KULDEEP KUMAR KOHLI
PRESIDENT
FEDERATION OF RESIDENTS WELFARE ASSOCIATION
08860332402
FORFORWA@GMAIL.COM
FAQs by buyers based on harassment by builders
May these answers be
construed as prima facie basic responses based on the limited information
provided to us as on date by the members and members are advised to consult
their Legal Counsel as well
Q. 1 If a person has been given the possession
letter after a delay can he file the case for interest but he has not taken the
possession?
Ans. 1 Yes, he can file a case for
claiming interest for delay in granting Possession.
It is however advised
that the Buyer should take possession if the construction is complete in all
sense to the satisfaction of the Buyer and then the Buyer can proceed with
taking action against the builder for claiming interest for delay in
possession.
It is a common practice
that even before the flats are ready, developers roll out the “Offer of
Possession“. The actual possession of apartment happens after months of making
final payments. Sometimes the possession is delayed further for reason like no
Occupancy Certificate etc. Developers may give various excuses like the fitting
and fixtures shall only be installed after final payment.[1]
The consumer / flat
buyers cannot be forced to accept possession of the unit, offered at a belated
stage, in the absence of any force majeure circumstances.[2]
It is also to be
noted that in case a person / consumer denies to take possession of their
property on being offered the same from the builder, a concrete reason /
deficiency needs to be pointed out to enable the consumer to later accept the
possession and claim interest for delay also.
Q.2 What happens to a person who has taken the
possession after a delay, having signed the indemnity bond?
Ans.2 Indemnity bond shall be executed by
the Builder in favour of the buyer/s. Hence signing of Indemnity Bond is in the
interest of the buyers.
Q. 3 One person bought the property from another
and got a delayed possession. Can he file the case? He has taken the
possession.
Ans. 3 Yes,
The subsequent buyer steps into the shoes of the previous buyer and hence all
the rights and entitlements which the
previous buyer would have claimed, the subsequent buyer would be entitled to
the same. In any case, the subsequent buyer would ‘buy the risks’ inherent with
a property and that is the reason the subsequent buyer would usually purchase
the property at a higher rate.
The answer to this
question depends on the time when the re-sale was given effect to. Although the
Subsequent Buyer of the Property has the right to claim interest from the
builder but the rate at which such claim can be made depends upon the time when
the re-sale happened.
Q.4 A person was offered possession four years
beyond the delivery period and he is not taking possession because he wants
interest what happens to his case.
Ans. 4 The answer to this
question is same as that of 1. The claim for interest will survive irrespective
of whether possession has been taken or not by the Buyer.
Q.5. What happens to a person who has two
properties? Will it be termed as commercial or he will be considered a consumer
on the act.
Ans.5 Please
refer to the judgment of Laxmi Engineering Works vs P.S.G. Industrial Institute
on 4 April, 1995, Equivalent citations: 1995 AIR 1428, 1995 SCC (3) 583.
The person may not be considered a consumer in the eyes of law. At times
however if the property has not been bought from the same builder, the builder
may or may not make this claim of the buyer/complainant owning second property.
A buyer who already
has 2 Properties will be considered as a consumer under the act provided the
Buyer does not trade in buying and selling houses on a regular basis for
commercial gains.
Q.6 What happens to a person who is living in his
own house and this is second or third property in his own name. Does he still
get the interest inn case of delay in handing over possession and the Buyer
denies taking the possession: the question was whether the Buyer can file a
case for claiming Interest?
Ans.6 The answer would be
same as above. (Please refer to answer to the question 5 and Laxmi Engineering
Judgment)
Q.7 Under which section is a buyer covered under
the Consumer Protection Act/Rules.
Ans.7 In
terms of Section 2(1)(d) of the Consumer
Protection Act, 1986
Q. 8. If the builder whose services are
engaged by a buyer for construction of a residential house for him fails to
complete the construction and deliver its possession on or before the date
committed by him for the purpose, would such an act on the part of the builder
be termed as an act of negligence, causing loss or injury to the flat buyer.
Ans. 8 Yes, The term “negligence” has not
been defined in the Consumer protection Act but as per its dictionary meaning,
it is the failure to give enough care or attention especially when such an act
has serious results to another person. (Oxford Advanced Learner’s
Dictionary, New 8th Edition). As per Black’s Law
Dictionary IX Edition, negligence includes the failure to exercise the standard
of care that a reasonably prudent person would have exercised in a similar
situation.
Hence in the absence
of force-majeure circumstances, a prudent builder would have been in a position
to construct the flats and offer their possession to the buyer on or
before the date committed or at best within the grace period under the
BBA. By not delivering on the commitment made by it with respect to the
delivery of the possession of the flats booked by the buyers, the builder
certainly commits an act of negligence and since the said act of negligence
results in loss or injury to the buyer who is deprived of the use of the flats
booked by them, compensation in terms of 14(1)(d) of the Consumer Protection
Act may be awarded to the buyer.
Furthermore since the
Act empowers the Commission to direct removal of the deficiencies in the
services, in exercise of the afore said power of the Commission, the
builder can also be directed and in fact ought to be directed to complete the
construction and deliver possession of the flat to the buyer at the earliest
possible. Therefore both the directions sought by the buyers viz.
direction for completion of the construction and delivery of possession of the
flats and the direction for payment of compensation for the period, the
possession is delayed are within the competence of the NCDRC under section 14
of the Consumer Protection Act.
Such a delay on the
part of the builder would tantamount to deficiency in service in terms of
2(1)(g) of Consumer Protection Act, 1986.
Q. 9 Would it be correct to say that the buyer
approaching the NCDRC are asking for specific performance of the Agreement the
buyers executed with the builder.
Ans.9. No, the
specific performance of a contract can be sought before a Civil Court in terms
of the provisions contained in the Specific Relief Act 1963. Neither is
the NCDRC a Civil Court not do the buyers invoke the provisions of the Specific
Relief Act, 1963.
Q 10. Is the person entitled for interest as
compensation if he has bought the property in re-sale?
Ans. 10 Yes, the buyer steps
into the shoes of the original buyer and hence is entitled for the interest as compensation.
Q. 11 The builder first takes three
instalments as advance and then sends the BBA for signatures which the buyer is
bound to sign. The time period of construction mentioned in the BBA
starts from the date BBA is signed. Is the person entitled for the
interest for the first three instalments till the time the BBA is signed?
Ans. 11 Interest is usually awarded on the payment
made which is calculated from the date of deposit till the date of realisation
of the amount ordered by the Forum/Commission.
However interest on
refund is treated differently from interest on delay. On delay the interest is
usually awarded from the date of promised date of possession.
Q.12 Is giving the money as advance to the builder tantamount
to acceptance of the offer and hence a contract is established
Ans. 12 Yes. A
contract is certainly established. The builders are known to treat the buyers
as captive buyers and hence they are left with no option but to dance to the
tune of the builder. Thus in BBA the buyers don’t usually get any opportunity
to negotiate the terms of the Agreement which goes contrary to the spirit of an
enforceable contract.
Q. 13 What is the limitation within which you
can approach RERA or NCDRC after having taken the possession?
Ans 13.To invoke
Consumer Protection Act the limitation is 2 years from the date of cause of
action whereas to invoke RERA the limitation is as per the Limitation Act, 1963
i.e. 3 years. It is to be noted that in terms of Section 19(10) every allottee
is supposed to take physical possession of the property within a period of two
months of the occupancy certificate issued by the government. It is advisable
to invoke Consumer Protection Act in such situations where the
defect/deficiency is on account of some latent defect in the property.
Q. 14 Should a consumer approach the State
under RERA or go to the National Consumer for Relief.
Ans.14 It would depend upon the relief sought. At
the moment jurisprudence related to RERA is still in the infancy and much has
been left to the discretion of the authorities. At the same time however RERA
can conduct investigation etc. whereas Consumer Fora cannot do that. Owing to a
developed jurisprudence of Consumer Protection Act however the ease of handling
of litigation is much more in Consumer Protection Act than RERA
Q. 15 Since the pecuniary limit of National
Consumer Court is Rs. one Crore, can few flats owners asking for Possession and
Interest or Principal & Interest approach National Consumer if their
combined value is more than Rs. One Crore.
Ans. 15 Yes under
12(1)(C) of Consumer Protection Act, 1986.
Q. 16 Can an Association file a case on behalf of
its members before the National Consumer
Ans.16 Yes, under 12(1)(b) of Consumer Protection
Act
Q.17 Can an Association file case before the
State RERA.
Ans. 17 Yes, under 12(1)(b) of Consumer Protection
Act. Please refer to Amrapali Judgment CC/816/2016 upheld by SC in Civil Appeal
No. 10882/2016
Q. 18 In view of the clauses stipulating per
sq.ft compensation per month by way of penalty, would it be considered as the
upper limit of the compensation which can be awarded to the complainants, in
the event of builder not giving the possession as per the dates mentioned in
the BBA.
Ans.18 The aforesaid compensation is a unilateral
and patently unfair term imposed by the builder upon the flat buyers.
Having already paid the booking amount to the builder, they become captive
buyers and thus have no other option but to sign on the dotted lines, since the
failure to execute the agreement unilaterally drafted by the builder and
imposed upon the flat buyer is likely to result in the booking amount being
forfeited by the builder. Therefore, executing an agreement containing
such a term is nothing but a consent given under coercion and cannot be said to
be the result of the exercise of a free consent on the part of the flat
buyer. Moreover, a term to pay such a paltry compensation to the flat
buyer in the event of default on the part of the builder, while making him pay
exorbitant interest in the event of default or delay on his part is an
absolutely unfair term. In fact the incorporation of a term for payment
of a paltry compensation to the buyer in the event of the failure of the
builder to deliver possession within the time period committed by him had
become so wide spread and rampant that the Legislature had to step in by
enactment of the Real Estate (Regulation & Development) Act, 2016 to
statutorily require the builder to pay compensation in the form of interest at
prescribed rate in the event of the possession being delayed or the buyer
deciding to quit on account of the delay on the part of the builder in
delivering upon the promise made by him. Hence irrespective of the
clauses in the BBA, the buyer is entitled to a just and fair compensation for
the period the possession of the flats is delayed by the opposite party.
If a paltry
compensation of say Rs. 10 per s.ft per month is awarded against a builder, it
may lead to dangerous consequences since the builder may be tempted not to
complete the construction and divert the money collected from the flat buyers
for other purposes. Paying such a meagre compensation would be a win-win
situation for a builder who is likely to pay many times more if he goes to
market for arranging finances which he gets by diverting the money collected
from the flat buyers to other purposes.
Q.19. What is
the normal compensation being awarded by the NCDRC – National Consumer Dispute
Redressal Forum.
Ans. 19. Simple interest @ 8% per annum with
effect from the committed date of possession till the date on which the
possession was given or is actually offered.
Q 20. Till what
date is the interest given?
Ans. 20. Till
the date on which the possession is actually offered and not till the date of
the Occupation Certificate.
Q 21. What is the grace period which the
builder is entitled while computing the committed date of possession.
Ans. 21. There is no entitlement. However usually the
terms of the BBA incorporate a grace
period of 3 months/6 months. It is to be noted that this grace period is a
matter of agreement between the two parties i.e. builder and the buyer. Hence
the builder may as well insist on no grace period.
Q. 22. Is the compensation payable adjusted out
of the additional amount, if any payable, by the complainants to the opposite
party?
Ans. 22 Yes. Usually the courts direct adjustment of
the amount.
Q. 23
Is the balance amount, if any, to be paid to the builder before the flat
is offered.
Ans. 23. The
balance amount is payable while offering possession of the flat.
Q 24. In case a possession has been taken, does
the court still award the compensation and within which period is it payable to
the buyer.
Ans. 24. Yes,
the buyer is entitled for compensation even if he has taken the possession and
the amount is payable to him within three months of the order of the
Commission.
Q. 25 Does the Court order the cost in favour
of the buyer.
Ans. 25 Yes the court has been ordering the cost of
litigation to the tune of Rs. 25,000.00 in respect of each complaint.
Q.26. Is the existing BBA applicable in
respect of projects under RERA.
Ans. 26 No, for such projects the BBA has to be approved
by the Legislature. Most of the ongoing projects have been kept out of the
purview of RERA and As per section 13(2), the appropriate Government is
required to specify through Rules the ‘Agreement for Sale’ to be entered into
between the promoter and the allottee. This Agreement is binding on the
parties, however, internal flexibility could be provided in the said Agreement
for Sale, for determination / insertion of other provisions as decided between
the parties for mutual benefit. Hence the existing BBA are not applicable with
respect to projects under RERA.
Warm Regards
Kuldeep Kumar Kohli
[1] Read more at The Logical Buyer's blog: Pay
delay penalty till actual possession – No more “Offer of Possession”
http://www.thelogicalbuyer.com/blog/?p=1416
