Delay in possession: Legal remedies

Delay in possession: Legal remedies

Owning a “Dream” home is something that every individual dreams off especially people who come from far and wide to make a name for themselves in the city. One saves, invests and takes a categorical and effective decision while choosing a home for itself. Buying a flat, a house or any property with your hard-earned money and not getting it on time can be very frustrating. When the Developer or Builder stops taking your call and keeps on delaying the possession of your dream house, it takes away all your energy, focus and mental peace. You not only lose your money in EMIs and rent payments  but this agony could also disturb your household.

The real estate sector has been suffering because of this chronic problem for years. This is one of the reasons why the Government felt the need for a sector-specific forum and RERA was born. As per the estimates, in Delhi NCR alone, more than 3 lakh home buyers are waiting for possession despite paying 90% of the price of their flat/plot. A lot of times the Builders take excuse in the fact that they failed to obtain the necessary approvals from the Authority on time or the Occupancy Certificate is delayed for some bureaucratic tussle. Occupancy Certificate is mandatory to move in the property or make use of the property as it signifies that the possession of property has shifted from one place to another.

 

Delay in delivery of possession by builder / developer:

A Builder-Buyer Agreement is signed between a Builder and a Buyer, whenever a person invests or agrees to invest in an immovable property. The stipulated time within which the property/possession has to be handed over to the buyer is stated in this Agreement in clear terms. When the possession is not transferred or delivered by the Builder to the buyer within the stipulated time period (in some cases, even after the extension period), it is known as Delay in Delivery of Possession by the Builder.

It is seen many times that the builder does not abide by this Agreement (by delaying the delivery of the residential property). Some builders delay the possession from the decided time also because of some malpractices such as shortage of funds. It has been seen that sometimes alterations in designs and plans of the property are also made without the knowledge of the buyer.

In case there are some genuine reasons for the delay in completion, the builder can seek an extension in time. However, if the property is not delivered even after the extension period, it is delay in delivery and/or possession of the property.

However, the liability of the builder arises only when the delay is due to his own fault. If the delay is due to any calamity, or situation which is beyond the control of humans, the buyer would not succeed in an action against the builder. Such an immunity is covered by the “Force Majeure” clause of the Builder Buyer Agreement.

Some of the major concerns of the aggrieved homebuyers are:

 

  • Delay in delivery of the unit for possession;
  • Demand of extra charges based on excuses by the builder, at the time of handing over of the unit to the buyer;
  • Frustration of the purpose of purchase by the homebuyer, due to major changes in the layout plan/building plan, by the builder and or inordinate/undue delay in delivery of possession;
  • Non-Execution: In case the builder does not execute the relevant sale agreement despite having received a substantial advance amount;
  • Non-Issuance of Documents:  In case the builder fails to issue copies of all relevant documents viz.; development agreement, power of attorney, sanctioned plan (by concerned Regional Authorities), specification of construction materials/design as per sanctioned plan and/or any other relevant documents;
  • Charges: In case the buyer is charged higher than the amount agreed between the parties;
  • Receipt: In case the builder fails to issue receipt(s) against the paid amount;
  • Poor quality construction: In case the builder has used substandard or poor quality materials and/or products to build/construct the project;
  • Not complying with specifications: In case the builder delivers the house, not complying with the agreed specifications;
  • Parking space: In case the builder does not provide a free parking space within the premises.
  • Completion Certificate: In case the builder does not issue the requisite Completion Certificate at the time of delivery of the respective flats/house to its occupants;

 

The three most effective legal remedies available to the Homebuyers for the resolution of their grievances lie in the REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016; the Consumer Protection Act and the Insolvency and Bankruptcy Code, 2016.

 

Real Estate Regulatory Authority (RERA): 

RERA is a dedicated forum 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, the 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.A buyer can file a case and send legal notice to the builder for delay in possession under the RERA Act, 2016 or transfer their case from a CDRC to the State Real Estate Regulatory Authority. According to this Act, a builder will have to pay 10% interest on the value of the property for delayed possession of flats.

 

Consumer Forum

Passed in 1986, the Consumer Protection Act enables the buyers to file a complaint for ‘deficiency in service’ against the builder. Under this act, the buyers can file complaints in the District Consumer Forum for dispute claims up to Rs. 20 Lakh, while filing the complaint in the State Consumer Disputes Redressal Commission (SCDRC) for amounts between Rs 20 lakh to Rs. 1 Crore and in the National Consumer Disputes Redressal Commission (NCDRC) for amounts exceeding Rs. 1 Crore. It enables the buyers to get a refund with interest or possession with delay compensation for mental harassment, litigation costs, etc.

 

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. The Homebuyers can now form a group of 100 allottees in a particular real estate project or 10% of the total allottees and file an Application under section 7 of the Insolvency and Bankruptcy Code, 2016 and request for the initiation of Corporate Insolvency Resolution Process against the Builder/Developer leading to its potential resolution or Liquidation at the end of which the allottees will have an opportunity to realise its claims and if proposed in the Resolution Plan get the flat/home/plot if proposed to be completed by the successful Resolution Applicant.

 

Arbitration

If in the agreement, an arbitration clause exists, the buyer should refer the case to the arbitrator instead of going to a civil court. Arbitration is a process of resolving a dispute with the help of arbitrator(s) – a third party, which gives its decision via an award. Through this, the arbitrator(s) would decide if the builder has deviated from the agreement or not.
The arbitrator, in his order would declare whether there is default by the builder, and the compensation he is liable to pay to the buyer, if any.

 

Criminal Case

A criminal case can also be filed in some cases for example when the builder/developer is purposely not handing over the property possession, only to keep the money. He/she could be criminally sued for cheating and/or criminal breach of trust, etc. under the Indian Penal Code. In criminal cases, if the builder is found guilty, he could be sent to jail and there is no assurance that the buyer would be getting monetary compensation.

 

Remedies against the builder for delay in possession:

1. Compensation: A buyer can claim compensation of upto 10% of the property price if in case the delay has been caused by the builder without any justification as given under RERA rules. Even under a consumer case, a buyer can claim compensation.

2. Refund: In cases wherein the construction has not even begun or is still in its initial stages, a complete refund of the amount paid can also be sought. A refund would enable you to buy another property. If the court is satisfied that the builder is at fault and that the buyer has had to go through hardships due to this, it can order the builder to refund the entire amount, along with a direction for the builder to pay the entire cost the litigation. Under RERA, builders are required to keep the money/funds received from the buyers in a special account. These funds cannot be used for any purpose other than this.

3. Punishment: When there is delayed delivery, along with the builder being at a risk of losing the registration of the project, he/she is also liable to be imprisoned.

4. Completion of Project: The builder can also be ordered to complete the construction of the project as per the agreement between the buyer and the builder. The court can also grant the builder some extra time in order to complete the construction.

5. Damages: In case your agreement has a clause stating that a certain fixed penalty must be paid in case the builder delays in delivering the possession, the court may order the builder to pay this penalty to the buyer. However, even if there is no such clause in the agreement, you can seek damages/compensation for the mental agony that has been suffered by you.

6. Interest: A buyer can also claim interest on the payment that has already been made to the builder till date. If the builder cannot justify the delay caused by him in handing over the possession of the property to the buyer, he/she shall be liable to refund the amount of the buyer with an interest of 9% to 18%.

Points of differenceReal Estate Regulatory Authority (RERA)Consumer ForumNational Company Law Tribunal (NCLT)
LegislationReal Estate (Regulation and Development) Act, 2016Consumer Protection Act, 1986Insolvency and Bankruptcy Code, 2016
EstablishmentNew law; still in development phaseWell establishedWell established
Appellate BodyRERA Appellate TribunalDistrict Forum to SCDRC SCDRC to NCDRC NCDRC to Supreme CourtNational Company Law Appellate Tribunal (NCLAT)
JurisdictionAll real estate matters. However, if the occupancy certificate has been granted, then a complaint cannot be filed. It can be filed for any claim amount.File in District Forum – Claims up to Rs. 20 Lakh File in SCDRC – From Rs 20 lakh to Rs. 1 Crore File in NCDRC – more than Rs. 1 Crore The bad financial condition of a registered company with a disputed amount above Rs. 1 crore
CompensationRefund of payment with interest OR Monthly interest till handing over of possessionRefund with interest OR Possession with delay compensation for Mental harassment, litigation costs, etc.Dissolution of Company, and claiming your share upon liquidation or possible Resolution
Time frame of judgement (as per Act)Typically within 60 daysTypically within 1-2 yearsTypically within 12-24 months
Implementation of ordersWeak (Execution can be filed in cases where orders are not implemented)StrongStrong
Court FeesVaries from Rs. 1,000 to Rs. 5,000 for different statesRs. 2,000 to Rs. 5,000Rs. 25,000

 

Our team of advocates at Magnus Legal has expertly dealt with more than 200 Builder Disputes.

 
 

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