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What Builders cannot do..yet do

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What Builders cannot do..yet do

Postby » Wed Nov 06, 2013 9:37 pm


Builders have an uncanny ability to get away with things that they are not legally allowed and hence should not do. Yet, the greed and their corrupt practices beckons them to break every law, to gain at the expense of the consumers and the State. In any given project the Builder, normally commits so many irregularities and illegalities, that it is often difficult if not impossible for any common man to match the machinery of the state and the legal fraternity to get justice. Knowing this fact, the builders continue to blatantly over rule the law with a set of their own declared and followed practices. Consumers in their own capacity have dragged these unscrupulous builders to court on several defects, deficiencies and unfair trade practices but still its fashionable for them to continue with their devious plans, as no punitive action has so far been taken by law to dither them.

1. Selling without obtaining License from Competent Authority:-

In states like Haryana, it is mandatory that the Colonizer/promoter obtains a license under Section 3 of the Haryana Development and Regulations of Urban Areas Act, 1975, from Competent Authority. The primary requirement for obtaining a license under the section is that the colonizer has to be owner of the said land on which he proposes to develop a colony. Further Section 7 of the said Act prohibits any sale, advertisement or erection of any building, till such time the statutory requirement of license is not fulfilled. Yet we find hundreds of townships/colonies/projects being sold and construction going on without fulfillment of this mandatory condition. Not only the sale and construction is going on, but such constructed dwelling units have even been registered by the registration authorities, yet no action has been taken in this regards by the Competent Authority to curb this menace. If you ask the builder who is operating without a license or title of land in its name, he will say it is industry practice and will cite umpteen projects where even with same discrepancy the units have been lawfully registered. If all goes well yours will be registered too but only if all goes well. There have been cases where the original licensee has gone bust and to recover his dues the court has liquidated his assets including the land he owned, which was being developed illegally by another builder. In Esha Ekta Apartments Co-operative Housing Society Ltd. and Others Versus Municipal Corporation of Mumbai and Others (Civil Appeal No. 7934 of 2012) The Supreme Court observed that to achieve the aim of planned urban development it was must that builders take mandatory permissions else the purpose of urban development would be defeated and therefore the courts should refrain from exercising equitable jurisdiction for regularization of illegal and
Unauthorized construction. Yet the builders for their own greed put the ho prejudiced position.

2. One Sided Builder Buyer Agreement:-

The Builders across States in India, employ abusive and one sided Builder- Buyer Agreements, to protect their own interest while the interest of the consumer is side stepped. This is done without the sanctity of law. As industry practice "Standard Format Builder Buyer Agreements" are authored, prepared and presented by Builders which do not allow any scope of improvisation or modification to the Consumer. To top it, the Builders pass on these agreements to Buyers without first signing on the dotted line, for consumers to return the documents signed, allowing Builders undue advantage of thereafter altering the promised date of possession etc. A glimpse of such agreements clearly shows how the Builders are using their position of dominance to put each and every onus on the Buyer of knowing all the titles of the land, of having satisfied by seeing all requisite approvals and sanctions obtained by the Builder etc.. which unfortunately no builder in India shares with his buyers. Further, the builder places the onus of timely payment as essence for timely possession and for any delay in payment by the buyer to the builder, the builder charges penalty @ 18% P.A. or more but in the same breathe the builder absolves itself from honoring its prime responsibility to handover possession of said unit on promised time by inserting FORCE MAJEURE clauses to leave the buyers completely at his mercy. Not forgetting that the penalty that the Builder acknowledges to pay for non-fulfillment of the essence of timely possession is a paltry 2% P.A. The Builder also illegally reserves the right, to modify and alter the floor plan/ layout plan/ area of the unit etc. Thus, very rightly the Competition Commission of India in the Belaire Owners Association Vs DLF and Others (Order Dated:- 12.08.2011) observed that such clauses were arbitrary and abusive, favoring the Builder and against the Buyers. Surprisingly, even after such a strong worded order the Builders have continued to prepare the same one-sided agreements. This menace can only be curbed if the Govt. or the Apex Court takes cognizance of the matter and issues strict directions to the Builders by preparing a Model draft of such an Agreement, which takes care of interest and rights of the consumers in an equitable manner. The Consumer on its part, should try and force the Builder to delete such unlawful clauses that jeopardize the present and future rights of his in the said property. The Consumer Fora, in the Rajat Kr. Bhadra Vs M/s Supercon Engineers and Contractors has stated that the Commission is competent to entertain a complaint even in absence of any agreement of contract between parties.

3. Offer Possession without obtaining Occupation Certificate:-

Building bye laws of each state in India mandate Builders to only allow Possession of the dwelling unit in a colony after obtaining an Occupation Certificate from the competent authority. Further, no builder promoter can allow possession of the dwelling unit without getting the same registered as per the Registration Act, 1908. Even with all the laws and Regulations, the builders are blatantly flaunting each rule to gain unlawfully at the expense of the Home Buyer. Mainly in this category there are two types of Violations:-
a) Offering Temporary Possession for Fit-Outs:-
Builder have found an easy way to avoid the legal formalities of obtaining valid Occupation Certificate for the purpose of handing over the possession of the dwelling units in the developed Colony by Offering Temporary Possession for Fit-outs. In layman terms it means the possession being offered is only for the purpose of carrying out certain interior works within the said unit. Where as the fact of the matter is that the Builder under this pretext demands the complete consideration/Sum and assures the buyer that on such payment the buyer can occupy the unit/tower and within reasonable time. What the Builder has done is that it has illegally allowed the Buyer physical possession of the flat but by feigning ignorance as on papers he has not allowed anyone physical possession. Therefore, it is the buyer who is being unknowingly the law breaker though in reality it is willful and deliberate act of the Builder.
b) Offering Possession with grant of OC but without registration of the said unit:-
Builders easily default on Government dues of land/Lease/ External Development Charges/ Labour Cess/Composition fees etc, due to which though in certain cases the Competent Authorit grants OC of the said unit/towers but does not allow the creation of third party rights by way of Conveyance deed between the Buyer and Builder, till all dues are cleared by the builder. Which singularly means that the Builder has been negligent and deficient in service as it was its contractual obligation to offer possession of dwelling unit peacefully and without any defect or liability which could jeopardize the buyers propriety rights.

The sum of these violations is that the buyer even after having abided by all contractual obligations is bereft of legal ownership of his dwelling unit and remains at the mercy of the Builder for uncertain period of time. Further to compound the matter the Registration authorities in connivance with the builder illegitimately register the said units, bye-passing the strictures laid down in the building bye laws of the state, which hurts the propriety interests of the Buyer in long term. As was found by the Ardee City Resident's and Buyers Association Vs State of Haryana and others (CWP. No. 22761 of 2010), the Hon'ble court observed, " in case some Builders have committed gross, non-compoundable violation of the structure designing/zoning plan and sold plots to various persons without getting the Occupation Certificate, it will be open for the DTP/Competent Authority to blacklist them for the future and to register criminal cases against those persons".

4. Selling Units on Super Area:-

Builder in India have coined this term for their own gain. Nowhere in the world this terminology exists nor dwelling units sold on Super Area. Its a fantastic way of earning super profits. In India each state has its own Building bye-laws and none allows builders to sell on super area. In fact the Bureau of Indian Standards, which is premier agency for measurement and weights standards has not defined super area but has clearly defined covered area and carpet area, which invariably means that the Indian standards too like the rest of the world does not recognize Super Area. The fact of the matter is that not only the builder sells on Super Area the Registration authorities also register a dwelling unit on super area, which shows the connivance of the Governments, who for meagre gains of revenue through artificial increase in land area, without slightest compunction are allowing such wide-spread unlawful activity. Recently the Mumabi High court has taken cognizance of this illegality and converted a letter from an activist with a CD of a sting operation carried out by Bloomberg, into a Public Interest Litigation. link to the news in TOI.. ... -area.html

5. Selling Basements for usage other than common usable area:-

Basements as per Building Bye-laws of the States in India; are part of common area as they fall below the land on which the building is situated and by definition the area of land under the building/tower falls under common area which is to be used jointly by all residents of that building/tower and therefore builder can not legally create third party rights by selling the same to any one or group of individuals, thereby changing the character of the purpose for which the basement has been allowed to be free of FAR (Floor Area Ratio). But it has been noticed umpteen number of builders in their project sell the same by connecting ground floor units to the basement, where by they increase the size of the ground floor unit exponentially as well as usurp the common area of the other residents in favor of the ground floor unit holder. It is pertinent to keep in mind that all units holder had already jointly paid their due share of this common area, in their respective Basic Selling Price. In the Nivdita Sharma Vs The State of Haryana and Others (CWP. No. 16387 of 2009) the Hon'ble court observed that "Basement is allowed to be used only for parking, generator room, machinery room etc and can not be used for habitation purposes and is part of common areas, hence can not be allowed to be registered in any one persons name".

6. Delaying Possession of the dwelling Unit:-

Though its is clear from the onset that the Builder has to carry on the development and construction work in a defined manner and hand over the physical possession within reasonably agreed time line. The Builders in India very rarely, if any, adhere to these time lines. In most cases the Builders delay project by minimum of a year to seven to ten years. The Consumer courts are overflowing with such cases of deficiency of the builders and the courts repeatedly have been awarding compensation to the home buyers for deliberate delays in handing over possession. The highest the apex consumer forum has awarded is 18%, but seems that unless courts take a larger view by announcing more stringent punitive compensation the builders would not mind shelling out small compensation to two or three litigants who march up to the court to seek rederessal. In, Ghaziabad Development Authority Vs Balbir singh the supreme court deprecated the practice of delayed possession and the authority was made liable to pay 18% as compensation for deficiency in service.

Most of the above stated practices though illegal are continued to be practiced, by all Builders, irrespective of their size, brand-name or type of project they are constructing. Naturally they gain exponentially by devising and implementing such corrupt practices at the expense of the Home buyer. Like the insurance industry dried out its promising start due to unlawful selling of defective products which caused injury to the people who purchased these products. Similarly, this real estate industry in India will also falter and crumble under its own corrupt weight or the Govt. of the day will have to measure up to, to exercise its right to protect the interest of its citizens and of equitable justice and would have to ensure strict adherence to law and clamp down such illegal practices of the builders which cause injury to public at large.. else this menace would.. God forbid.. only compound.
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