Respite to homebuyers without sale agreements

By Subit Chakrabarti, Vidhii Partners

The Real Estate (Regulation and Development) Act, 2016 (RERA Act), was enacted with the objective of regulation and promotion of the real estate sector and for the protection of the interest of the consumers. The Real Estate Regulatory Authority (RERA) has become a speedy and low expense dispute redressal mechanism.

Subit Chakrabarti Vidhii Partners
Subit Chakrabarti
Vidhii Partners

One of the major issues plaguing the real estate sector is delayed projects, with promoters often unable to deliver possession of flats by the promised dates. Before the RERA Act, under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, the only relief available was under section 8, which provided for refund of amount paid with interest upon failure to give possession within the specified time. Under the RERA Act, section 18 and the proviso, provides for a choice to the allottee to withdraw from the project and be entitled to refund along with interest or to continue in the delayed project and earn interest until the possession is handed over.

Since the establishment of RERA in Maharashtra, a recurring question that the authority has been called upon to answer is the circumstances under which a complaint seeking reliefs under section 18 would be maintainable. The initial stand adopted by the RERA was that an agreement for sale was a sine qua non for a complaint under section 18. In the matter of Naim Kamaruddin Shaikh and Ors v JVPD Properties, the state regulator Maharashtra Real Estate Regulatory Authority (MahaRERA) held that section 18 would apply only in the event the promoter failed to complete or was unable to give possession in accordance with the terms of the agreement for sale or by the date specified in such agreement for sale and that in the absence of an agreement for sale, section 18 would have no role to play.

The above position was consistently followed till the Maharashtra Real Estate Appellate Tribunal considered the appeal arising out of the final order in the JVPD case. The tribunal went on to hold that the allotment letter, which formed the basis for the complaint, contained all the essential terms that would show an agreement between the parties, namely the description of the property to be purchased, the payment schedule, total purchase consideration, obligation to complete the project and clarity on the title. Under these circumstances, the tribunal held that MahaRERA would have jurisdiction to entertain such a case under section 18, thereby setting aside the order in JVPD case and remanding back the matter.

However, a necessary corollary to the above decision was whether every species of allotment letter would come under the ambit of section 18. The question has been considered by MahaRERA against the backdrop of the order passed by the tribunal. In the matter of Mohit Melwani v AA Estates, a complaint had been filed under sections 18 and 12 of the RERA Act, based on an allotment letter and MahaRERA ruled that the allotment letter did not have a specified date of possession and in view thereof, there could be said to have been a violation of section 18. Thus, what follows from such a ruling is that not every species of allotment letter can give rise to cause of action under section 18.

However, the applicability of section 18 was further considered by MahaRERA in the matter of Manish Mody v Skyline Construction Co, wherein a complaint was filed under section 18 based on an allotment letter. A plea of non-maintainability of the complaint was raised by the respondent in view of the fact that the allotment letter did not mention the date of possession. MahaRERA relied on a letter addressed to members of the project by the respondent, committing to a date of possession and by reading the letter conjointly with the allotment letter concluded that an agreement existed and thus, held section 18 to be applicable.

Thus, the position as it stands is that the mere absence of a registered agreement for sale would not invalidate a plea for reliefs under section 18, as long as there exists documentary evidence to demonstrate the essential terms of a concluded contract such as a date of possession, total purchase consideration, description and specification of the property, payment schedule and so on, which provides a respite to the homebuyers who do not have a registered agreement.

Subit Chakrabarti is an associate at Vidhii Partners


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