Rights and du­ties in realty trans­ac­tions

This year’s land­mark rul­ings in the real es­tate sec­tor have clearly de­fined the priv­i­leges and re­spon­si­bil­i­ties of de­vel­op­ers and buy­ers

HT Estates - - HTESTATES - Su­nil Tyagi

The year 2013 has wit­nessed some im­por­tant or­ders and judg­ments re­lated to the real es­tate sec­tor, de­liv­ered by the In­dian Courts . Th­ese judg­ments have not only clar­i­fied the ex­ist­ing laws but have also in­ter­preted and de­fined the rights and du­ties of the de­vel­op­ers and buy­ers. Here are some of the high­lights of such re­cent judg­ments.

Be­laire Owner’s As­so­ci­a­tion v. DLF Limited and oth­ers (also known as the DLF case)

P u r s u a n t t o t h e o r d e r, dated March 29, 2012, of the Com­pe­ti­tion Ap­pel­late Tri­bunal, the Com­pe­ti­tion Com­mis­sion of In­dia (CCI) passed a sup­ple­men­tary order dated Jan­uary 3, 2013, un­der which it pro­posed the draft clauses that may be sub­sti­tuted in place of the un­fair terms in the buyer’s agree­ment and ex­tended clar­i­fi­ca­tion in re­spect of cer­tain buyer-de­vel­oper re­lated is­sues, tak­ing note of and re­ly­ing on var­i­ous pro­vi­sions of laws ap­pli­ca­ble in Haryana. Some im­por­tant clar­i­fi­ca­tions ren­dered and pro­vi­sions rec­om­mended by CCI un­der its order in­cldue: Con­sent of the buyer to be ob­tained by the de­vel­oper in case of change of su­per area of the unit be­yond 2% Buy­ers to have joint and un­di­vided own­er­ship rights of the land and com­mon ar­eas in the project The earnest money not to in­clude any of the com­po­nents such as pref­er­en­tial lo­ca­tion charges, bro­ker­age etc In­ter­link­ing of projects should not ad­versely af­fect the rights of the buy­ers. Th­ese draft clauses and rec­om­men­da­tions of CCI cater to the re­quire­ments of both the de­vel­oper and buyer and pro­pose to make the buyer’s agree­ment more com­pli­ant to the ap­pli­ca­ble laws.

Des­ig­narch In­fra­struc­ture Pvt Ltd vs vice cha­ri­man, Ghazi­abad D e ve l o p m e n t Au t h o r i t y ; Ab­hi­nav Jain vs state of UP; Sun Tower Res­i­dents Wel­fare As­so­ci­a­tion vs Ghazi­abad De­vel­op­ment Au­thor­ity and O l i ve C o u n t y Ap a r t m e n t Owner’s As­so­ci­a­tion vs state of UP.

I n t he present case, t he Al­la­habad High Court while hear­ing var­i­ous writ pe­ti­tions filed by apart­ment owners / buyer as­so­ci­a­tions gave clar­i­fi­ca­tions on the pro­vi­sions of the UP Apart­ment (Pro­mo­tion of Con­struc­tion, Own­er­ship & Maintenance) Act, 2010 (Act) and UP Apart­ment (Pro­mo­tion of Con­struc­tion, Own­er­ship and Maintenance) Rules, 2011. Some of the main high­lights of the judg­ment are as un­der: The term ‘apart­ment owner’ will also in­clude lessee, where lease is for a pe­riod of 30 years or more; spouse and chil­dren of apart­ment owner, law­ful ten­ant, of­fi­cer or em­ployee of the com­pany/ f ir m or as­so­ci­a­tion, which owns an apart­ment and its ten­ant and per­sons hold­ing valid power of at­tor­ney of the al­lot­tee/ owner of the apart­ment; If the de­vel­oper re­fuses / re­sists RWA reg­is­tra­tion then apart­ment owners can get the RWA reg­is­tered, the com­mon ar­eas and fa­cil­i­ties can­not be trans­ferred, par­ti­tioned or sub­ject to any divi­sion (will re­main un­di­vided with the apart­ment) and will be en­joyed by the apart­ment owner with­out en­croach­ing upon the rights of other apart­ment owners; The de­vel­op­ment au­thor­ity may de­mand an NOC from the apart­ment owners as a con­di­tion for grant­ing ap­proval to pro­moter/de­vel­oper for car­ry­ing out any al­ter­ation in the build­ing plans. The RWA is to be reg­is­tered by the regis­trar, deputy regis­trar or sub- regis­trar un­der the So­ci­eties Reg­is­tra­tion Act as amended in the State of UP Larsen and Toubro Limited and anr. vs State of Kar­nataka and anr.

The larger bench of the apex court in the present case has held that buyer’s agree­ments of un­der-con­struc­tion prop­er­ties are com­pos­ite con­tracts. Such con­tracts have el­e­ments of both a works con­tract and trans­fer of im­mov­able prop­erty. In the present case the apex court has fur­ther ob­served that even if the dom­i­nant in­ten­tion of any con­tract is not to trans­fer own­er­ship in goods/con­struc­tion ma­te­ri­als but rather to ul­ti­mately trans­fer im­mov­able prop­erty, it be­comes the pre­rog­a­tive of the states to levy sales tax on the ma­te­ri­als used in the ex­e­cu­tion of such works con­tracts. Thus, hence­forth any agree­ment to sell an im­mov­able prop­erty en­tered into prior to the con­struc­tion would fall within the purview of the term ‘works con­tract’, al­low­ing state gov­ern­ments to levy val­ueadded tax on such con­tracts.

DLF Limited v. Man­mo­han Lowe and Ors.

One of the pri­mary is­sues in this mat­ter for con­sid­er­a­tion be­fore the Hon’ble Supreme Court was with re­gard to the rights of the apart­ment owners, vis-a-vis the col­o­niz­ers over “com­mu­nity and com­mer­cial fa­cil­i­ties” re­ferred to in Sec­tion 3(f)(7) of the Haryana Apart­ment Own­er­ship Act, 1983. Dis­cussing the pro­vi­sions of ap­pli­ca­ble leg­is­la­tions and the terms of buy­ers agree­ment, the apex court has re­versed the judg­ment of Divi­sion Bench of the Pun­jab and Haryana High Court and has held that the since the law re­quires de­vel­op­ers to con­struct cer­tain com­mu­nity and com­mer­cial fa­cil­i­ties in the com­plex at its own costs, the own­er­ship of such com­mu­nity and com­mer­cial fa­cil­i­ties shall rest with the de­vel­op­ers. The apex court fur­ther ex­plained that if the de­vel­oper in­cludes such com­mu­nity and com­mer­cial fa­cil­i­ties in the dec­la­ra­tion, then the apart­ment owners would be en­ti­tled to the un­di­vided in­ter­est in re­spect of the com­mu­nity and com­mer­cial fa­cil­i­ties with­out bear­ing the costs in­curred by the de­vel­oper


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