Remedies for Property Disputes with Builder of residential floors

The unfair practices of the builder have been minimized as the buyer now can avail several legal redressal mechanisms including:

• Filing of a complaint under RERA [Real Estate ( Regulation and Development) Act]
• Initiating proceedings before the Consumer Forum
• Filing of a civil suit in a Civil Court
• Initiating a criminal case
• Filing a case before the Competition Commission of India (CCI)

We shall discuss the same in detail below, but first, let’s discuss the concept of the builder floor.

 

What are builder floors?

Builder floor housing is a single/ self-contained floor unit that offers greater space of more than 1500 sq. ft. (usually). The builder floor housing provides a complete home comprising of separate electricity and water supply. Builder floor houses are comparatively more expensive than flats/ apartments as they offer more independence and flexibility[i].

A builder floor apartment offers limited floors that are developed by the builder himself or maybe in collaboration with the landowner. Nowadays, investing in builder floors is a lifestyle choice for people who want independent living space.

 

Builder floor ownership

The builder floor ownership depends on the buyer and seller/ builder agreement and it usually comes with proportional ownership of the plot. The purchase of builder floor plots should to be registered and duly stamped, however, in some cities registration of builder floor is not allowed. Buyers are advised not to enter into agreements with the builder where builder floor housing is not permitted.

 

Common complaints regarding builder floor housing

It is advisable to inspect the builder floor housing to avoid the issues faced by the buyers[ii] :

In the case of Nahalchand Laloochand Pvt. Ltd. v. Panchali Co-operative Housing Society Ltd.[iii], the Apex Court dismissed the argument of a real estate development company wherein they stated that they are entitled to sell garages or stilt parking areas under a separate flat to the buyers who want a separate parking facility. The court held that the builders/ sellers cannot sell parking areas as independent units as they are considered to be “common areas and facilities” for the buyers. It clarified that the builders/ seller can charge a price for the common areas and facilities from the buyer of the flat in proportion to the carpet area.

The Apex Court[iv] held recently that the flat buyers are entitled to compensation for “delayed handing over of possession” and if the developer fails to provide the promised amenities to the buyer he has to compensate them for it.

 

Legal checklist for buying builder floor houses[v]

1. Proper due diligence: You should check the property title by visiting the local registrar’s office and also inspecting the other documents such as the approved building plan, floor area, etc.
2. Completion and occupancy certificates: You must ensure that no local development laws have been violated. Also, completion and occupancy certificate is a must and without it residing in the premises would be considered illegal.
3. You may also hire a property surveyor to inspect the construction quality and to determine the age of the building as it shall be important when you want to resale it.
4. Always check that all the dues are cleared before taking possession of the builder floor houses: property, water, electricity tax should be cleared.
5. Do check that your unit has separate power and water connections. Avoid buying a builder’s floor that doesn’t provide separate facilities.
6. Be aware of the circle rate and base price for residential properties in the area you are buying in.

 

Significance of buyer-builder/ seller agreement

Recently, the Supreme Court stated that a model of buyer-builder agreement is a matter of extreme public importance. A bench of the Apex Court comprising of the bench of Justices DY Chandrachud and AS Bopanna stated that “This is an important matter where the issue is about the need to frame a model builder-buyer agreement under the RERA. The government has the power to do so and a group of homebuyers has come to the court. This is not an adversarial matter. This is a very important issue of public interest[vi].”

 

Remedies available to buyers[vii]

1. Civil Remedy – If a builder commits a breach of obligations as per the seller-buyer agreement then the buyer can approach a Civil Court by filing a petition for injunction/damages or for seeking a refund of amount/ interest under the Code of Civil Procedure, 1908 (CPC).
2. Consumer Forum – A buyer can file a complaint before the consumer forum within 2 years from the date of dispute for any deficiency in services on part of the builder. A homebuyer according to the Consumer Protection Act, 1986 is the one who buys the house for his use and is not bought for any commercial purpose.

 

Limitation under Consumer Act for initiating the complaint

The Supreme Court[viii] held that the builders of housing projects are amenable to the Consumer Act and hence they are responsible for defective construction. It added that “The complaint has to be filed within 2 years from the date on which the defect arises. Whether the complaint is time-barred or not will always be a matter of debate and will be argued extensively. However, the District Forum may accept a complaint beyond 2 years if the buyer has sufficient reasons for not filing the complaint within such period[ix].”

InMili Jain v. Wave City Centre Pvt. Ltd., Consumer[x]– It was stated by the Commission that the complainant cannot be directed to wait for an indefinitely for possession of the Flat, as in the instant matter the construction was yet to be completed after 9 years from the date of booking. It directed the developer to refund the entire amount deposited along with interest @ 9% per annum.

3. Competition Commission of India (CCI)- If the consumer feels aggrieved as the builder has used a dominant position causing disadvantages to the buyer, then he can approach the CCI to file a complaint against a builder for doing so, as per the provisions of the Act. The Commission shall investigate the anti-competitive practices of the builder and it may also impose stringent penalties on the offenders if they are found guilty.

4. Regulatory Forums – A homebuyer can complain to the regulatory authorities such as RERA (Real Estate Regulatory Authority) for the non-compliance with statutory obligations that are imposed on the builders. A house allottee can initiate the complaint with the authority u/s 31 of the Real Estate (Regulation and Development) Act, 2016.

5. Criminal Courts – The buyer can file a criminal complaint under the Indian Penal Code, 1860 (IPC) if the builder/ seller has committed the offense of cheating, breach of contract, or if he is not responding to the grievance of the buyers, providing poor quality of construction, etc.

6. Arbitration- The proceedings can be initiated under the Arbitration and Conciliation Act, 1996, if there is an ‘Arbitration Clause’ in the Builder Buyer Agreement.

Promoters, builders, and agents have an arbitrary one-sided agreement that leads violation of rights of buyers conferred under Articles 14, 15, 21 of the Constitution. There have been many instances of deliberate inordinate delays to hand over possession by the builders and lodging of complaints by buyers. Hence, the buyers need to be aware of their rights; they should always inspect the premises along with relevant documents before investing in it.

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[i] https://www.thehindu.com/real-estate/the-difference-between-builders-floor-and-multi-storey-apartment-everything-you-need-to-know/article19790849.ec

[ii] https://www.businesstoday.in/magazine/real-estate/story/real-estate-buy-builder-floors-independent-living-31285-2012-05-07

[iii] AIR 2010 SC 3607

[iv] https://www.india.com/business/builders-to-pay-interest-if-possession-not-delivered-as-per-agreement-to-flat-buyers-supreme-court-4330072/

[v] https://housing.com/news/what-is-a-builder-floor/

[vi] https://housing.com/news/heres-why-you-should-thoroughly-read-your-builder-buyer-agreement/

[vii] https://www.scconline.com/blog/post/2021/11/02/law-on-builder-buyer-dispute/

[viii] Lucknow Development Authority vs. M K Gupta

[ix] https://www.financialexpress.com/money/dispute-with-builder-and-planning-to-move-court-heres-why-you-need-to-act-fast/1128985/

[x] Case No. 3304 of 2017, decided on 29-10-2021