Legal Remedies for Buyers if Possession of Flat/Apartment is delayed by the Builders

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legal remedies for buyers

By Shweta Kaushik

Introduction

With the continuous growth in population, shift towards urban cities owing to education and job opportunities and joint families breaking into nuclear families, there is a tremendous growth in residential projects coming up in the market. The builders build apartments/flats in order to cater to a large number of population and less availability of land. The builders often take loans in order to complete the project and enter into a contract with the buyer ensuring timely delivery of the flat while at the same time using the best materials. But it has been seen that many a times, the builders fail to keep their promises and lure the general public who pay hefty amounts towards purchase of the flat after seeking loans from various banks and financial institutions.  If this is the case that has happened with you, here are a few remedies that we have attempted to list for you so that you can resort to the best available remedy available to you. 

Remedies under Civil, Criminal and Consumer Laws against Builder/Developer

A property buyer, who fails to get the possession of his property on time, can resort to several provisions under India’s civil, criminal and consumer laws, to take action against the developer

A property buyer, who capitalizes his hard-earned money in buying a home and does not get its possession on time, not only fails to get a roof over his/her head but also ends up losing money, in the form of EMIs on the home loan and paying for a hired accommodation. Moreover, the buyer may also have to wage a long and tedious legal battle to get the justice.

Legal remedies

If possession is not delivered on time, a purchaser can :

  • First send a legal notice to the builder, claiming the refund of the amounts paid along with interest and/or damages. 
  • “The buyer can also file a consumer complaint for ‘deficiency in service’ as defined under the Consumer Protection Act, 1986 against the builder,” 
  • The flat purchaser is required to file a written complaint before the appropriate consumer dispute redressal forum set up under the act, depending on the value of the property, or the amount of damage he has suffered.
  •  Any dispute over Rs 20 lakhs can be directly filed before the State Commission.
  • Any dispute over Rs 1 crore can be filed before the National Commission in New Delhi. 
  • Any dispute for a value lower than Rs 20 lakhs has to be filed in the District Commission. 
  • A property purchaser can also file a regular suit before a court of competent jurisdiction, for damages or specific performance, under the Indian Contract Act, 1872. 
  •  If there is fraud involved–for example, if the builder knew from the beginning that he would not be able to deliver possession within the stipulated time and by some misrepresentation, induced the purchaser to book the flat – civil and criminal proceedings can be initiated.

 Type of damage and relief the buyer can get through legal course

  1. Claim the money required to buy alternate accommodation at the ongoing market value in the respective area. 
  2. The purchaser can also claim the money given to the builder.
  3. Claim interest on the payment made till date.
  4. If the purchaser/ complainant is buying the property for personal use, he can file a complaint seeking relief in the Consumer Dispute Redressal Commission.
  5. You can also file a complaint to RERA (Real Estate Regulatory Authority  of your respective state claiming your refund along with the interest or damages. RERA is a dedicated court for the resolution of disputes arising in the real estate sector. Established in 2016, the RERA Act is still in its development phase. With its appellate body, RERA Appellate Tribunal, its jurisdiction lies in all real estate matters. The complaints under RERA can be filed for any claim amount but in the cases where the occupancy certificate has already been granted, then a complaint cannot be filed. It allows the buyers to get the total Refund of payment with interest or Monthly interest till handing over of possession by the builder. RERA Act clears out each case typically within 60 days.
  6. National Company Law Tribunal (NCLT): In case the builder is unable to continue or finish the real estate project, insolvency proceedings can be initiated by the buyer under the insolvency and Bankruptcy Code established in 2016. This well-established law with its appellate body National Company Law Appellate Tribunal (NCLAT) solves cases for the registered companies having a bad financial condition with a disputed amount of above Rs. 1 lakh. It compensates the company owner with the dissolution of the company and enables them to claim their share upon liquidation. The average time of judgment (as per the act) taken to resolve a case is typically within 9 to 12 months.
  7. If the purchaser/ complainant is sure to get possession of the flat in a few months or years, he can claim compensation for the money that he will spend as rent on an alternate accommodation. This will be applicable if he is a first-time home purchaser, or if his building is being redeveloped.
  8. The purchaser can claim damages for loss of opportunity caused to the purchaser, had he invested his money elsewhere.
  9. The purchaser can also claim litigation costs if the buyer has to approach the courts for legal remedies.

Important point

Before signing any contract i.e. Builder Buyer Agreement, buyers should read all the points, including the disclaimers and check the builder’ financial credibility and the timelines mentioned for delivery of possession. If you sign the agreement with terms that are not in your favour, you would be disentitled to claim relief in your favour from the judicial process.

Recent Judgment on Delay in Delivery of Possession of Property

Pradeep Narula v. Granite Gate Properties – Consumer Complaint No. 315 of 2014 Dated 23rd August, 2016

Facts: Mr. Pradeep Narula (referred to as the ‘Complainant’) booked a residential apartment with Granite Gate Properties (referred to as the ‘Builder’).

In furtherance to booking a residential apartment with the Builder, the Builder issued an allotment letter dated June 28, 2010 to the Complainant. Additionally, the parties entered into an Apartment Buyers Agreement on June 29, 2010, according to which, the Builder was to endeavor to complete the construction within 39 months from the date of allotment, i.e. the possession was to be delivered by September 27, 2013. The possession however was not offered to the Complainant by the said date and he was informed that the possession would not be given before July 2014. The aforesaid deadline was later extended till December 31, 2014. Being aggrieved by the said delay, the Complainant approached the Commission against the Builder.

Held: The Commission held that the Builder was under a contractual obligation to complete the construction and hand over possession of the apartments to the Complainant within 39 months from the date of allotment, and the Builder had failed to do so and none of the reasons given by the Builder were justified. The Commission directed the Builder to complete the construction and hand over possession before 31.01.2017, failing which, they were to pay compensation in the form of simple interest @ 10% per annum from the committed date of possession till the date possession is offered to the apartment owner. Accordingly the Commission ordered the Builder to pay to the Complainant, compensation to the same effect as mentioned in the Apartment Buyers Agreement. The Builder was also required to pay Rs. 10,000/- as cost of litigation to the Complainant.

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