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 primary objective of the act is to protect the interests of the buyers, it does not solely deal with the same. It obligates certain duties on both the promoters and the allottees to ensure the smooth regulation of the process. 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 buyers but the builder as well and helps in carrying out the process smoothly with several checkpoints. It also helps the bona fide promoters in establishing accountability in the market. Their obligations have been discussed further -
AGREEMENT OF SALE
It is the duty of both the promoter and the allottee to enter into a written agreement for sale. It is the duty of the promoter to register the said agreement for sale, under any law for the time being in force. Such agreement of sale shall specify the particulars of development of the project including the construction of building and apartments, along with specifications and internal development works and external development works, the dates and the manner by which payments towards the cost of the apartment, plot or building, as the case may be, are to be made by the allottees and the date on which the possession of the apartment, plot or building is to be handed over, the rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default, and such other particulars, as may be prescribed.
The insurance with respect to the title shall stand transferred to the benefit of allottee and associations of allottees, at the time of promoter entering into an agreement for sale with the allottee. According to section 13 of the Act, the promoter cannot take more than 10 percent of advance payment unless he enters into and registers the agreement for sale.
ASSOCIATION OF ALLOTTEES
It is the duty of every promoter to form an association, federation, society, or a co-operative society, as the case may be of all the allottees of a particular project. The laws in force in the time being are to be followed in such formation. Where the local laws are silent in this aspect, such association, federation, society or a co-operative society, as the case may be shall be formed within three months of the booking of plot or apartment or building, as the case may be, by the majority of the allottees.
There exists a corresponding duty of the allottees, according to section 19(9), to become a part of such association, federation, society or a co-operative society, as the case may be.
OBLIGATIONS ARISING FROM VERACITY OF THE ADVERTISEMENT OR PROSPECTUS.
As per Section 12 of the Act, the promoter shall be liable to compensate any loss or damage caused to a person, who has made an advance or deposit on the basis of the information contained in the notice advertisement or prospectus, or on the basis of any model apartment, plot or building, and sustains any loss or damage by reason of any incorrect, false statement included therein.
OBLIGATION TOWARDS RECTIFICATION AND ALTERATION
According to Section 14 of the Act, the proposed project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans, and specifications as approved by the competent authorities. Where the promoter does not have the power to make any additions and alterations in the sanctioned plans, layout plans, and specifications and the nature of fixtures, fittings, and amenities described therein in respect of the apartment, plot or building, as the case may be, which are agreed to be taken, without the previous consent of the person who agrees to take one or more of the said apartment, plot or building, as the case may be after the sanctioned plans, layout plans, and specifications and the nature of the fixtures, fittings, amenities, and common areas, of the apartment, plot or building are disclosed or furnished, he may make minor additions and alterations as required by allottee or alterations as may be necessary due to architectural and structural reasons duly recommended and verified by an authorized Architect or Engineer after the proper declaration and intimation to the allottee. For such purpose, minor addition and alteration exclude the structural change including an addition to the area or change in height, or the removal of part of a building; 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; a change to or closing of any required means of access ingress or egress or a change to the fixtures or equipment.
It shall be the duty of the promoter to rectify structural defects or any other defects in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession without further charge, within thirty days, and in the event of promoter's failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under the Act.
SERVICES AND PAYMENTS
The 11(4)(d) of the Act requires the promoter to pay all reasonable charges and provide for the essential services till the maintenance of the project is taken over by the association of allottees. For as long as the physical possession of the plot, apartment, or building, as the case may be, is with the promoter it is his duty to pay charges of all the outings. Outgoings include 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. Also, as per section 16(2), the promoter is responsible to pay the premium charges of all the insurance and shall pay them before transferring the insurance to the association of the allottees.
The promoter is freed from his obligation once he transfers the physical possession of the plot, apartment, or building, as the case may be, to the allottees or the association of the allottees.
If however, promoter fails to pay all outgoings, he shall be liable to pay penal charges along with the outgoings to the authorities or person to whom they are payable. To add to such liabilities is the cost of any legal proceedings which may be taken therefor by such authority or person. This liability of the promoter continues even after the transfer of the property to the allottees or the association of the allottees, as the case may be. The promoter shall also be liable to pay the premium and charges in respect of the insurance specified and shall pay the same before transferring the insurance to the association of the allottees.
A corresponding duty of the allottee exists in this regard. As per the section 19(6) of the Act, every allottee who has entered into the agreement for sale to purchase any plot, building or apartment as per section 13, shall be responsible and duty-bound to make all the necessary payments as per the terms of the agreement for sale and shall also be responsible to make such payment within proper time and proper place. He/she shall be liable to pay all the fees and taxes pertaining to registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other expenses if any. This duty of allottee may be minimized by the mutual consent of the allottee and the promoter, as mentioned under section 19(8). However if the same is not adhered to, the allottee becomes liable to pay interest as applicable according to the concerned State Rules. The provisions of the act require the rate of interest on delay by the allottee and the promoter to be the same.
DELIVERY OF POSSESSION
As per section 18 of the Act, it is the duty of the promoter to act in accordance with the terms of the agreement for sale and hand over to the allottees the possession of an apartment, plot or building, as the case may be, duly completed by the date specified therein. He is liable to compensation if due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he fails to deliver the possession.
If due to such failure, the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under the Act. However, where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed. The promoter shall also compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.
In the complaint bearing complaint number 2096/2019 adjudged by the Haryana RERA authority, there was a delay in the delivery of possession of the property by the promoters. Noting that the agreement was executed before the commencement of the Act the court held that no penal action could be taken under against the promoters. The complaint was seen to be in lieu of non-compliance of obligations on part of the promoters. The respondent denied the allegations of delay and submitted that in lieu of section 18 of the Act, the parties entered into an agreement whereby they agreed towards the extension of the time period for delivering the property under circumstances such as force majure. Giving due opportunity of being heard to both the parties, the authority in the interest of justice and fair play directed the promoter to pay delayed possession charges, interest from the due date of delivery until the date of the order. The allottees were also directed by the authority to pay outstanding dues.
Hon’ble Bombay High Court in Neelkamal Realtors Suburban Pvt. Ltd. vs Union Of India 2017 SCC Bom 9302, held that the RERA law is not to be considered as an anti promoter. It is a law for the regulation and development of the real estate sector. Under the scheme of RERA, the promoter's interest is also save guarded and there is a reason for the same unless a professional promoter making genuine efforts is not protected, then the very purpose of development of the real estate sector would be defeated. It was held that in case, in spite of making genuine efforts, a promoter fails to complete the project, then the concerned authorities, adjudicators, forums, tribunals would certainly look into genuine cases and mold their reliefs accordingly. The principles of Natural Justice are required to be followed at all that. They require both parties to be heard. A lthough the allottee has right to seek the refund in case of the unit is not delivered in time as per the agreement, but considering the scheme of the RERA, the adjudicating authority may suitably pass orders ‘by molding reliefs by granting interest, compensation to the allottees, and issuing directions for timely completion of the project, transit accommodation during the completion of the project, so on and so forth’. If the Authorities start allowing refund in every case of delay in possession, it will defy the very object and scheme of the Act. S uch a refund should be suitably decided after considering the facts and circumstances of each case. It was further held that t he payment of interest under Section 18 is a form of compensation to the allottee for his money being used by the developer for the period of delay in handing over the possessio n. The provision of Section 18 must be read with Section 71 & 72, and section 72 provides for the Adjudicator to consider each case on its merit .
However, the very next year the Supreme Court held that the allottee cannot endlessly wait for the delivery of possession. In Fortune Infrastructure v. Trevor D’lima and ors, (2018) 5 SCC 442 the allottees and the promoters came into an agreement in 2011. The possession of the apartment was not delivered to the respondent until 2015 and instead a third party’s interest was created in the apartment. The national commission held that the appellant was guilty of deficiency in service since they delayed the handling of possession and hence were directed to refund along with compensation and litigation expenses. Aggrieved by the order the appellant filed an appeal to the Supreme court. After considering the facts and circumstances of the case, it was held that unwillingness to carry out the obligations constitutes made. It was observed that the agreement did not mention any stipulated delivery date and in such circumstances, a reasonable time has to be taken into consideration which, in the present case, was 3 years. But possession was not transferred in that time period. The allottee cannot be made to wait indefinitely for the transfer of possession. It was further held that compensation can be given if after allotment is made there has been a cancellation of the scheme without any justifiable cause.
DELIVERY OF DOCUMENTS
As per Section 19(5) of the Act , t he promoter shall hand over the necessary documents and plans, along with that of common areas, to the allottee after giving the physical possession of the property . According to Section 17(2) of the Act, such documents must be handed over to the association of allottees whereas as per Section 19(5) of the Act states they must be handed over to the individual allottees. It is contended in this article that both the sections deal with different aspects, that is one deal with the handing over of the possession of the documents pertaining to the title of the plot, building, and apartment whereas the other deals with the association of allottees claiming their right to the common area, therefore, the documents related to the common areas. The documents that should be transferred are -
Completion and Occupancy Certificate:
Section 11(4)(b) of the Act mandates the promoter to obtain the completion certificate and the occupancy certificate, or both from the relevant competent authority. It is the duty of the promoter to make this certificate available to all the allottees or the association of allottees, as the case may be, without any delay. The promoter while obtaining such a certificate is bound by the laws in force for the time being.
There exists a corresponding duty of the allottees, according to section 19(10), to take physical possession of the property within a period of 2 months of issuance of the occupancy certificate.
Conveyance deed and necessary documents
According to Section 11(4)(f) and section 17 of the act, it is the duty of the promoter to hand over all the necessary sanctioned documents and plans after obtaining the occupancy certificate and thereafter also handing the physical possession of the plot, apartment or the building, as the case may be, to the allottees and the common areas to the association of the allottees or the competent authority created in a real estate project. After the completion of the project, it is the duty of the promoter to execute a conveyance deed in favor of the association of allottees of the apartment, plot, or building as the case may be. It should also state the proportionate title in the common areas of the apartment, plot, or building as the case may be. The handover of documents and execution of the conveyance deed has to be done in accordance with the local law in force for the time being.
However, if the local laws are silent on conveyance deed, it’s execution shall be conducted within three months from the date of the issue of occupancy certificate. If the local laws on delivery of documents are silent then the same must be done within thirty days after obtaining the occupancy certificate.
There exists a corresponding duty of the allottees, according to section 19(11), to participate in the registration of the conveyance deed of the property.
Lease certificate
In a circumstance where a project is developed on leasehold land, the promoter as per Section 11(4)(c) of the Act is required to obtain a lease certificate that explicitly mentions the period of the lease and the payment of all dues and charges on leasehold land. It is the duty of the promoter to make such a lease certificate available to the allottees.
Insurance documents
According to section 16(1), it is the duty of the promoter to obtain all such insurances as notified by the appropriate government. It includes the title of the land and building and for construction as a part of the real estate project where ‘title’ refers to legal ownership over and the use, deal with and dispose of the property. The list of insurance is non-exhaustive Such title insurance offers financial protection against hazards of title. As per section 16(3), the documents relating to insurance shall stand transferred for the benefit of the allottee or the association of the allottees as the case may be, just at the time of promoter entering into an agreement for sale.
TRANSFER OF REAL ESTATE PROJECT TO A THIRD PARTY
According to section 15 of the Act, the promoter shall not transfer or assign his majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent from two-third allottees and prior written approval of the Authority. Such transfer shall not affect the allotment or sale of the apartments, plots, or buildings as the case may be, in the real estate project made by the promoter. If such transfers are approved, the intending promoter shall be required to independently comply with all the pending obligations under the provisions of the Act or the rules and regulations made thereunder, and the pending obligations as per the agreement for sale entered into by the erstwhile promoter with the allottees. Such transfer shall not result in an extension of time to the intending promoter to complete the real estate project and he shall be required to comply with all the pending obligations of the erstwhile promoter, and in case of default, such intending promoter shall be liable to the consequences of breach or delay, as the case may be, as provided under the Act or the rules and regulations made thereunder.
CANCELLATION OF ALLOTMENT
The promoter may cancel the allotment but only in terms of agreement of sale and if such cancellation is not in accordance with the agreement of sale the allottee may approach authority for relief. However, according to section 11(5), such cancellation of the allotment will amount to be wrongful and unjustifiable if cancellation is not as per the terms and conditions of the agreement for sale; the cancellation is not ad idem; the reason quoted by the promoter is unreasonable and lacks sufficient cause.
PENALTY BY VIRTUE OF VIOLATION OF ORDERS
The real estate agent has a duty to abide by the orders, decision, or direction of the Authority. However, if he fails to adhere to the same, according to Section 65 of the Act, he shall be liable to pay penalty for the period during which the breach continues, which can increase up to 5% of the unit cost of the real estate project, for which the sale or purchase has been facilitated as regulated by the Authority. However, if the violation is with respect to the orders, decision or direction of the Appellate Tribunal, according to section 66, he shall be punishable with imprisonment for a term which may extend up to 1 year, or with fine on day-to-day basis till the violation continues, which can increase up to 10% of the unit cost of the real estate project, for which the sale or purchase has been facilitated, or with both.
A corresponding liability of allottee arises in this respect. If the allottee fails to abide by or violate any of the orders, decision or direction of the Authority, then by virtue of section 67 of the Act, he shall be liable to pay penalty for the period during which the breach continues, which can increase up to 5% of the unit cost, as regulated by the Authority. However, if such violation exists with respect to the orders, decision or direction of the Appellate Tribunal, according to Section 68 of the Act, he shall be punishable with imprisonment for a term which may extend up to 1 year, or with fine on day-to-day basis till the violation continues, which can increase up to 10% of the unit cost, or with both.
Disclaimer: Views are based on the knowledge and expertise of the author.
No part of this work may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permission from the Author/Publisher.
The author of this article, Harshit Batra is an Advocate and RERA Consultant based in Gurugram, Greater Noida & 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 bachelor's 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.
He can also be reached at harshit.batra7@gmail.com.
CAclubindia
