Housing Scheme : Payment After Receiving More Than 20% Of The Flat Price For Executing Sale Agreement Is Illegal
The Maharashtra Real Estate Appellate Tribunal (Maha REAT) ruled that demanding extra payment after receiving over 20% of the flat price for an agreement is illegal. The builder’s termination due to unpaid additional fees was deemed illegal. The homebuyer is entitled to a refund of Rs. 16,20,869/- with interest as per MOFA and RERA Act.
Maharashtra Real Estate Appellate Tribunal (Maha REAT/Tribunal) bench, comprising of Justice Shri Shriram R. Jagtap (Judicial Member) and Dr. K. Shivaji (Technical Member), has held that demanding additional payment from homebuyers after receiving over 20% of the flat price for executing the agreement for sale is illegal. Consequently, the Maha REAT held the builder’s termination of the letter of intent upon the homebuyers’ failure to make the demanded payment as illegal.
The builder was constructing a project named Kakad Paradise under the Affordable Housing Scheme. Homebuyers expressed their interest in June 2015 to buy flats in the project. Subsequently, the homebuyers booked the flat whose cost was Rs. 52,01,000. After that, builder issued a Letter of Intent dated 7.01.2016 to the homebuyers. Following this, the homebuyers paid Rs. 16,20,869/- to the builder from time to time, which is more than 20% of the sale price.
Despite paying 20% of the total sale money, the builder failed and neglected to enter into an agreement for sale. Instead, the builder demanded further payment of an amount for executing an agreement for sale from the allottees.
However, the homebuyers failed to make the demanded payment to the builder. By letters dated 10.09.2018 and 28.09.2018, the builder terminated the transaction, cancelled the Letter of Intent, and forfeited the amount paid by the homebuyers.
Aggrieved by the conduct of the builder, the homebuyer filed a complaint before MahaRERA seeking withdrawal from the project with a refund and interest.
In its order dated 04.032020, MahaRERA directed the builder to execute an agreement for sale within a period of one month. Aggrieved by the order of MahaRERA, the builder filed an appeal before MahaREAT.
Contention of the Builder
The builder contended that according to the terms of the Letter of Intent, if there was a default in payment of installments, and if this was not corrected within 15 days after notice, the builder had the right to cancel the allotment of the flat. In such a case, the builder can choose to either refund the money paid by the homebuyer without interest, after deducting any expenses incurred, or forfeit the entire amount, depending on the circumstances at that time. After termination, the builder would be free to deal with the flat as they saw fit.
REAT Order
The Tribunal held that demanding additional payment from homebuyers after receiving over 20% of the flat price for executing the agreement for sale is illegal. Consequently, it is also illegal to terminate the letter of intent on the ground of non-payment of demanded dues by homebuyers.
The Tribunal held that the builder has violated both Section 4 of MOFA and Section 13 of the RERA Act, 2016, which imposes obligations on the promoter to execute an agreement for sale before receiving 20% and 10% of the total consideration, respectively.
The Tribunal relied on Section 4 of The Real Estate (Regulation and Development) Act, 2016, which is read as follows:
Section 13 – No deposit or advance to be taken by promoter without first entering into agreement for sale.
(1)A promoter shall not accept a sum more than ten per cent 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.
Therefore, the Tribunal held that the Homebuyer is entitled to a refund of the amount of Rs. 16,20,869/- from the builder, along with interest.
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