India: Operation Of One Transaction In Two Different Stages Under The RERA Regime

Last Updated: 31 January 2019
Article by Chirag Shah and Malavika Menon

Introduction:

The Maharashtra Real Estate Regulatory Authority ("RERA Authority") in the case of Anita Castellino vs. Godrej Landmark Redevelopers Private Limited vide its final order dated 22nd January, 2019 has whilst dismissing the complaint, dealt with an important legal issue i.e. whether Section 12 and Section 18 of the Real Estate (Regulation and Development) Act, 2016 ("Act") operate at two different stages of the same transaction in two different spheres.

Facts:

Anita Castellino ("Complainant") booked a flat ("Flat") in the project 'Godrej Central' ("Project") of Godrej Landmark Redevelopers Private Limited ("Promoter"). The Complainant whist seeking to withdraw from the Project and claiming refund along with interest and/or compensation under Section 12 of the Act, inter-alia contended that (i) the sales team of the Promoter falsely led her to believe that (i) the Flat would be located at the dead end of the podium adjacent to which no car would be parked, and (ii) the podium would be constructed 27 feet above the ground level. However, contrary to these representations, the Promoter ended up constructing a ramp inter-alia for visitors parking adjacent to the Flat on the podiumended which was only 12 feet above the ground level. The Complainant also contented that the Promoter failed to give possession of the Flat on the promised date.

The Promoter whilst denying all the allegations against it, inter-alia contended that (i) the Complainant had raised similar issues before the execution of the agreement for sale of the Flat ("AFS") and all the issues were resolved by the Promoter by waiving the amount of interest on account of delayed payments and thus, the Complainant had been adequately compensated for the same, (ii) the Complainant was fully aware at the time of registration of the AFS, that the podium was only 12 feet above the ground level and further prayed that the complaint be dismissed.

Judicial Notes:

The RERA Authority made a judicial note of the following stages of purchasing flats by allottees from a promoter:

First stage: the project is launched by the promoter by inviting the allottees for making advances or depositing money with the promoter on the basis of information of the project presented by the promoter by way of notices, advertisements, or prospectus or by showing model apartment etc. Thereafter the allottees, on the basis of such information, apply for the allotment and after collecting initial payment of booking, the promoter allots the flats and issues the allotment letters.

Second stage: the parties discuss and settle the terms of the agreement for sale regarding the payment schedule of the consideration, description of the flat and its specifications, date of possession, etc. Such terms are inclusive of amenities to be provided, quality of the material to be used for construction. The design of the flat is also agreed by the parties by showing and relying upon the layout and building plans which very often form the part of the agreement.

Third stage: The construction of the project i.e. the implementation of the terms and conditions of the agreement.

Fourth stage: the project is completed and the possession is offered to the allotttees post receipt of occupancy/completion certificate. The conveyance of the title of the flats to the allottees and that of the land and common amenities to the society is granted by the promoter.

Applicability of Section 18:

The RERA Authority observed that Section 18 applies on the occurrence of the following events:

  1. On the promoter's failure to complete the apartment on accordance with the terms of the agreement for sale; or
  2. On the inability of the promoter to give possession of an apartment duly completed by the date specified in the agreement for sale.  

Observations:

The RERA Authority has after considering Rule 10 (2) of the Maharashtra Real Estate (Regulation and Development) (Registration of Real Estate Project, Registration of Real Estate Agent, Rates of Interest and Disclosures on Website) Rule, 2017, observed that the agreement for sale supersedes all other earlier documents (including the brochures, prospectus and notices, etc.), acts or omissions of the parties i.e. Once the agreement for sale is executed, the parties are estopped from raising the claims based on the documents, acts, omissions which had taken place prior to the execution of the agreement for sale.

In view of the aforesaid, the RERA Authority further observed that Section 12 operates before the execution of the agreement for sale and after execution of the agreement for sale, Section of 12 ceases to operate and such cases shall be governed by Section 18 of the Act only. Thus, all grievances pertaining to the stage of booking are to be raised at pre-agreement stage under Section 12 of the Act and cannot be raised in post agreement period.

Held:

The RERA Authority whilst dismissing the complaint has held that (i) Section 12 and Section 18 operate at different stages of the sale transaction and they operate in different spheres and (ii) Section 12 operates from the stage of booking till the execution of the agreement for sale and Section 18 operates thereafter.

Conclusion:

In ordinary course, the parties are at liberty to settle the terms and conditions of their own choices mutually agreeable to both regarding the construction of the flat/apartment when they enter into the agreement for sale. In light of the above, the observations made by the RERA Authority appear to be sound.

However, in the event any allottee is apprehensive that he may be a victim of unfair treatment, in such event, it is advisable that the terms of the allotment letter as well as the agreement for sale be negotiated and settled with the promoter prior to execution of an agreement for sale.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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