Legal Remedies for Property Buyers against the malpractices of Builders and Developers

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Today, we are living in the era of skyscrapers. Where people are interested in constructing  huge structures where they can go beyond the clouds. The evolution of technology has led people to dream beyond imagination.

Everyone wishes to build a dream house, apartment, bungalow, villa, etc., of his/her own choice which includes structural designs of swimming pool along with the deck, precious rooms, ample parking, gym, club house, a lawn in front of the entrance and many more. People having strong will power are trying their best to fulfill each and every possible dream. But while getting your home from dream to reality one shall need sufficient knowledge regarding the development control rules and bye-laws of construction. People with a lack of proper knowledge become victims of fraudulent offers of Builders and Developers.

In recent times demand for commercial and residential property has increased at a rapid pace and for the same reason Builders and developers taking advantage of this to lure buyers with deceptive demands. Often the Builder or contractor (not everyone) makes fraudulent or false promises to buyers regarding the location, structure, measurement, amenities, etc. of the property. Moreover, late government approvals, getting the occupancy certificate, delay in getting raw material, cement and steel procurement, manpower delay, etc., all such reasons are used by contractors in numerous cases and hence they fail to fulfill their promise of delivery of possession in the scheduled period. Therefore it affects the quality of construction.

Most of the time due to late possession buyers has to face countless issues regarding the loan taken against the property. Without getting possession the buyers have to pay pre-EMIs of the Bank and also the rent of current residence if the buyer is a tenant. Therefore the delay in possession affects the overall budget of the buyer. And this leads to financial loss and mental soreness of the buyer which cannot be retrieved unless by giving him the possession of the property and the same cannot be compensated in terms of money every time.

Besides delay in delivery of possession, buyers have to face post-possession issues regarding deficiency in service, improper amenities, ceiling leakage, worst quality bathroom doors, defective commode and urinal pots, improper drainage system, inadequate water supply, incomplete fire safety system, low quality of electrical appliances, wiring, improper water provisions, not providing the occupancy certificate and relevant documents, etc.

At some point, there is an immense need to stop the mental and financial exploitation of buyers from fraudulent offerings, fake promises, and various malpractices of Builders and developers.
For this, there are some precautions and legal remedies for buyers to deal with the above-mentioned malpractices of Builders and developers.

Precautions for buyers to be taken before buying any property:

  • First of all the buyer should ensure that, whether the property is registered within the guidelines prescribed by RERA (Real Estate Regulation Act), this can be checked on the State RERA authority website.
  • He must ensure that, whether the project is constructed as per the guidelines provided as per the current Model Building Bye-Laws.
  • The buyer should ensure that whether the location of the property is in residential area/premises.
  • He must verify that, whether the Builder has obtained the N.A. Permission (Non-Agricultural) from the Collector for the premises.
  • He must examine all the title deeds and title report of the said property.
  • He must go through the 7/12 extract of the property or Property Card and also verify whether there is a name of Builder or its company or Landowner if any.
  • He must verify that, the Mutation Entries which specifies the ownership of the Builder on 7/12 extract of the property.
  • He must ask Builder for the copy of all the documents including title deeds and title report of the property.
  • He must ask for a copy of the order of the Urban Land Ceiling Act.
  • He must verify that, the sanctioned plan issued by a competent authority.
  • He must verify that, whether the Builders, developers, and agents had obtained the commencement certificate from Municipal Corporation/Municipal Council.
  • He must scrutinize the Agreement to Sale in detail and ensure the following:
    • The sanctioned plan by the municipal authority.
    • Details of built-up and carpet area.
    • Prices of the property along with valuation as per ready reckoner
    • Prices of facilities or amenities provided i.e., parking (whether covered or uncovered), gymnasium, meditation center, clubhouse, meeting hall, children’s park, jogging park, lift, gas pipeline, garbage ducts, CCTV Cameras, etc.
    • Details of installments paid by the buyer.
    • Proper stamp duty is paid as per valuation.
  • He must verify that, whether the Builders, developers, and agents has provided all the amenities as mentioned there in the brochure.
  • He must verify that the mode of payment of maintenance charges are monthly, quarterly, annually or one-time.
  • He must verify whether the carpet area of balconies or terrace (if provided) is mentioned separately.
  • He must verify that, whether the structure or elevation is built according to the sanctioned plan. Whether the Builder had made any structural changes.
  • He must verify the safety and security provisions made thereon if any natural calamity occurs.
  • He must verify that, as per the mission of Swachh Bharat Abhiyaan whether the Builders, developers, and agents had made any provision for disposal of garbage.
  • Above all the buyer must seek legal advice or guidance from an expert lawyer.
All the above-mentioned clauses must be properly ensured by the buyer before taking possession of the property.

Prior to RERA enactment “The Maharashtra Ownership Flats Act, 1963” was enacted specifically to control the malpractices and misadministration of Builders or developers.

Section 8 of The Maharashtra Ownership Flats Act,  Refund of the amount paid with interest for failure to give possession within the specified time or further time allowed -

If - 
(a) the promoter fails to give possession in accordance with the terms of his agreement of a flat duly completed by the date specified, or any further date or dates agreed the parties, or 
(b) the promoter for reasons beyond his control and of his agents, is unable to give possession of the flat by the date specified, or the further agreed date and a period of three months thereafter, or a further period of three months if those reasons still exist, then, in any such case, the promoter shall be liable on demand (but without prejudice to any other remedies to which he may be liable) to refund the amounts already received by him in respect of the flat (with simple interest at nine percent. per annum from the date he received the sums till the date the amounts and interest thereon are refunded), and the amounts and the interest shall be a charge on the land and the construction if any thereon in which the flat is or was to be constructed, to the extent of the amount due, but subject to any prior encumbrances.

It is clearly stated in the said act that, once the plan is sanctioned by the competent or local authority of concerned premises, after that the promoter (Builders, developers, and agents) cannot make any structural changes or alteration without taking prior consent of the buyer. Also, if within three years of possession if the buyer founds any defect in structure or unauthorized changes in construction, then he is entitled to resolve the said defect by the promoter without imposing further charges on the buyer.

Legal Remedies for Wrongs committed against Buyer

The buyer can seek legal remedies against the malpractices of Builders or developers by the assistance of following forums:
The buyer can – 
  • File a Civil Suit 
  • File a Criminal Case under Indian Penal Code
  • File a complaint under the Real Estate (Regulation and Development) Act (RERA) 
  • File a complaint at Consumer Forum
  • Civil Suit
Civil suits are filed to get compensation in terms of money or physical property. In civil suits, the wrongdoer is not entitled to penal punishment.
The buyer can file a suit under the Civil Procedure Code, 1908, if the Builder uses unfair means and violates the terms and conditions of the Builder-buyer agreement. The buyer can also seek remedy against Builders, developers, and agents by filing a civil suit under Specific Relief Act for specific performance of certain act or obligation for which the Builders, developers, and agents is bound.
Also, the buyer can file a civil suit under Maharashtra Ownership Flat Act for a Refund of amount paid with a along interest at the rate of nine percent per annum for failure to give possession of the concerned property within a specified time or further time allowed.

In civil proceedings the Court can pass a decree to deliver a permanent relief to the victim i.e., buyer which is as follows:
  1. Completion of Project- The Court can direct the Builders, developers, and agents to complete the project within the time prescribed as per the discretion of Hon’ble Court.
  2. Damages- The Court can direct the Builder to pay a specific amount of damages or penalty charges in respect of delay in handing over the property to the buyer.
  3. Reimbursement- The Court can direct the Builder to reimburse the amount paid by the buyer for the concerned property along with interest of nine percent per annum.
  • Criminal Complaint
If the Builders, developers, and agents deny to handover the possession of the property in a stipulated time period, the buyer has a right to file a criminal complaint against the Builder for criminal breach of trust and cheating.

In criminal proceedings, the court can order for corporeal punishments and monetary fines as per the schedule prescribed therein Indian Penal Code.

Criminal complaints take an immediate effect as compared to civil suit. If the Builder founds guilty for his offences, then he can be convicted and will be liable for imprisonment or fine or both.
With a fear of getting behind bars, closure of business, and defamation the Builder immediately fulfills his obligations towards the buyer.

  • Complaint under Real Estate (Regulation and Development) Act (RERA)
RERA came into force from 1st May 2016. The Act was brought up to protect home-buyers as well as help boost investments in the real estate industry. It has certain guidelines for the Builders which are mandatory. Unless and until the Builder makes registration of the project and acknowledges the terms and conditions set forth by the Act, the Builder is not allowed to develop his project.

If a Builder violates the Real Estate Regulation Act of 2016 (RERA Act), he can be criminally put on trial by the Real Estate Regulatory Authority (RERA). If a Builder starts publicizing his project without obtaining a RERA registration number, he can be penalized with up to three years in jail as well as fine under sections 59 of the RERA Act.

It is significant to note that a property buyer cannot file a criminal complaint under RERA Act directly. He must first address his complaint to the Authority (RERA). If RERA feels that the complaint has merit, it will file a criminal case against the sinful Builder for violating the Act and orders passed by it.

RERA is a medium for property buyers through which it is easy to get relief against the malpractices of builders, developers and agents. RERA offers a set of remedies and preventive actions that puts a protective shield around the property buyers to protect them against the fraudulent and deceit ideas of Builders, developers, and agents.

The buyer can file a complaint against Builders, developers, and agents under sec.31 of Real Estate (Regulation and Development) Act. The buyer can file a complaint online at the official website https://maharerait.mahaonline.gov.in/. The buyer has to create an account on prescribed site ofRERA to register a complaint. Further he has to furnish his personal details including his name, address, phone numbers, project details, etc. He can also upload documents relevant to the project. After filling of form the buyer has to pay a sum Rs.1000/- for filing a complaint before Adjudicating Officer or RERA Authority. Whereas if he is not satisfied with the decision of Adjudicating Officer and wants to file an appeal at Real Estate Appellate Tribunal, then he has to pay a sum of Rs.5000/- for an appeal by the online transaction.

The Bombay High Court in Lavasa Corporation Ltd. Hicon versus Manju Narendra Joshi the court observed that, the Real Estate (Regulation and Development) Act, 2016, is enacted by the Legislature, "To establish the 'Real Estate Regulatory Authority' for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy redressal and also to establish the Real Estate Appellate Tribunal to hear Appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and Adjudicating Officer and for the matters connected therewith or incidental thereto."

The Bombay High Court in Lavasa Corporation Ltd. Hicon versus Manju Narendra Joshi Courtis of the view that, the RERA, therefore, imposes an obligation upon the promoter not to book, sell or offer for sale or invite persons to purchase any plot, apartment or building, as the case may be, in any real estate project, without registering the real estate project with the Authority. It makes the registration of real estate project compulsory, in case where the areas of land proposed to be developed exceed 500sq.mtrs or number of apartments proposed to be developed exceeds 8, inclusive of all phases. It imposes an obligation upon the Real Estate Agent also not to facilitate sale or purchase of any plot, apartment or building, as the case may be, without registering himself with the Authority. The Act imposes liability upon the Promoter to pay such compensation to the Allottees in the manner, as provided under RERA, in case if he fails to discharge any obligations imposed on him under RERA.
Basically RERA offers a brief support to buyers who had become victims of malpractices, frauds, false promises, etc., of Builders, contractors, developers, and agents.

  • Complaint at Consumer Forum
When the buyer avails a service from trader, Builder, developer, etc., for which he had paid a specific sum of money and if there occurs any deficiency in service or product or the Builder fails to perform his part then the consumer can file a complaint against the trader, Builder, developer, etc., before the consumer protection authority.
If the buyer initiates legal action as above, in most of the cases, the trader or Builders, developers and agents prefer to settle the matter by compensating a specific amount to the buyer for his loss.

Landmark Judgments

Pioneer Urban Land & Infrastructure Ltd. V. Govindan Raghavan 

Facts - The Flat Purchaser (Respondent) entered into an Apartment Buyer’s Agreement dated 08.05.2012 with the Builder(Appellant)to purchase an apartment in the said project for a total sale consideration of Rs.4,83,25,280/-. As per Clause 11.2 of the Agreement, the Builder(Appellant)was to make all efforts to apply for the Occupancy Certificate within 39 months from the date of excavation, with a grace period of 180 days.

The excavation of the project commenced on 04.06.2012. As per Clause 11.2 of the Agreement, the Builder was required to apply for the Occupancy Certificate by 04.09.2015, or within a further grace period of 6 months i.e. by 04.03.2016, and offer possession of the flat to the Flat Purchaser (Respondent). The Builder (Appellant)however failed to apply for the Occupancy Certificate as per the stipulations in the Agreement.

The Flat Purchaser (Respondent) filed a Consumer Complaint before the National Commission on 27.01.2017 alleging deficiency of service on the part of the Builder(Appellant)for failure to obtain the Occupancy Certificate, and hand over possession of the flat.

The Respondent prayed inter-alia for Refund of the entire amount deposited being Rs.4,48,43,026/-, along with Interest at the rate 18 per cent per annum and Compensation of Rs.10,00,000/- for mental agony, harassment, discomfort and undue hardship; and 
Refund of the wrongfully charged taxes including Service Tax, and other charges along with Interest @18% p.a.; and Litigation Costs of Rs.1,00,000/-.

Judgement - The National Commission vide Final Judgment and Order dated 23.10.2018 allowed the Consumer Complaint filed by the Flat Purchaser (Respondent), and held that since the last date stipulated for construction had expired about 3 years before the Occupancy Certificate was obtained, the Flat Purchaser (Respondent) could not be compelled to take possession at such a belated stage. The grounds urged by the Builder(Appellant)for delay in handing over possession were not justified, so as to deny awarding compensation to compensation the Flat Purchaser (Respondent). The clauses in the Agreement were held to be wholly one – sided, unfair, and not binding on the Flat Purchaser (Respondent). The Builder(Appellant)was directed to refund Rs.4,48,43,026/- i.e. the amount deposited by the Flat Purchaser (Respondent), along with Interest @10.7% S.I. p.a. towards. The rate of Interest @10.7% S.I. p.a. was fixed in accordance with Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017 which reads as follows:
“15. An allottee shall be compensated by the promoter for loss or damage sustained due to incorrect or false statement in the notice, advertisement, prospectus or brochure in the terms of Section 12 of RERA.

The Hon’ble Supreme Court in Bangalore Development Authority v. Syndicate Bank, held that, when possession of the allotted plot/flat/house is not delivered within the specified time, the allottee is entitled to a refund of the amount paid, with reasonable Interest thereon from the date of payment till the date of refund.

The Hon’ble Supreme Court in Lucknow Development Authority Versus M.K. Gupta, held that when a person hires the services of a Builder, or a contractor, for the construction of a house or a flat, and the same is for a consideration, it is a “service” as defined by Section 2 (o) of the Consumer Protection Act, 1986. The inordinate delay in handing over possession of the flat clearly amounts to deficiency of service.

The Hon’ble Supreme Court in Fortune Infrastructure & Anr. Versus Trevor D’Lima & Ors.,3 held that, a person cannot be made to wait indefinitely for possession of the flat allotted to him, and is entitled to seek refund of the amount paid by him, along with compensation.

Disclaimer: The views expressed in this article should be strictly construed for information purposes only.

"This article is authored by Mr. Amit Sonwane, you can reach out to him at son.ameet.999@gmail.com"

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