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Discussions related to Real Estate matters, Real Estate laws, loans, financial queries

CCI working on model framework for commercial agreements

Postby anuj_bansal » Wed Jan 02, 2013 10:25 pm

http://www.moneycontrol.com/news/curren ... 02082.html

Fair trade regulator CCI is working on a model framework for commercial agreements between real estate developer and the property buyer, which it expects to serve as a benchmark for the industry. The framework is being prepared by the Competition Commission of India (CCI) in connection with a high-profile market dominance case against realty giant DLF Group, which has challenged a Rs 630 crore penalty imposed on it by CCI.

Upon hearing DLF's appeal against the CCI order, the Competition Appellate Tribunal (COMPAT) asked the fair trade regulator to present a modified buyer-seller agreement between DLF and the flat buyers of its two housing projects in Gurgaon in the national capital region. "Whether a real estate company is dominant or not, DLF was found to be dominant because it was big, most of them follow the same format pattern that flows from big players in the market," CCI Chairman Ashok Chawla told PTI in an interview.

Asked whether he expects the modified pact being prepared by CCI to serve as a benchmark for the entire real estate industry, Chawla said that it should certainly "serve as a general model of framework". "I think once that happens, that (the modified pact) meets judicial test, that I believe should take care of the most of the commercial aspects between the buyer and the seller," Chawla said.

COMPAT has asked the fair trade regulator to decide on what constitutes a good, balanced and fair agreement between the buyer and the seller. CCI is expected to shortly finalise the key parameters related to the buyer-seller pact in the context of DLF case. "I won't be surprised if that (the modified pact) is accepted and stands judicial scrutiny, it would give a sort of key to the mind of the Commission which most real estate companies might follow," he added.

Chawla said there would always be issues related to local laws and regulations in the real estate sector, but CCI's jurisdiction was limited to the agreement between the buyer and the seller and whether any anti-competitive practices were being followed in that regard. "How much can be built and how much cannot be built, that are not our concern," he added.

"If the model agreement is fair and balanced... by and large the issues get resolved," the CCI chief emphasised. CCI had slapped a penalty of Rs 630 crore in August last year on DLF after finding the realty major guilty of abusing its dominant market position. The orders were passed following inquiries into complaints filed by the flat buyer associations' of two separate DLF projects in Gurgaon, DLF Park Palace and The Belaire, alleging delays in the project and increase in the number of floors than planned earlier, among other things.
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Re: CCI working on model framework for commercial agreements

Postby anuj_bansal » Thu Jan 03, 2013 6:31 pm

http://www.cci.gov.in/May2011/Home/DLFOrderModified.pdf

COMPETITION COMMISSION OF INDIA

CCI issues supplementary order u/s 27 of the Competition Act in the DLF case; modifies Apartment Buyers Agreement as directed by COMPAT

The Competition Commission of India passed a supplementary order under Section 27 of the Competition Act, 2002 today, modifying the Apartment Buyers Agreement entered into between DLF and the apartment allottees. This order relates to the order of the Hon’ble Competition Appellate Tribunal of March 29, 2012, by which the Commission was directed to pass an order under Section 27(d) of the Competition Act specifying the extent and manner in which the terms and conditions of the Apartment Buyer’s Agreement need to be modified.

The Commission in its order today, after considering the modified terms of the Apartment Buyers Agreement submitted by both parties, has modified the terms of the Apartment Buyers Agreement in a manner which it considers fair and reasonable and takes into account the interest of both parties.

The Commission in its earlier order dated August 12, 2011 had held that DLF Ltd. was a dominant enterprise which had violated the provisions of Section 4 of the Competition Act 2002 by entering into an agreement with apartment allottees that was one sided, abusive and unfair to the allottees. Accordingly the Apartment Buyers Agreement has been amended such that the abusive and unfair conditions present in the original one sided agreement have been removed. The Commission in its order has also considered the relevant provisions of the laws applicable to the development of group housing projects in Haryana, particularly the mandatory requirements which must be followed by every developer/builder, but which were not followed by DLF Ltd. in this case.

The order of the Commission has been passed in Case No. 19 of 2010 and a copy of the order has been uploaded on the website of the CCI at www.cci.gov.in.
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Re: CCI working on model framework for commercial agreements

Postby anuj_bansal » Fri Jan 04, 2013 11:39 am

From several links I found some of the clauses which CCI has modified and even all the buyers in faridabad are suffering due to these. Can something be done so that the builders in faridabad also comply to this new agreement?

CCI disallowed any additional construction beyond the approved building plan. It also said the builder will no longer have sole ownership of open spaces within the residential project area not sold to the allottee and has suggested a joint ownership mechanism among the owners.

CCI said the so-called “time of essence clause” will now be applicable to both builder and allottee. This clause is typically found in contractual agreements and allows one party to hold the other liable in case contractual obligations are not fulfilled by the latter. In the present case, the liability is only on the allottee and not on the builder.

CCI deleted the clause which said that in case Company abandons the scheme or becomes unable to give possession within three years from the date of execution of this Agreement…the Company shall be entitled to terminate the Agreement whereupon the Company’s liability shall be limited to the refund of the amounts paid by the Apartment Allottee with simple interest at the rate of 9 per cent per annum for the period such amounts were lying with the Company and to pay no other compensation whatsoever. However, the Company may, at its sole option and discretion, decide not to terminate this Agreement in which event the Company agrees to pay compensation at the rate of Rs 5 per sq. ft. of the super area per month.

CCI has also removed the clause which said that in case of delay due to reasons beyond the control of the company shall be entitled to the extension of time for delivery of possession of the said Apartment the Apartment allottee agrees not to claim compensation of any nature whatsoever.

The Commission mandated the company to inform buyers about the change in layout plans, if any.

Group housing projects must be constructed in line with the layout plans, floor plans and specifications. Builders will also have to adhere to the compensation promised to the buyers in case of delay in construction or delivery of flats
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