Delay in possession by builder/developer
This article gives basic information on how the law can help in case property possession is delayed by builder.
I signed an agreement to buy an apartment from a developer/builder. I have made all payments as per the schedule but I have not been given possession till date. What can I do?
As a person who has paid money to a developer or builder who has then not handed over the property, you have the right to a solution to your problem. Under a new law passed by the government known as the Real Estate (Regulation and Development) Act, 2016, you have the right to file a complaint before a special body set up for real estate projects known as the Real Estate Regulatory Authority. You can also access consumer courts or file criminal complaints. In certain situations, you can also start an ‘arbitration’ proceeding or file a complaint before the Competition Commission of India. Read more about these options below.
What is a Real Estate Regulatory Authority? What are my options if I decide to pursue this option?
Under a new law, states have to establish Regulatory Authority which is a special body dealing with the real estate sector. Here’s what you need to know about the law with respect to your particular problem:
- Compulsory registration of new and ongoing projects - All builders and developers have a duty to register their new and ongoing projects with the Regulatory Authority.
- Please remember that this duty extends to projects which are currently going on as well. They have to complete this by the end of July 2017. However, if the builder or developer has already obtained the completion certificate, they do not have a duty to register their project under this law.
They are not required to register projects which are very small - if the area of the land which is going to be developed is less than 500 square meters and the number of apartments is less than eight. This exemption might differ from state to state.
- Once the registration is granted by the Regulatory Authority, the builder or developer has to publish entire details of their projects on the website (Section 11 of The Real Estate (Regulation and Development) Act, 2016) of the Regulatory Authority. The registration is valid for the period indicated in the project application as the time required for completion of the project. Once this period is over, the Regulatory Authority has a right to revoke the registration (Section 7 of The Real Estate (Regulation and Development) Act, 2016) granted for this project.
- If the builder or developer has not handed over the property by the date mentioned in your agreement for sale or if the registration granted by the Regulatory Authority has been suspended or revoked, you have the right to withdraw from the project (Section 18 of the Real Estate (Regulation and Development) Act, 2016).
- If you choose to withdraw from the project, you have the right to be compensated for the full amount you have paid till date along with interest. You get this right as soon as the date has passed - you do not have to file a complaint or case at this point. The developer and/or builder is supposed to compensate you as soon as you make the request.
- If you choose not to withdraw from the project, you have the right to be compensated with interest for every month of delay. The exact interest amount will differ from state to state and depend on the state regulations issued.
- If the builder or developer is not voluntarily compensating you, you have the right to file a complaint (Section 31 of the Real Estate (Regulation and Development) Act, 2016) before the Regulatory Authority. Each state Regulatory Authority is supposed to appoint an officer (Section 71 of The Real Estate (Regulation and Development) Act, 2016) who performs the functions of a judge. She will conduct an inquiry and pass an order once she has decided whether you are actually supposed to get the interest or money spent.
- You need not compulsorily hire a lawyer to represent yourself. You can appear yourself or even hire a chartered accountant or cost accountant or company secretary (Section 56 of the Real Estate (Regulation and Development) Act, 2016).
- If you are not satisfied with the decision of the officer, you can file an appeal (Section 44 of the Real Estate (Regulation and Development) Act, 2016) before the Appellate Tribunal set up under this law within 60 days. Every state is supposed to have one such appellate tribunal.
Every state and union territory is supposed to have such an authority and an appellate tribunal. Since this is a very recent law (important provisions came into force on May 1, 2017) and a number of states have not yet set up authorities, you will need to check if the state in which the property is located has set up the Regulatory Authority and Appellate Tribunal to see if this option is available in the first place.
What is the time period within which the Regulatory Authority is required to dispose the complaint?
The new law states that the Regulatory Authority should endeavour to dispose of the complaints within 60 days (Section 71 of the Real Estate (Regulation and Development) Act, 2016) from the date of filing. However, the Authority can take more time and is only required to record the reasons for not completing the proceeding within the 60 day period.
If there is a Regulatory Authority set up in my state, can I still approach a civil court or file a writ petition before the High Court?
No, if the Regulatory Authority has been set up in your state, you cannot file a case before a civil court or file a civil writ petition before the High Court. Recently, some High Courts have in fact been directing those who file civil writ petitions before it to approach the Regulatory Authority in that state. However, since this is a very new law and some states may not have set up a regulatory authority, you might still have the option of filing a civil case.
If there is no Regulatory Authority set up, is there any other court I can go to?
Generally, the law does not let you litigate in two different courts for the same dispute or grievance. This does not include non-legal remedies like approaching CREDAI. Also, for a case that can be decided by the Real Estate Regulatory Authority, you cannot simultaneously file a case for the same remedies in the civil court (Section 79 of the Real Estate (Regulation and Development) Act, 2016). (However, you may have the option to approach civil courts if the state government has not yet set up a Regulatory Authority.) Alternatively, there are other places you can look at for a solution - for example, filing a case before the consumer forum is also an option. Also depending on the situation, some other options include arbitration, insolvency applications and filing criminal complaints are available.
Since choosing of alternative remedies requires in depth analyses of facts and forums, it is always advisable to consult a lawyer before proceeding with any remedy.
What kind of remedies can I get from a civil court?
(If there is no real estate Regulatory Authority in your state,) you can file a civil case in the area where the apartment is located or where the builder carries on his business.
The remedies that can be obtained from a Civil Court are:
- Completion of the project: The court can order the builder to complete the construction according to your agreement or it may grant the builders a reasonable amount of extra time to complete the construction.
- Refund: The court can order the builders to refund the amount you have paid along with interest or penalty. The court will also then cancel your agreement with the buyer.
- Damages: Your agreement may contain a certain fixed penalty charge which the builder has to pay if they delay in handing over of the property. The court can order the builder to pay such penalty. If there is no fixed penalty in your agreement, the court may order the builder to pay compensation for the mental agony you have suffered or even for rent you might have been able to recover till the apartment is handed over.
One advantage of approaching a civil court is that obtaining temporary orders may be easier. However, generally cases in civil courts are time consuming and require court fees which are dependent on the amount of claim
My agreement with the builder has an ‘arbitration clause’. What does this mean?
If there is an arbitration clause in your agreement, then you should refer your case to the arbitrator (and not go to a civil court). Arbitration is a private method of resolving a dispute by referring it to an independent third party called as arbitrator. This person will then decide whether the builder has not followed the terms of the agreement in relation to handing over and compensation.
Arbitration is supposed to be a quicker solution than a general civil case. Even though you do not have to pay court fees, both you and the builder will have to pay the fees of the arbitrator. The arbitrator can at best give a decree (order) confirming the default by the builder and the compensation. The buyer should approach the civil court for enforcing the arbitrator’s order. This may make it time consuming.
The builder has cheated me and several other buyers. Is it possible to file a criminal case against him?
In situations where the builder or developer is purposely not handing over possession of the property in order to keep the money for herself, you can also file a criminal complaint. There are provisions in the general law of crimes, the Indian Penal Code, 1860 which punishes such crimes (for example, cheating (Section 415 of IPC 1860) and criminal breach of trust (Section 405 of IPC 1860)).
Generally, a criminal case may be a completed quicker than a regular civil case. Also, the court fees involved is minimal. If the builder is found guilty, the court may send her to jail which might make her more diligent in settling claims. However, there is no assured monetary compensation even if the builders are found guilty.
Can I file a consumer complaint? What are the benefits?
If you have bought the property for a residential purpose or if the rent from the property is your source of livelihood (for example, when the builder is building the property on your land), you can file a consumer complaint instead of going to the Real Estate Regulatory Authority or a civil court. You are able to make a complaint as a consumer because you have paid for a service from the builder and there is a deficiency (Section 2 of The Consumer Protection Act 1986) in this service.
You can file a complaint with the District Consumer Forum (Section 11 of The Consumer Protection Act 1986) if the value of the property and compensation you are claiming is less than Rs. 20 lakh. If this is between Rs. 20 lakh and Rs. 1 crore, you have to file the complaint with the State Consumer Commission (Section 17 of The Consumer Protection Act 1986). If this is above Rs. 1 crore, you have to file the complaint with the National Commission (Section 21 of The Consumer Protection Act 1986). The complaint should be filed within two years (Section 24A of The Consumer Protection Act 1986) from the date on which you were supposed to get possession.
Approaching a consumer forum generally means a quicker end to the case. Also, getting temporary relief, compensation and a settlement with the builder is easier. The complaint fee is very nominal and not based on the value of the claim (like in a civil court). However, if the property value is above Rs.20 lakh or Rs.1 crore, then you can only file the complaint before the State Commission or National Forum.