Compulsory Execution of Agreement for Sale between Builder and Homebuyer – An overview
Aryan Raj & Amrisha Kumari
3rd Year, B.A. LL.B.( Hons.), Chanakya National Law University, Patna
Introduction
When a homebuyer/allottee wishes to buy a home for themselves, it does not always end well with homebuyers, as delays, structural defects, modifications to the sanctioned plan, and builder/promotor delaying agreements for sale are very common hurdles that homebuyers face despite paying consideration. As per Section 2(c) of the Real Estate (Regulation and Development) Act, 2016 an “agreement for sale” is defined as an agreement entered into between the promoter and the allottee.[1] An agreement for sale is a contract i.e. legally binding between the builder and the homebuyer. This includes the terms and conditions of the sale, the possession date, a consideration clause, a force majeure clause, and other such obligations of the parties. The agreement for sale plays a significant role when the matter goes before the Real Estate Regulatory Authority (Authority) for compensation, refunds, and other issues. The authority relies on the terms of the agreement before granting compensation, refunds, and other reliefs to the homebuyer. However, it has been observed that builders indulge in delay tactics where they either refuse to execute the agreement or demand further payment. In this article, we will discuss the statutory provisions that require builders to execute and register the agreement for sale and the approach of authorities and tribunals.
Statutory Mandate for Agreement for Sale
According to Section 13(1) of the Real Estate (Regulation and Development) Act, 2016 it is mandatory for the builder to execute and register the Agreement for sale if the homebuyer has paid 10% of the total cost of the apartment, plot, or building. Section 13(1) is read as follows:
“(1) A promoter shall not accept a sum more than ten percent of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force.”[2]
Further, Section 4(1) of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 stipulates that the builder is obligated to execute the agreement for sale and mention the possession date before accepting payment of more than 20% of the total cost. Section 4(1) is read as follows:
“Notwithstanding anything contained in any other law, a promoter who intends to construct or constructs a block or building of flats, all or some of which are to be taken or are taken on an ownership basis, shall, before accepting any sum of money as advance payment or deposit—which shall not be more than 20 percent of the sale price enter into a written agreement for sale with each of the persons who are to take or have taken such flats. The agreement shall be registered under the Registration Act, 1908, and such agreement shall be in the prescribed form.”[3]
Analysis of Authority and Tribunal Orders
In the case, Kakad Housing Corporation Versus Rajkumari Singh and another (2024) ibclaw.in 03 REAT,[4] the Maharashtra Real Estate Appellate Tribunal (Tribunal) has held that the promoter demanding additional payment from allottees despite receiving over 20% of the total cost of the apartment is illegal and violates Section 13(1) of RERA, 2016, and Section 4(1) of MOFA, 1963.[5]
Haryana Real Estate Regulatory Authority (Authority), while hearing the five complaints of homebuyers together in the case of Kusum Lata Narula Versus Vatika Ltd and another and 4 others,[6] where the promoter had not executed the agreement for sale even after receiving 100% of consideration, and imposed a penalty of Rs. 100,000 for each complaint. It also directed the promoter to execute and register the agreement for sale within 30 days.[7]
However, regulatory authorities in many complaint cases have granted interest and refunds in cases of delay in handing over possession by the promoter, even though there was no agreement for sale executed between the promoter and allottee. The Maharashtra Real Estate Appellate Tribunal (Tribunal) in the case of Kakad Housing Corporation vs. Rajkumari Singh and another,[8] directed the promoter to repay the amount paid by the allottee to purchase the flat including interest, even though there was no agreement for sale executed between the parties.[9] The Tribunal held that the non-execution of the agreement for sale does not debar the allottee from claiming the refund under Section 18 of the Real Estate (Regulation and Development) Act, 2016, which is absolute and unqualified in nature.[10]
Furthermore, in the case of Sachin Tomar and Shivaji Tomar vs. Ensaara Metropark Luxora Infrastructure Pvt. Ltd. 2024) ibclaw.in 12 REAT,[11] the Maharashtra Real Estate Appellate Tribunal (the Tribunal) set aside the order of the Maharashtra Real Estate Regulatory Authority (the Authority). The Authority had refused to entertain the complaint of the allottee, holding it to be outside the scope of RERA because there was no agreement for sale executed between the parties.[12] The Tribunal held that an agreement for sale is not essential for the allottee to avail the absolute and unqualified rights of a refund or monthly interest in case of delay under Section 18.[13]
Conclusion
Therefore, Section 13(1) of the Real Estate (Regulation and Development) Act, 2016 and Section 4(1) of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management, and Transfer) Act, 1963 mandate the builder to execute the agreement for sale if they have received 10% and 20% of the total payment, respectively. Although the agreement for sale plays a vital role in deciding the monthly interest and refund along with interest under Section 18 of RERA, 2016, the authority places its reliance on the terms of the agreement; however, the authority has taken a consumer-centric approach and has also granted relief to those homebuyers with whom the builder has not executed the agreement for sale.
References:
[1] Real Estate (Regulation and Development) Act, 2016, Section 2(c).
[2] Real Estate (Regulation and Development) Act, 2016, Section 13(1).
[3] Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963, Section 4(1).
[5] Ibid, ¶ 27 & 32.
[6] Complaint no 6484 of 2022 and 4 others.
[7] Ibid, ¶ 21.
[8] Supra No. 4.
[9] Ibid, ¶ 34.
[10] Ibid, ¶ 31.
[11] (2024) ibclaw.in 12 REAT.
[12] Ibid, ¶ 3.
[13] Ibid, ¶ 16.
