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What to do when a Builder Delays Possession of Property?
Property buyers in our country often face the issue of delayed possession, where builders fail to deliver promised properties on time. This trend has led to a general skepticism among buyers. The reasons for delays range from insufficient attention to paperwork to outright denials of possession.
To address this, stricter rules under the Real Estate Regulatory Authority now provide buyers with options for compensation. If a builder fails to deliver within the agreed timeline, the buyer can opt for either interest on the delayed possession or a full refund with interest.
In the event, the builder fails to deliver the possession of the property to the buyer within the timeline specified in the sale agreement or delays the property possession, they are liable to return the amount received along with the due interest. The interest applicable is usually 10% and if the builder fails to deliver the possession, he is liable to pay a fine up to 10% of the estimated cost of the project or imprisonment for a term of up to 3 years or both.
What happens if the builder delays possession?
Delay in possession can happen due to multiple events, in case of the builder decides to change the date of possession of the project then the buyers have a choice to legally withdraw the project and claim a refund of the advance amount paid from the builders within 45 days. However, suppose the buyer does not opt to withdraw from the project. In that case, the builder has to compensate the buyer for the delay in the form of monetary interest with an applicable interest rate till the time the purchased property is handed over to the buyer. The greater the delay, the more the law is expected to lean toward the buyer, more specifically in cases where a significant percentage of the total purchase consideration is already paid by the buyer to the builder.
There is a certain course of action that buyers can opt to seek remedy under the various legal provisions. The Real Estate Regulation Act, the Consumer Protection Act, and NCLT offer various legal remedies to take strict action against defaulters in the following manner.
Breach of Agreement:
Delay in delivery of possession of property purchased occurs when the builder is not able to deliver the property at the promised date or event as mentioned in the agreement to sale to the homebuyers. This is a clear breach of contract and legal actions can be taken against the builder for such breach as per the Indian Contract Act. A penalty is imposed on the builder as stated by the court of law.
Action by RERA:
The Real Estate Regulation Act 2016 was established to regulate and promote real estate in India. The Real Estate Regulatory Authority was set up under this act to ensure that the sale of properties like plots, apartments, buildings, and real estate projects takes place efficiently and transparently. It also looks after the day-to-day grievances n the real estate sector and provides fast-track dispute resolution. It also increases the accountability of the builders towards the consumers. It is a quasi-judicial body that has the power to investigate the matter and issue notices on its own motion.
In case of delay, a complaint should be filed against the builder under Section 31 of the Real Estate Regulation Act 2016 by the homebuyer or via association of allottees. An imprisonment of 3 years or a fine up to 10% of the estimated cost of the real estate project can be imposed on the defaulter for being non-compliant with the act.
The act also lays down provisions for real estate agents who do not comply with the directions of the authority and penalizes them for a penalty for each day till the default occurs. It may increase up to 5% of the total cost of the property, up for sale or purchase.
Action by Civil Court:
It is important to note that the right to file a civil suit or writ petition in the high court is available for the buyers only when there is no specific regulatory authority available in a particular state. The case should be filed where the defendant resides or where the property purchased is located. In some cases, where the builder is not handing over the property to cheat the buyer, the buyer can also file a criminal complaint. Section 415 (cheating) and Section 405 (criminal breach of trust) of the Indian Penal Code provide punishment and imprisonment for fraud done in such cases and a criminal case can be filed against the builder.
Action by Consumer Forum:
Any individual who is facing a delay of property possession can file a complaint against the builder as per the Consumer Protection Act 2019, under the respective jurisdiction. This enables the consumer to make complaints whenever any unfair trade practices take place or deficiency in goods or services. Post complaint, a legal notice is sent to the developer seeking compensation or other relief caused due to delay. District Consumer Dispute Redressal Commission, State Consumer Dispute Redressal Commission, and National Consumer Dispute Redressal Commission are three redressal forums mechanisms where disputes are filed as per the claim limit specified therein. Forums can terminate the agreement and seek for refund with an applicable interest. Additionally, compensation for mental agony and litigation costs suffered by the buyer is also recovered from the builder.
RERA Rules for Delayed Possession
The Real Estate Regulatory Authority has implemented certain rules and provisions for property possession to protect the interests of homebuyers to bring transparency and accountability to the real estate market. Some of the key rules of RERA are:
- Mandatory Registration: Every new real estate project needs to be registered with the respective state RERA authority before initiating any marketing or sale activities. By registering the project, it becomes legally authorized and provides transparency.
- Possession Timeline: As per the RERA guidelines, the timeline of the possession within which the builder must deliver the property to the buyers should be well specified and the same should be mentioned in the agreement, executed between the buyer and the seller, along with the project registration documents. This prevents unwanted delays and provides the home buyers with a clear understanding of the timeline within which they can expect possession of the property.
- Consequences of Delayed Possession: In case any builder fails to deliver the possession of the property within the agreed timeline they are liable to pay compensation to the home buyers along with the interest. RERA rules define the compensation amount calculated based on the agreed-upon terms or prescribed rates.
- Extension of Possession Timeline: As seen in most cases, developers can seek an extension of the possession timeline for events such as force majeure events or any other valid reasons, after obtaining approval from the RERA authority.
- Occupancy Certificate: Before handing over the possession, developers are required to obtain an occupancy certificate from the relevant authorities to signify that the building is constructed in compliance with the approved plan and is safe for usage by the buyers.
- Grievance Redressal Mechanism: Any non-compliance with possession-related rules, RERA imposes penalties on the builders including but not limited to fines, cancellation of project registration, or any other disciplinary actions.
What legal actions can be taken if your builder delays possession?
- Examine Sale Agreement and Possession Clause: This can be a tricky part of the sale agreement, in the case of NBSS Limited vs Shri Ram Trivedi, the Supreme Court of India held that mentioning the term “endeavor” does not mean an absolute commitment to hand over the possession on or before a specified date, it has to be read with the entirety of the clause. The sale agreement should be examined well and the date of handing over should not be indefinite and at the sole discretion of the developer. The court further held that the builder should make all reasonable efforts to comply with the duty to hand over possession by the given date. Read More: Things To Check In A Builder-Buyer Agreement
- Issue Legal Notices: The most common legal action is to send a legal notice to the builder when they fail to deliver your property after the due date of delivery for a refund of the advance amount paid to him during the signing. The legal notice should contain the name, description, and place of the builder and the complainant, details of the cause of action, and relief claimed by the claimant. It should be sent on the letterhead of an advocate and should clearly mention that the buyer’s right is infringed due to the builder and they seek relief from him.
- File a Complaint with RERA: Section 18 of RERA provides that an allottee has the option to withdraw from the project if the possession is delayed by the builder. The procedure involves filing a complaint with the authority by providing relevant documents and evidence of delay. The Real Estate Regulatory Authority will assess the case and determine the compensation amount based on the prescribed rates or agreed-upon rates in the agreement. Buyers can even ask for compensation to buy an alternative accommodation at the current market price.
- File a Complaint in Consumer Forum: Delay in possession provides a right to the builders to file a complaint in the consumer forum for deficiency of goods or services. Delay in delivery causes deficiency in services entitling the buyers to receive a refund of the money along with reasonable compensation. An interest rate is applicable as directed by the forums on the builders for the delay in the possession of the project.
- Approach National Company Law Tribunal: In the event, that the delay in delivery of possession of the purchased property is due to a shortage of funds and the project cannot be continued further, in such circumstances buyers should resort to NCLT and initiate insolvency proceedings against the builder under the Insolvency and Bankruptcy Code 2016 for the claim amount to be above 1 lakh. The average time period over which the case resolves is from 12-20 months as the company is dissolved and the claim is received upon liquidation.
Conclusion
Numerous issues may contribute to the property being delivered late. The process of taking ownership of the land could be delayed by a variety of problems. However, one must proceed cautiously while buying a home. The points and disclaimers in the buyer-builder agreement must be carefully read by the buyer.
Additionally, it is essential to look into the builder's financial situation. After signing a contract with unfavorable terms, the buyer may lose all legal remedies in the legal system. As a result, the buyer must take precautions before signing any real estate transactions, such as hiring a property lawyer.
References:
https://timesproperty.com/news/post/recent-amendments-in-rera-blid3877
https://restthecase.com/knowledge-bank/everything-about-rera-act
https://www.magicbricks.com/blog/how-to-file-a-case-in-nclt-against-defaulting-builder/122191.html
Suggested Blogs:
Things to keep in mind while purchasing a property
5 common real estate disputes in India
Common Property Disputes in India and how to avoid them
Author Bio: Adv. Rohit Singh (BA LLB (Hons), LLM (CL))
Advocate Rohit Singh, the Managing Partner of PSK Legal Associates, is a highly experienced and reputable commercial lawyer known for his strategic expertise. With a strong background in legal matters, he has advised and represented major clients across diverse industries, including education, IT, finance, pharmaceuticals, and publishing.
His career journey includes serving as an in-house counsel for Reliance Capital and working extensively with the Former Advocate General of the State of Punjab. Throughout his professional trajectory, Advocate Singh has honed his skills to cater specifically to the legal needs of corporate entities. His vast experience in various fields of law has been instrumental in benefiting numerous business clients, offering them specialized and impactful legal counsel.