Dear Patron,
We are excited to present the inaugural edition of our monthly real estate legal updates, brought to you in collaboration with Rayasa Law Partners. Our goal is to keep you informed about the latest developments in the Indian real estate sector, helping you navigate the legal landscape with confidence.
In this first edition (#20240701), we cover significant regulatory changes and important legal rulings, including:
UP RERA's New Model Format for Offer of Possession Letters: Aiming to curb arbitrary practices and protect homebuyers, UP RERA has mandated a standardised format for these letters, ensuring transparency and uniformity.
NCDRC's Stance on Delayed Possession: The National Consumer Disputes Redressal Commission has ruled that builders cannot force buyers to accept possession after delays, emphasising the rights of buyers to seek compensation.
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Best regards,
The Realty Tree Team
customercare@therealtytree.in
Here is the Legal Update:
UP RERA cracks down on arbitrary Offer of Possession Letters, issues model format.
On June 8, 2024, in a significant move aimed at curbing the arbitrary practices of real estate promoters, the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has issued new model format for the issuance of Offer of Possession letters. This step is intended to protect homebuyers from misleading and binding conditions often disguised within such letters.
The core Press Note, outlined in an office order issued by UP RERA on May 29, 2024, mandates that all Offer of Possession letters must adhere to a standardized format available on the RERA portal. This measure is designed to ensure uniformity and transparency in the process, safeguarding the interests of allottees.
As per the Press Note, any letter issued under the guise of an Offer of Possession, such as Demand Notices or Final Demand Notices, will no longer be considered valid. The sole purpose of the Offer of Possession letter, as clarified by UP RERA, is to facilitate the handover of possession of the unit to the allottee. Subsequently, the Press Note clarified that the Offer of Possession letter can only be issued after the promoter has obtained the Occupancy Certificate (OC) or Completion Certificate (CC) from the Development Authority and the letter must explicitly state the unit’s readiness for possession.
If any construction work remains, the letter should clearly mention the pending tasks and the time required for their completion. Once the OC/CC is received, promoters are required to send the Offer of Possession letter to the allottees via their registered email and postal addresses. Additionally, they must inform the allottees through SMS and phone calls. Information regarding the issuance of these letters should also be displayed prominently at the project site and the promoter’s head office.
To eliminate confusion and disputes, UP RERA has made the model format of the Offer of Possession letter available on its portal. Promoters are required to use this format without imposing any additional binding conditions on the allottees. Any deviations from this format will render the letter invalid.
As per this Press Note, the Offer of Possession letters must be issued within two months of receiving the OC/CC and at the time of possession, promoters must also provide a copy of the OC/CC to the allottees.
This regulatory move comes in response to numerous complaints from allottees regarding the arbitrary and varied formats of Offer of Possession letters. These often contained binding conditions and misleading information, causing confusion and disputes between promoters and buyers.
UP RERA Chairman Sanjay Bhoosreddy, in this Press Note, has emphasized the importance of this initiative, stating that “the promoters send Final Demand Letter and Final Demand Notice using the name and language of Offer of Possession, which creates confusion among the allottees, and it carries some binding conditions. Offer of Possession should be meant only for the purpose of taking possession. Hence, we have made available a model Offer of Possession on the portal and any other format of letter will not be valid. This will remove confusion among the stakeholders and help in the disposal of disputes related to it.”
Now, with the implementation of these guidelines, any disputes arising from non-compliance will be addressed according to the provisions of the U.P. Real Estate (Regulation and Development) (Agreement for Sale/Lease) Rules, 2018.
This regulatory framework ensures that promoters adhere strictly to the standardized process, thereby protecting the rights and interests of allottees.
NCDRC opines that builders cannot force buyers to accept possession after delays.
The National Consumer Disputes Redressal Commission (NCDRC), presided by AVM J. Rajendra, recently in Mahesh Gugnani v. M/S. Sushma Buildtech Limited, has affirmed that builders cannot force buyers to accept possession of properties after significant delays. The ruling emphasizes that buyers have the right to either accept the delayed possession or seek compensation for the delay.
In the instant case, the complainant booked a flat with Sushma Buildtech, and a Flat Buyers Agreement was executed between the parties. According to the agreement, possession was to be offered within 30 months (24 months plus a 6-month grace period). Despite receiving 97% of the sale price, the builder failed to deliver possession of the flat within the stipulated period. Aggrieved by the delay, the complainant filed a consumer complaint before the State Commission of Punjab seeking redressal. The State Commission allowed the complaint and directed the builder to pay compensation for the delay at ₹5 per sq. ft. per month of the flat's super area from the stipulated delivery date until possession is handed over. Additionally, the builder was directed to pay simple interest at 6% per annum on the deposited amount of INR 54,30,226 from the stipulated date until delivery. The builder was also required to pay INR 65,000 as litigation costs and other expenses. Dissatisfied with the State Commission's order, the complainant appealed to the National Commission.
As per the builder, the complaint should be dismissed due to pecuniary jurisdiction issues, claiming that the complainants were not 'consumers' under the Act as they purchased the flat for speculative purposes and already owned a house. They denied any deficiency in service, stating that they were actively developing the project and committed to delivering possession as per the agreement terms. The builder claimed that the funds received were used for project construction and development, citing force majeure circumstances like labour issues, sand shortages, and demonetization as reasons for delays. On the merits,the builder asserted that the project had all necessary approvals and licenses, which the complainants had seen before signing the Apartment Buyer's Agreement.
The National Commission observed that the complainants paid INR 64,27,245 towards the flat, with receipts confirming the payment. The agreement stipulated that possession was to be delivered within a specified timeline plus a grace period. Despite these terms and the complainant's payments, the builder failed to hand over the flat within the agreed timeframe. The complainants, who had also taken a home loan from HDFC Ltd and were paying EMIs, had invested a substantial amount in seeking possession of the flat.
The Commission underscored that homebuyers are entitled to compensation for possession or project completion delays. Citing the earlier judgment of the National Commission in case of Emmar MGF Land Ltd. & Ors. v. Amit Puri, the Commission noted that buyers have the right to either accept the delayed possession or seek a refund with compensation. The Commission also referred to the Supreme Court decision in Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghvan, to state that builders cannot force buyers to accept possession after significant delays, and buyers are entitled to refunds with interest. The Commission emphasized that contracts with one-sided clauses favoring builders are considered unfair trade practices under the Consumer Protection Act. The Commission also noted that complainants should not wait indefinitely for possession and that invoking force majeure clauses while retaining deposits is a deficiency in service and an unfair trade practice.