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DELAYED POSSESSION TO HOME BUYERS

INTRODUCTION

Buying a home is a dream for many, and many people use their entire life savings to purchase their dream property. These days, many developers delay in handing over the possession to the home buyer, which has an adverse effect on the home buyers, who have already duly paid the entire amount as per the ‘Flat Buyers Agreement (FBA)’, and has taken home loans from banks at high rates of interest and still bears the costs of rent, despite legally being the purchaser of the particular property. 

DEFICIENCY IN SERVICES?

One of the biggest reasons behind this is the ill intention of the developers, who initially give false hopes, use unfair trade practices to lure in potential buyers, and then cite meritless excuses for the delayed possession. This is a deficiency in services, as provided under the Consumer Protection Act, which was even laid as a decision in the case of Emaar MGF Land Ltd V Karnail Singh[1]In this case, the builder was not able to construct the property and hand over the property within the stipulated time period and had used the money of the buyers for his own use. The Hon’ble Supreme Court had clearly stated that this process of delaying the possession of the property leads to unfair trade practices under deficient services. The Hon’ble Supreme Court and Consumer Redressal Commissions have previously taken up cases of delayed possession and have favoured the buyer if he has paid all the dues in the stipulated time period and has waited for sufficient time for the possession to be handed over. 

THE BUYER CANNOT BE COMPELLED TO WAIT INDEFINITELY

In the case of Kolkata West International City V Devasis Rudra[2]the buyer was unable to get possession of the property, despite paying all of the dues in time due to the delay by the builder. The buyer was made to wait for an extended period of time to get the possession, yet he was never given possession of the property, nor was he provided any refund along with an interest rate and other charges, including mental agony and litigation cost. The Hon’ble court decided that the Home Builder can ‘not provide the buyer a relief.’ The court directed the builder to pay the entire amount deposited along with a percentage rate of interest to cover up the financial hardships faced by the appellant while paying for the property.  

UNREASONABLE CLAUSES IN THE FLAT BUYER’S AGREEMENT

Not only delayed possession, many times, builders have also compelled the buyers to sign a Flat Buyer’s Agreement (FBA) containing unreasonable clauses. This includes unreasonably high penalty rates for non-payment of dues and very long construction timelines, i.e., the period after which the builder has to hand over possession to the buyer/purchaser after signing the Flat Buyer’s Agreement (usually, the standard construction timeline varies from anywhere between 36-48 months). 

In the case of Ireo Grace Realtech Pvt Ltd V Abhishek Khanna and Ors[3], the Hon’ble Apex court held that unreasonable clauses in the Flat Buyer’s Agreement are arbitrary, and the buyers cannot be compelled to oblige to such terms and conditions. Similarly, in the case of Mrs. Hardesh Mehta V Parkwood Developer[4]due to an unfair clause in the Flat Buyer’s Agreement and the FBA being one-sided, the contract between the buyer and builder was declared null, and the entire amount of the property deposited was refunded.

In such cases, where the buyer is unable to get possession of the property after a reasonable period (generally 42-28 months after the signing of the Flat Buyer’s Agreement), the builder cannot compel the buyer to wait indefinitely, and if the buyer demands a refund, the builder has to initiate that as per the Flat Buyer’s Agreement. A similar judgment was held in the case of Kolkata West International City V Devasis Rudra[5]where the Hon’ble Supreme Court had stated in its judgment that the complainants could not be expected to wait endlessly, without any substantive reason, for the possession of the unit, as in that case, the construction of the property was not completed even after a period of 6 years since the date of signing the Flat Buyer’s Agreement and booking the property

The minimum a buyer has to wait for before asking for the entire refund along with interest is three years or 36 months, as per the case of M/S Fortune Infrastructure V Trevor D’Lima.[6]

IS THE BUYER COVERED UNDER THE CONSUMER PROTECTION ACT?

A lot of the builders have mischievously labelled customers as non-consumers under the Consumer Protection Act, thereby not protected under the Consumer Protection Act, 2019. However, in the case of Aloke Anand V Ireo Pvt Ltd and Ors[7]the Hon’ble NCDRC held that a home-buyer comes under the definition of a ‘consumer’ as per the Section 2(1)(d) of the Consumer Protection Act, 2019, and can sue the builder under the provisions of the Consumer Protection Act, 2019. However, the Commission had also stated that the buyer should not be indulged in the trading of properties, and should have bought the property as an end user.

THE BUYER HAS THE ABSOLUTE RIGHT

 However, the buyer still has a right to the property even after delays in possession, and the builder is bound to complete the construction without any excuses within the stipulated grace period and cannot compel the buyer for a monetary refund. As per the Newtech Promoters and Developers Pvt Ltd V State of UP[8]the buyer holds the absolute right whether he wants a refund or the possession of the property. Suppose the builder is unable to handle the possession of the unit/property within the stipulated time period as per the Flat Buyer’s Agreement, regardless of any unforeseen events, provided that the buyer ‘wishes’ to withdraw from the project. In that case, the buyer shall be entitled to a refund, along with interest. However, the buyer would still have the option to opt for the possession of the property, which the builder is bound to construct in, during the grace period.

CONCLUSION

The tussle between buyer-seller has been since times immemorial. Real Estate disputes will forever stay in society. The judgments already passed in various Consumer Forums and Courts have already acted as a precedent favouring the buyer, further protecting the buyer from the mala fide intentions of the greedy builders. They delay in handing over the possession of the concerned property and compel the buyer to sign Flat Buyer’s Agreements containing unreasonable clauses. In cases of delayed possession, the buyer of the property has the absolute right, whether he wants a refund or gets possession of the property. The builder has no authority to compel the buyer to get a refund instead of possession and has to ensure that the possession of the concerned property is handed over within the stipulated grace period. The introduction of the Real Estate (Regulation and Development) Act, 2016, has also worked in favor of the consumer/buyers, as RERA has various provisions offering speedy remedies and benefiting the home-buyers. 

Author(s) Name: Avi Maheshwari (Gujarat National Law University, Gandhinagar)

References:

[1] Emaar MGF Land Ltd V Karnail Singh 2014 SCC OnLine NCDRC 332

[2] Kolkata West International City V Devasis Rudra First Appeal 958 of 2016

[3] Ireo Grace Realtech V Abhishek Khanna and Ors AIR 2021 SC 437

[4] Hardesh Mehta V Parkwood Developers Consumer Complaint 07/2021

[5] Kolkata West International V Devasis Rudra (2019) CPJ 29 (SC)

[6] M/S Fortune Infrastructure V Trevor D’Lima Civil Appeal No(s). 3553-3534 of 2017

[7]Aloke Anand V Ireo Pvt Ltd Consumer Case No. 1277 of 2017

[8]Newtech Promoters and Developers Pvt Ltd V State of UP Civil Appeal No (S). 6745-6749 of 2021