competent authorities, banks and financial institutions, which are related to the project until he transfers the physical possession of the real estate project to the allottee or the associations of allottees. If the promoter fails to do so, the aggrieved allottee can file a complaint about a violation of Section 11(4) (g) and (h) of the Act.

The promoter is also responsible for providing and maintaining the essential services, on reasonable charges until transfer of physical possession. If he fails to do so, a complaint can be filed for violation of the obligation under section 11(4)(d) of the act.

 

11. Defective title of land: It is the obligation of the promoter to ensure that the land on which the unit is being built is not defective. If any loss is caused to the allottee due to the defective title of the land, the aggrieved allottee can file a complaint under section 18(2) of the Act for compensation.

 

12. For any violation: The ambit of the act is very wide. If the allottee is aggrieved for any violation of obligation as per the act and seeks compensation for the same, a complaint can be filed under section 18(3) of the Act. A penalty can also be imposed on the promoter under section 61 of the Act.

 

13. Maintenance: The promoter shall be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees. If the promoter fails to oblige by the same, a complaint can be registered under section 11(4)(d).

 

WITH RESPECT TO AGREEMENT FOR SALE

Both the allottee and the promoter enter into an agreement for sale(hereinafter referred to as “the agreement”) by virtue of which, they share a contractual relationship with each other tied with the restrictions of the agreement. The rights and obligations as specified by the agreement have to be adhered to. In the case of non-obligation of the same, it attracts liabilities.

Every agreement, though follows a similar model, is peculiar and hence the obligations under a particular agreement have to be studied in particularity to know the solution to breaches of obligations therein. However, there are certain general anticipated breaches of the agreement as per the act which can be caused under the following circumstances:

 

1. Wrongful cancellation: Wrongful cancellation can be said to be done if the same is done unilaterally, without sufficient cause or without obliging the terms and conditions of the agreement. If the promoter wrongfully cancels the allotment of the allottee, the aggrieved allottee may file a complaint about violation of Section 11(5) of the Act.

 

2. Pending obligations before transfer: The promoter can transfer his majority rights and liabilities in the project to any third party but only after obtaining the written consent of two-thirds of the allottees and the authority. In case of such transfer, the promoter is liable to complete his pending obligations of the agreement. If he fails to do so, the aggrieved allottee can file a complaint about a violation of Section 15(2).

 

3. Delivery of possession: The promoter is obligated to deliver the possession of the allotted unit to the allottee within the due date and the grace period as mentioned in the agreement. If the same is delayed, the aggrieved allottee can file a complaint under section 18(1) and section 19(4) of the Act for return of amount and compensation and interest.

 

4. Information for plans and schedules: The promoter has to give information relating to sanctioned plans, layout plans along with the specifications, approved by the competent authority along with the stage-wise time schedule of completion of the project, including the provisions for water, sanitation, electricity and other amenities and services as agreed to between the promoter and the allottee. It may include any other information as per the agreement or even the Act or the rules and regulations. If such information is not given to the allottee, the aggrieved allottee can filed a complaint about a violation of section 19(1), 19(2) and 11(3) of the Act.

 

5. Any other violation: As has already been mentioned that each agreement needs to be dealt with in particularity. For any other violation of obligation arising from such agreement, a complaint under section 18(3) can be filed for return and compensation.

 

WITH RESPECT TO AUTHORITY

 

1. Compliance of order of authority: If the promoter does not comply with the order or directions of the authority, the aggrieved allottee may file a complaint under section 63 of the Act.

 

2. Compliance of order of appellate tribunal: If the promoter does not comply with the order or directions of the appellate tribunal, the aggrieved allottee may file a complaint under section 64 of the Act.

 

3. Execution: It is not unusual for an order by the adjudicating authority or even the appellate tribunal to not be followed. In that case, the aggrieved allottee can file for the execution of an order under Section 40 of the Act. On such filing, a recovery certificate (RC) is issued to jurisdictional District/Revenue Collector/Magistrate. RC is then forwarded to Jurisdictional Tehsildar or related officer for its execution. The authority/officer/tribunal that passes the order possesses the power to enforce it as well.

 

OTHERS

At certain instances not covered in the act, the aggrieved allottee can also approach the authority. The modern trend in the real estate sector has been to attract the buyers with interest rate subvention schemes or subvention schemes which provide financial flexibility and ease on the buyers. They have been discussed herein below-

 

Pre-EMI scheme: Pre-Emi schemes can be traced from the builder buyer agreement. They are also popularly known as NO PRE-EMI TILL POSSESSION schemes. In such schemes, the buyer takes a loan from a housing finance bank and thereafter a Tri-Partite agreement is entered into amongst the builder, the buyer, and the housing bank. The payment schedule is broken in two parts - Pre-EMI and EMI. It is the obligation of the builder to pay the Pre-EMI as per the terms and conditions of the agreement which can either be for a specified period or until the delivery of possession, as the case may be. It is only after such a period that the Buyer's liability to pay the EMI begins. In the meanwhile, the housing bank keeps on disbursing the loan amounts to the builder as per the construction linked plan.

It has been seen that certain banks and the builders act in connivance and harass the buyer into paying the Pre-EMI as well. If the buyer refuses to pay such amounts, it drastically affects the CIBIL Score of the buyers. The housing bank on the other hand disburses the loan amount to the builder without considering the construction of the project which is also against the Reserve Bank of India’s guidelines[1]. In such instances, although the act does not mention any specific relief, yet the allottee can approach the authority to seek grievance of the same. Here, the allottee does not have to wait for the due date of delivery to pass in order to approach the authority, the allottee can approach even if the default has occurred before such a date.

 

Buy Back Scheme: Buy Back schemes are one of the most attractive schemes where the builder assures the allottee that the builder would buyback the property, if the allottee would not want to take its possession after a stipulated time at an appreciated price. In such agreements, the allottee may either retain the property or sell it to the builder at the predetermined price. It is also to be noted that such schemes if arising out of MOUs shall not be within the jurisdiction of the authority or the adjudicating officer. The forum deals in contractual obligations arising out of builder buyer agreements. For the recourse to the sought from RERA, the MOU should be a part of the BBA. However, an MoU containing the assured return scheme could be considered as an agreement for sale if the adjudicating authority established under RERA and the Appellate Tribunal were to interpret the definition of agreement for sale under Section 2(c) broadly by taking into consideration the objects of RERA and without limiting the definition by the particulars of Section 13(2) and the prescribed agreement for sale and hence RERA would have exclusive jurisdiction in such matters on account of Section 79.

 

Assured Return Scheme: In such schemes, the builder assures the allottee a return on payment of a substantial part of the unit value. For instance, the builder may demand an upfront payment of 50% of the total sale consideration and promise to pay a return on such payment until the delivery of possession and demand the remaining amount at the time of delivery. The Delhi High Court[2] held that certain assured return schemes are structured such that, the developers invite investors to invest in their project on a rate per foot basis. There will be no unit or property that will be demarcated to be allotted to the investor and there is no intention to hand over the possession of the property upon completion. The developer retains the possession of the property and manages it according to the scheme. The developer finds appropriate persons to lease the property to and the retail investor receives returns based on the value of the lease and corresponding investment made. This type of assured return schemes is recognized as a CIS (collective investment scheme)

 

  

Disclaimer: Views are based on the knowledge and expertise of the author.

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The author of this article, Harshit Batra is an Advocate and RERA Consultant based in Gurugram & Delhi, practicing Pan India. He is also the National Coordinator of the Youth Bar Association of India (Regd.).To bring about his expertise on this subject; he was also the Former Legal Executive of the Real Estate Regulatory Authority – Gurugram Bench. 

Academically, He holds an LL.M in Alternate Dispute Resolution from GGS INDRAPRASTHA UNIVERSITY, NEW DELHI as followed after pursuing his bachelors from the same university.  Additionally, he holds a P.G. Diploma in Corporate Laws and Management from INDIAN LAW INSTITUTE and another P.G. Diploma in International and National Intellectual Property Rights Law from THE INDIAN ACADEMY OF INTERNATIONAL LAW & DIPLOMACY (INDIAN SOCIETY OF INTERNATIONAL LAW). Apart from these he also holds a Diploma in Cyber Law From GOVERNMENT LAW COLLEGE, MUMBAI (Jointly Offered with Asian School of Cyber Law, Pune), Certificate course on Intellectual Property Rights (IPR)From FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY and has also done a Certificate course in Consumer Protection (CCP) from Indira Gandhi National Open University.

If you have any questions regarding this article, please do not hesitate to contact him at harshit.batra7@gmail.com.

 

 



[1] RBI/2015-16/46 DBR.No.DIR.BC.13/08.12.001/2015 -16 dated 1.07.2015

[2] PGF Ltd. v. Union of India, (2015) 13 SCC 50

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