CANCELLATION OF AGREEMENT FOR SALE DUE TO DEFAULT OF ALLOTTEE OF PROPERTY under RERA Act

RERA Act provides safeguards to developers & customers in India. Today every developer and customer has to be govern by RERA Act and its provisions while developing projects by developers or while purchasing or booking property at under-construction stage with developers.

As per RERA Act, No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act:

There are certain exemptions from registration provided in RERA Act:

Subject to some condition, Section 3(2) of RERA provide the exemption to real estate project from registration requirement and the conditions are as follows:

(a)   If Land area is <= 500 Sq Meters or

(b)   Number of the apartment in the project are <=8 (inclusive of all phases)

Eg: If the project is divided in 2 phases and 1 phase have 7 apartment and other have 4 apartments than both the phase has to get registered as total number of apartments has crossed the limit.

(c)   If the completion certificate of the project is received by the promoter.

(d)   Project is for Repair/renovation/redevelopment and which does not include marketing, advertisement, new allotment of apartment.

For the purpose of this Act every phase of the project will be considered as separate and every such phase will require registration.

Every Allottee book property, may be Residential or commercial, with developer with an intention to purchase the said property but it may happen that allotee make default in making payments even after giving payment reminders to allottee. In such cases RERA Authority may pass an order cancelling the Agreement to sale entered between complainant – promoter/developer and the respondent allottee which had been duly registered before the judicial Sub – Registrar. RERA Authority may direct the Sub Registrar to cancel the Agreement to Sale which was registered.

The Karnataka  Real Estate Regulatory Authority (‘KRERA’ in short) IN Complaint No. CMP/201230/0007353, has passed an Order dated 02.01.2023 cancelling the Agreement for Sale entered into between the Complainant- Promoter and the Respondent allottee which had been duly registered before the jurisdictional Sub-Registrar. The KRERA further directed the Sub- Registrar to cancel the Agreement for Sale which was registered.

The Order so passed by the KRERA goes a long way in addressing the issue of allottees not adhering to the terms of the Agreements for Sale that they entered into and make payments as per the payment schedule in such Agreements in respect of the apartment or plots that they would have agreed to purchase from the Promoters.

While Section 13 prescribes that any order to receive a sum of more than 10% of the sale price of an apartment or a plot, the Sale Agreement has to be executed and registered under any law for the time being in force, upon the allottee paying more than 10% when the Agreement comes to be executed and registered as mandated, the encumbrance is created in respect of the apartment or plot which is agreed to be sold under the Agreement for Sale.

Upon failure on the part of the allottee to adhere to the terms of the Agreement for Sale, the Promoter or the Developer then faces the problem of encumbered unit for which the allottee not paying the money as per the payment schedule and has also not coming forward to cancel the Agreement for Sale which may also stipulated the condition that the booking amount of 10% paid by the allottee would stand forfeited in the event of the allottee cancelling the Agreement.

In such cases, the  Real Estate (Regulation and Development) Act (‘Act’ in short) under Section 19, the liability is fastened upon the allottee to not only make payments in the manner and within the time as specified in the Agreement for Sale but also be liable to pay interest at the rate as may be prescribed, for the delay in payments towards any amount or charges to be paid as a consequence of not having made the payments as per the terms of the Agreements for Sale.

The Promoter/Developer, in such a case, can file a complaint before  Real Estate Regulatory Authority (‘Authority’ in short) and seek for the relief of direction to the allottee to pay the balance amount that remained unpaid as per the schedule of payments under the Agreement for Sale along with interest as prescribed therein and seek for an alternative prayer of cancellation of Agreement for Sale along with payment of money towards interest that may have accrued on account of non-payment of the money as per the payment schedule.

Rights & Duties of Allottees under Kerala RERA:

Rights of allottees

• Have the right to obtain all information about the project such as copies of sanctioned plans, layout approvals, and specifications approved by the Competent Authority and copies of all documents such as Title Deeds.
• Need not give the promoter an advance exceeding 10% of the cost of the apartment, plot, or villa without entering into a written, registered agreement for sale in the prescribed format.
• If the promoter fails to give possession of the apartment, plot, or building, as per the terms of the agreement, or discontinues the business due to suspension or revocation of registration under this Act or related Rules and Regulations, then the allottee can claim the refund of the amount paid along with interest at a prescribed rate and compensation, as provided by this Act. In case the allottee wants to continue with the allotment, he can claim interest for delay. The interest rate prescribed in both cases is the Benchmark Prime Lending Rate (BPLR) of State Bank of India plus two percent.
• Have the right to take possession of the apartment, plot or building and execute the Conveyance Deed within two months of receiving the Occupancy Certificate.
• If the developer fails to provide possession of the completed project on the agreed date, the buyer can claim interest for delay or receive a refund of the paid amount along with interest by filing a complaint with K-RERA.

Duties of allottees

• Every allottee is responsible for paying monthly instalments to the promoter in the manner and within the time as specified in the registered agreement for sale, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other charges if any. He/ She shall be liable to pay interest for any delay to the promoter in payment towards any amount or charges to be paid as specified in the registered agreement for sale. The interest rate prescribed is the Benchmark Prime Lending Rate of State Bank of India plus two percent.
• Shall join as a member of the Association of Allottees.
• Shall pay common area maintenance charges to the Association.
• Shall take possession of the apartment within two months of receiving the Occupancy Certificate for the project and execute the Conveyance Deed within three months of receipt of Occupancy Certificate.