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
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