Toxic Contracts And Refund Denial Continue Despite RERA

Maharashtra was the first Indian state to set up the Maharashtra Real Estate Regulatory Authority (MAHA RERA) to implement the provisions of the Act. MAHA RERA has a dedicated website where homebuyers can lodge online complaints; view rulings passed by MAHA RERA or by the Maharashtra Real Estate Appellate Tribunal; keep an eye on the registered projects and documents submitted by builders to MAHA RERA at the time of obtaining registration; among other things.

While this is welcome, none of it translates into what one of the chief objectives of the Act is meant to be: to protect the interests of homebuyers.

Two pointed issues have long-troubled homebuyers and triggered the coming into being of the Act: toxic contracts and denial of refund. Needless to say, the bargaining power between a homebuyer and a large real estate corporate is disproportionate, immoral, and unconscionable. As aptly spelt out by the Bombay High Court while upholding the constitutionality of the Act in the case of Neelkamal Realtors Suburban Pvt vs. Union of India (2017), the idea behind the Act was to prevent builders from incorporating invariably one-sided terms and conditions in Sale Agreements and leaving individual purchasers with not much of a choice but to sign on the dotted line.

Pertinently, the Act and the Regulations made thereunder do provide for templates of contractual documents to be used by the builder at the time of concluding a sale transaction. The Regulations also provide (as Annexure A) for a sample template of the Agreement for Sale to be used by builders. Some minor lapses aside, the terms and conditions incorporated in the template broadly balance the rights and obligations between the builder and the homebuyer.

But as every other law, the problem lies in the implementation of the Regulations.

Upon a quick perusal of the templates uploaded by some builders in Maharashtra, it emerges that builders continue to subject homebuyers to unreasonable and one-sided terms and conditions. The terms and conditions specified under the Regulations are not used in the template uploaded on MAHA RERA's website, or are used only selectively. This is alarming because MAHA RERA is duty-bound to peruse the contract templates submitted by the builders at the time of seeking registration of projects and ensure that they are in line with the Regulations, before granting approval of plans. In fact, failure to comply with the Regulations is also valid ground to cancel registration or approval of projects.

MAHA RERA's failure to take prompt action against builders for non-compliance with the contract templates stipulated under the Regulations has caused much hardship to homebuyers. In practice, at the time of booking, homebuyers are asked to complete and sign a "take-it-or-leave-it" Application Form and pay the booking amount. The Application Form contains numerous terms and conditions that are completely one-sided and almost each term and condition lean in favor of the builder and at the cost of the rights of the homebuyer.

The most concerning of all is the right of the builder to unilaterally cancel the transaction and forfeit the earnest money paid by the homebuyer in the event that the homebuyer fails to purchase the property. Rarely is the homebuyer provided with a sample of the Agreement for Sale at the stage of submission of Application Form or, even at the time of payment of booking amount.

Following the signing of the Application Form, a further demand for payment is raised, which, combined with the booking amount, comprises 10 percent of the total sale consideration of the unit. Pertinently, as per the Act, executing and registering the Agreement for Sale is a pre-condition to the builder raising demands for further sum of monies from the homebuyer in respect of the transaction. Soon thereafter, an Allotment Letter is sent to homebuyers asking them to come forward and complete the registration process within a period of 30 days from the date of such allotment. Usually, the Allotment Letter imposes a "burden of refusal" on the homebuyer and is deemed to be accepted if the homebuyer does not respond within the stipulated timeline, which is often less than two weeks.

This is concerning because the terms and conditions of the Application Form are repeated, and the homebuyer has no option but to accept allotment. The Allotment Letter notes that homebuyers must come forward and complete the registration process within 30 days from the date of receipt of the Allotment Letter. In some cases, builders would simply send a template of the Agreement for Sale which does not contain the relevant annexures or contains incomplete details of the homebuyer and the property. The problem becomes more significant when builders fail to send or make a delay in sending the Agreement for Sale to homebuyers.

There may be circumstances due to which homebuyers do not want to proceed with the transaction (such as inability to arrange funds), or homebuyers would like to modify the terms of the Agreement for Sale. In both cases, builders threaten homebuyers to complete the registration or face forfeiture of advances paid. Worse, homebuyers are often cajoled to pay the stamp duty before executing the Agreement for Sale so that they do not cause nuisance at the negotiating table in the future. This entire process puts the builder is an advantageous and dominating position through and through. What follows are relentless requests for payment of stamp duty and registration of the one-sided Agreement for Sale.

As per the Act, the homebuyer gets 45 days (including a 15-day reminder) to complete the registration process and in case homebuyer does not do so, the builder is obliged to return all monies and advances to the homebuyer, including the booking amount. A quick perusal of the draft Agreement for Sale uploaded on the MAHA RERA's website reveals that some builders have skipped this clause in their Agreements, for reasons best known to them.

MAHA RERA is increasingly seen as a toothless body that has, at times, failed to enforce its own orders.

In the past, MAHA RERA has refused to admit buyer-builder disputes on the ground that the homebuyer had already sought relief under the Consumer Protection Act. MAHA RERA has also unlawfully refused to entertain refund requests from homebuyers stating that the Act provides no powers to the Authority to grant refund in certain situations. In some cases, MAHA RERA rebuked homebuyers for approaching consumer courts for reliefs instead of approaching the Authority. In some cases, complaints are not listed for hearing for months. Orders passed by MAHA RERA are not adhered to by builders and the Authority has washed its hands off stating it is incapable to order execution. The Chairman of the Authority does not have judicial experience and as a result settled legal principles are not given heed to.

All in all, it seems that the Act and Regulations are meant only to be there in theory and not to be applied in practice by builders. Right from the stage of signing of the Application Form and payment of the booking amount until the stage of possession of flat, homebuyers continue to remain at the mercy of builders. This needs to change.

Views are Personal.

The Author is an Advocate.