Why ex­it­ing a project might not be easy

The sheer in­abil­ity of con­sumers to com­pre­hend lenghty prop­erty trans­ac­tion agree­ments can of­ten get them en­tan­gled in le­gal wran­gles

HT Estates - - HTESTATES - Su­nil Tyagi

The buyer of an un­der con­struc­tion prop­erty is re­quired to pay reg­is­tra­tion money to the de­vel­oper at the terms of ap­pli­ca­tion for al­lot­ment. This ad­vance paid while en­ter­ing into a trans­ac­tion is con­sid­ered earnest money, in­di­cat­ing the buyer’s good faith. It es­sen­tially rep­re­sents/ serves two key pur­poses – first, it acts as part-pay­ment of the pur­chase money and sec­ond, it acts as se­cu­rity for the per­for­mance of the pur­chase trans­ac­tion and con­trac­tual obli­ga­tions.

Another im­por­tant as­pect of such trans­ac­tions is the right of buy­ers to exit the project. How­ever, the terms and con­di­tions gov­ern­ing exit by buy­ers are am­bigu­ous. For­fei­ture of en­tire earnest money/ reg­is­tra­tion de­posit upon ex­er­cise of right to exit is a common prac­tice by de­vel­op­ers that places an ad­di­tional bur­den on the in­di­vid­ual buy­ers.

In the Ra­jbeer Singh Case, d e c i d e d by t h e N a t i o n a l Con­sumer Dis­pute Res­o­lu­tion Com­mis­sion (in 2013), the com­plainant booked a res­i­den­tial floor in ‘The Ter­races’, a res­i­den­tial group hous­ing project in Mohali and paid an ad­vance of ₹ 3 lakh. As per the re­ported judg­ment, the de­vel­oper had given out in­for­ma­tion about the provisional al­lot­ment of the unit in the build­ing. The com­plainant was given an as­sur­ance by the de­vel­oper that the project would be launched within one month and con­struc­tion would soon com­mence. How­ever, the de­vel­oper failed to abide by his com­mit­ments. The com­plainant sent sev­eral let­ters to the de­vel­oper with a re­quest to re­fund the earnest money of ₹ 3 lakh. Since there was no re­sponse, the com­plainant sent a le­gal no­tice to the de­vel­oper, for re­fund of the amount. No pos­i­tive re­sponse , how­ever, was re­ceived.

The com­plainant filed an ap­peal i n t he Na­tional Com­mis­sion upon the dis­missal of his case in the dis­trict fo­rum and state com­mis­sion. The de­vel- oper ar­gued that the com­plainant booked the apart­ment in ques­tion and paid the earnest money against the to­tal sale con­sid­er­a­tion of ₹ 46 lakh and failed to sign the buy­ers’ agree­ment. Re­liance was placed on clause 8.2 of the ad­vance reg­is­tra­tion ap­pli­ca­tion form for al­lot­ment signed by the com­plainant and co-ap­pli­cant. Un­der the clause, in the event of non-sign­ing of the buy­ers’ agree­ment, by the com­plainant, and re­turn­ing the same within 30 days, from the date of re­ceipt of the same from the de­vel­oper, the earnest money de­posited by the com­plainant, shall stand for­feited, with­out any no­tice/ re­minder.

The de­vel­oper ar­gued that since the com­plainant had not signed the buy­ers agree­ment in terms of the ap­pli­ca­tion form, the de­vel­oper was en­ti­tled to for­feit the earnest money. The com­plainant’s ver­sion was that he never re­ceived the buy­ers’ agree­ment and fur­ther sub­mit­ted that the de­vel­oper had changed the con­struc­tion­linked in­stall­ment plan with­out con­sult­ing him.

The Na­tional Com­mis­sion after re­view­ing the terms and con­di­tions of the ap­pli­ca­tion form held the un­der clause 8.1 of the ap­pli­ca­tion form, the com­plainant was en­ti­tled to re­fund of an ini­tial amount after de­duc­tion of 20% of reg­is­tra­tion/ini­tial amount. The com­mis­sion fur­ther held that since the com­plainant had not signed the buy­ers’ agree­ment, there­fore, clause 8.2 also did not ap­ply. Hence, the de­vel­oper had no right to for­feit the en­tire earnest money and such for­fei­ture was un­fair trade prac­tice. In this case, the terms of ap­pli­ca­tion and al­lot­ment specif­i­cally pro­vided for re­fund after de­duc­tion of 20% in case the buyer de­cided to exit the project. The com­mis­sion di­rected the de­vel­oper to re­fund the money after de­duc­tion of 20% of the reg­is­tra­tion amount within 60 days from the date of fil­ing of the com­plaint. This case brings to fo­cus the sheer ig­no­rance/ in­abil­ity of the con­sumers to in­ter­pret th­ese lengthy agree- ments. The case em­pha­sises the im­por­tance of the terms of the buy­ers’ agree­ments, ap­pli­ca­tion forms and al­lot­ment agree­ments and the re­quire­ment to read the terms care­fully be­fore sign­ing can­not be un­der­mined.

THINKSTOCK

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