Track2Realty TV Exclusive
In India, the moment you buy a house the joke is on you – whether you get the possession of the house, or that possession is delayed or even denied. The buyers’ harassment starts with the Builder Buyer Agreement which in most of the cases is a one-sided document. The buyers mostly have no other choice but to sign on the dotted lines, because by the time the Builder Buyer Agreement is thrown at their face they have already paid the initial booking amount.
If you get the possession then one gets another set of documents to sign in the name of Maintenance Agreement, that again is what in legal terms could be called Unfair Contract. If the possession is delayed then the home buyer has a whole lot of litigation to confront.
In recent times there are lot many distressed properties in the market where the previous builder with whom one has bought the apartment has exited the project and there is a new developer who has taken over it. In most of these cases the new developer has relaunched the project at a higher price point. It is very obvious that the new developer wants the existing buyers who have bought with the previous developer to either surrender their property or pay extra for the same.
What are the options for the harassed home buyers in such cases? Well, I am Ravi Sinha and today I have with me Advocate Nirmit Srivastav who handles such cases on behalf of the home buyers. He shares with us how the harassed home buyers could deal with such situations:
Ravi Sinha: Unfair Contract is a market reality. What are the options before the home buyers if the builder is insisting the buyer to sign on the dotted lines where the contract is unfair?
Nirmit Srivastav: Unfair Contract is a disease; it has become a practice which the promoters are adopting to. How do we identify what is an unfair contract? Whenever you see that there is any kind of discrimination against the home buyer and the builder is placing himself on a different pedestal and placing the home buyer on a different pedestal then the practice of Unfair Contract lies.
What can a home buyer do? What are the remedies? In Consumer Protection Act Section 47 (1) (2) the provision lies that if Unfair Contract has been executed, the buyer can get it declared null & void. The powers to get it declared null and void lies with the State Commission if the total sale consideration is less than INR 10 crore; and if the consideration is above INR 10 crore then the buyer can approach the NCDRC. Now since most of the cases are within INR 10 crore the buyer can file a consumer complaint in the State Commission to get it declared null & void. The builder will have to give penalty and adequately compensate the home buyer at the rate of 15-18 per cent.
Ravi Sinha: In most of such cases the Builder Buyer Agreement is given to the buyer only when he has made the advance payment. The builders threaten to forfeit the deposit when buyer is not ready to sign on the dotted lines. So, what are the options before the home buyers?
Nirmit Srivastav: There has been a landmark judgment in the case of Pioneer Urban where it has been clarified that the builder can only forfeit the Ernest Money. Today, what we find is that the builders are forfeiting inappropriate amount. Say, for instance, a buyer has paid INR 70 lakh and the builder is forfeiting up to 40 lakh, and even the rest of the amount is refunded into stages. This is a practice against which the home buyer can approach the consumer court and get relief.
Ravi Sinha: The Maintenance Agreement in many of the case is also one-sided. But the developer has the upper hand because the majority of the buyers have signed on the dotted lines. Now, legally he says this is the opinion of majority of the buyers. What can an individual buyer do in such cases?
Nirmit Srivastav: Just because the majority of the buyers have agreed to sign the documents, it is not agreed under the law that any aggrieved person is liable to sign on the same dotted lines. If one feels he is being defrauded and cheated, then there is no necessity that he should also sign the document just because everyone else has signed it. In actual practice, most of the builders compel and coerce to sign, threatening to deny possession or amenities. But one can move to court against this and refuse to sign the document till the matter is settled in the court.
Ravi Sinha: Where do you see the root of the problem? If you go to RERA asking for refund, the RERA order will only give you delay penalty and often force you to take possession.
Watch this interview with Track2Realty TV:
Nirmit Srivastav: You have raised a very pertinent issue and as legal professionals we come across these issues on a very regular basis nowadays where an individual buyer wants to completely opt out of the project but he is being compelled to stay invested just because RERA has passed the order to that effect. In my opinion, if you want to opt out with your principal amount and delayed interest, then you file an appeal but insist upon claiming your refund.
If you have filed for refund but the order only gives you delay penalty of MCLR plus 1 percent, then an illegality has been committed. Then onwards it is the lawyer’s job to get it cured. The Supreme Court is pretty clear on the issue that if there has been delay, then in pursuance of the Section 18 of RERA it depends upon the home buyer as to whether he wants delay penalty with interest or refund. The law is pretty clear on that. The buyer has a right to choose between delay penalty and refund, if the project delay is admitted.
Ravi Sinha: Would you agree that the role of the government agencies is also problematic?
Nirmit Srivastav: This also is a major cause of concern. Despite of the favourable orders, the home buyers are not being able to reap benefits of those orders. In my personal opinion, the entire process of order execution gets rattled just because there are bureaucrats involved. If there is a private agency on contract to get the orders executed then it would be more effective and efficient because they will have certain level of accountability also. Just because there is bureaucracy and administration involved, from local level to the District Magistrate, the process more often than not gets diluted. People get happy when they get the favourable orders but afterwards they realise there is a chain of administration between them and the desired justice.
Ravi Sinha: Today, there are lots of distressed properties in the market. Suppose there is a distressed property where the existing developer has sold it to a new developer. Can the new developer force the existing buyers to exit or make more payment?
Nirmit Srivastav: The initial contract plays a paramount role. The contract with the erstwhile developer will be considered in such cases. The new developer can’t charge over and above the previous sale consideration. If the builder makes an additional demand, then that is a matter of litigation.
Ravi Sinha: Suppose the new developer has decided to relaunch the project, then what are the options for the existing home buyers?
Nirmit Srivastav: If the new developer has relaunched the project then in that case the earlier clauses and recitals of the agreement will play a crucial role. The Supreme Court is very clear on this.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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