ANSWERS TO SOME IMPORTANT RERA QUESTIONS

REGISTRATION

Q.1. A developer
wants to develop a land admeasuring 500 sq. meters having 8 apartments. He is
advised by RERA expert that in view of section 3(2) he does not need to
register that project. The Developer wants to know whether his Project will be
totally outside the purview of RERA and none of the provisions of the Act will
be applicable to his project.

Issue regarding the
applicability of RERA in respect of the projects which should have been
registered but not registered by the Promoter for any reason, as also the
projects which are not required to be registered under the provisions of
section 3(2) of RERA, has been subject of varying views with different
Authorities taking different approach in the matter.

According to one
view the regulatory power is exercised on the basis of information furnished by
the promoter in the application for registration. In the absence of
registration of project, the Authority will not get the required information.
Hence, many provisions of RERA would become unworkable e.g. provisions based on
the sale agreement as per proforma,quantum of penalty, conveyance etc.

The other view is
that RERA nowhere restricts its application to registered projects. The
definition of ‘Real Estate Project’ is not confined to registered projects only.
Registration is only one of the obligations cast on the promoter, default in
respect of which visits with penalty under the Act. Non- compliance with one of
the obligation by the promoter, does not absolve him from all other obligations
which are cast on him for safeguarding the interest of the buyers which happens
to be primarily object and purpose of the legislation. It cannot be the
legislative intent to deprive the buyers of the protection provided under RERA
because of the self-serving default of the promoter.

MahaRERA had
consistently taken the view as mentioned in FAQs that it will entertain
complaint only in respect of registered projects. In a Writ Petition Mohmd
Zain Khan vs. MahaRERA & Others W.P. lodged under No. 908 of 2018
decided on 31.07.2018 the High Court of Bombay directed the Authority to
entertain complaints even in respect of unregistered projects and consequently
MahaRERA agreed to upgrade its software to record such complaints.
Consequently, the complaints in respect of unregistered projects also are being
registered by MahaRERA.

This settles the
controversy about the projects that are required to be registered but not
registered, The High Court order did not make it clear whether it will apply to
the projects which are exempted from registration by virtue of section 3(2) of
the Act. A view is possible to be taken that what applies to unregistered
projects, equally apply to unregisterable projects as well. Certain projects,
considered small, have been exempted from the requirement of registration for
ease of operation. It cannot be the legislative intent to deprive the
purchasers of apartments in real estate projects, the protection granted to the
purchasers under the Act. There is also no specific provision in the Act to
exclude these projects from the operation of RERA nor are they kept out of the
meaning of real estate project.

Q.2. As per
section 3(2)(b) the registration of the project will not be required if the
promoter has received completion certificate before 01.05.2017. This implies
that the relevance of O.C. is only for ongoing projects and not for those
projects which commence on or after 01.05.2017. Can a promoter start a new
project without advertising and without registering if he sells all the
apartments only after getting O.C.?

Section 3(1)
provides that w.e.f. 1^st May 2017 the Promoter can advertise and
sell the apartments only after registration of the project. As per section
3(2)(b), if promoter has received completion certificate before 1^st
May 2017 then registration is not required. This indicates that relevance of OC
is only in respect of the ongoing projects. However, as per the answer received
by us, MahaRERA has clarified that if a project is constructed, OC is obtained
and till the date of OC the promoter has not made any advertisement, then such
projects do not require registration. It means OC is relevant for new projects
also. If this view is adopted, the builder can avoid registration provided he
does not give advertisement and does not sell apartments till the date of OC.
This way he can save GST also.

The clarification,
however, has to be taken with a bit of caution. Any legislation needs to be
understood and interpreted in the context of the object and purposes it seeks
to serve. RERA is designed to introduce professionalism and transparency in the
sector and to ensure that the interest of the buyers are safeguarded against
the prevalent malpractices of the promoters. A question arises as to whether
the receipt of OC leaves the promoter with no scope for any other malpractice
against which remedies are provided under the Act.

Q.3. Suppose a
new project was registered on 15.05.2017 mentioning possession date as
30.08.2017. The Promoter could not complete construction. Hence, he got
extension of one year upto 30.08.2018. He obtained OC in August, 2018 but could
not sell all apartments upto 30.08.2018. Can he sell his unsold apartments
after 30.08.2018 when the registration certificate is not valid?

It has been
clarified by MahaRERA that after OC, registration is not required for a project
of a single building. Hence, sale of Apartments in building with OC does not
require MahaRERA registration.

The validity of
dispensing with the requirement of registration after issue of OC is a debatable
issue. In the facts of the case in the question, technically speaking, there
should not be any sale without registration. However, considering the
unavoidable hardship to the promoter, the Authorities may take a lenient view.

JOINT DEVELOPMENT PROJECT

Q.4. In
redevelopment arrangement where the landowner and the developer join to develop
a project, who is the promoter when-

(i)   there is an arrangement of area sharing?

(ii)  there is arrangement for revenue sharing?

RERA defines the
promoter as one who constructs or causes to be constructed apartments for sale.
The Explanation, however, provides that if the person constructing and the
person selling the apartments are different persons, both will be considered as
promoter and will be jointly liable in the project. Applying this provision, in
a redevelopment arrangement based on area sharing, both the landowner as well
as the developer will be treated as promoters as, while the construction will
be carried on by the developer, the sale of the share coming to the landowner,
will be made by the landowner.

The position in a
redevelopment arrangement based on revenue sharing, however, appears to be
different. MahaRERA in its clarification has been treating the area sharing and
revenue sharing arrangements at par and treating both as promoter. There is no
provision in the Act which makes the landowner sharing the revenue, as the
promoter when the entire work of construction and sale is carried out by the
developer alone.

Q.5. Whether a
cooperative Housing Society which enters into redevelopment arrangement in
consideration of part of additional constructed area to be allotted to existing
members, will be a promoter jointly liable with the developer. If so, whether
the Society will be responsible to the buyers of apartments sold by the
developer?

The issue is in the
realm of uncertainty. As per the definition of Promoter, the construction is to
be for the purpose of sale. In a redevelopment arrangement for development of
society land, the society, generally, gets the apartments from the builder, not
for sale, but for allotment to its members in lieu of the flats that they were
occupying pre-development. Strictly speaking, in such a case the society should
not be treated as promoter. MahaRERA, however, in its clarifications has been
taking different view and holding the society also as a promoter.

In a recent case of
Jaycee Homes Pvt. Ltd.,[7713] the Authority has taken the view that the
society is also a promoter and is also liable to the purchasers of the free
sale area made available to the developer. The order appears to have raised a
controversial issue. It needs to be read in the context in which the view was
taken by the Authority. Jaycee Homes Pvt. Ltd. executed development agreement
with Udayachal Goregaon CHS Ltd. The Developer constructed up to 11^th
floor out of 15 floors. It sold flats of his share. Meanwhile the society
terminated the agreements of the developer and refused to recognise the
purchasers of apartments from the developer. The purchasers filed a complaint
with MahaRERA and contended that their agreements are binding upon the society
as the society is also a promoter as per section 2(zk). Society relied upon the
judgement of Bombay High Court in the case of Vaidehi which held that as per MOFA,
the society is not a promoter. It was also contended that there was no privity
of contract between the society and the purchasers who purchased apartments
from the developer. But the Authority held that the society is a promoter and
liable to the purchasers.

In the facts of the
case above, the decision of the Authority seems to be influenced by the fact
that the development agreement having been terminated, the purchasers from the
developers were left in lurch and were without any remedy for no fault of
theirs. The society was brought within the meaning of ‘Promoter’ because of the
fact that by cancelling the development agreement of the developer and revoking
his power of attorney, the society regained the control and ownership of the
sales component. What the decision would have been, if the development of
building had gone in normal way without termination of the agreement, cannot be
said with any degree of certainty.

In our view, the
decision remains contentious. A cautious view is called for.

Q.6. Where the
person constructing and person selling are different, RERA makes both of them
promoters and make them jointly liable in respect of the project. In a
situation of redevelopment, on area sharing basis, whether it will be incumbent
on both to open separate specified bank accounts and deposit 70% of their
respective receipts in their accounts. If so, what will be the basis for the
landowner to withdraw from the bank account since no cost will be incurred by
him in the construction of the project and there will be no cost of land to the
project?

MahaRERA has taken
the stand that in such cases both the person being the promoter, should open
separate bank accounts and deposit 70% of their respective receipts in these
accounts. (Circular No. 12 ) In our view, the view needs reconsideration. The
law requires opening of the bank account for the project and not for the
promoter(s). In any case, the view leads to a position in which the landowner
having deposited 70% of the receipt from his share will not be able to withdraw
any amount as he will not be incurring any cost and as far as land owner is
concerned, there will be no land cost for the project. A view which results in
such situation of unintended hardship, can not be the legislative intent.

LEASE AGREEMENTS 

Q.7. Lavasa
Corporation Ltd. is developing a township at Lavasa. It is executing agreements
for transfer of apartments by charging substantial premiums and Re. 1/- lease
rent per annum for 999 years. Lavasa Corporation Ltd. is of the view that the
purchasers are given apartments on rent. Hence, Lavasa Corporation Ltd. is not
a promoter but Landlord.  Provisions of
RERA are not applicable to the lease of apartments by Lavasa Corporation Ltd.
What view can be taken in such matter?

A complaint was
filed before the Regulatory Authority against Lavasa Corporation Ltd. which was
dismissed by the Authority accepting the arguments of the promoter, for want of
jurisdiction. The learned member came to this conclusion on the basis of
definition of allottee given in section 2(d) of the Act. In the appeal filed by
the allottee before RERA Tribunal, it was held as under:

Although the
decision is on the facts of the case, it can be taken to be the view in all
such matters where the property is transferred on long term lease with
substantial amount by way of premium and a very nominal amount as rent to give
it the colour of a lease. Following several other cases cited by the appellant,
the Tribunal has held that the premium is to provide freehold rights to enjoy
the property subject to restrictions under the applicable Acts. The allottee
cannot be deprived of the benefits of RERA merely because a different
nomenclature is given to the transactions. The decision may be of help in all
such cases of long-term leases where the amount of premium forms a significant
part, almost equal to the price, forming in substance, a substitute of the
price of the property.

MOFA AND RERA

Q.8. The local
laws dealing with real estate promotion and development which prevailed when
RERA was introduced have not been repealed. As a result of which two
legislations dealing with the same subject are in operation simultaneously. In
such a situation, when RERA regulates ongoing projects also, how will the
defaults in delivery of possession in respect of agreements executed prior to
1.5.2017 will be dealt with in the matters of –

(i)   Award of interest?

(ii)  Award of compensation?

(iii) Quitting the project?

It was held by the
Tribunal in Aparna Arvind Singh vs. Nitin Chapekar (10448) that the
ongoing project bring with them the legacy of rights and liabilities created
under the statute of the land in general and MOFA in particular. Section 88
provides that its provisions shall be in addition to and not in derogation of
the provisions of any other law. MOFA has not been repealed.

MahaRERA in Order
No.4 dated 27.06.2017 clarified that ongoing projects in which agreements were
executed prior to 1^st May, 2017 shall be governed by the MOFA. Based
on this view, if the provisions of MOFA are applied, the position should be:-

Interest- Under MOFA, section 8 provides for payment of interest in case of
delay.at the rate of 9%. The Model agreement under MOFA also provides for
interest @ 9%. Hence, unless any other rate of interest is provided in the
agreement, that rate should be applied and in the absence of any rate, the rate
as per MOFA can be applied.

The question as to
whether the proposed date of completion should be as per the MOFA agreement or
the revised date informed under RERA. This question has been answered by the
Mumbai Tribunal in the case of Sea Princess Realty (0078) holding that
any extension of the date mentioned in the agreement is impermissible and the
promoter cannot give a go-by to solemn affirmation made at the time of
registration of the Agreement.

Compensation- There being no provision under MOFA for award of compensation in
case of default, award of compensation in accordance with RERA may not be
permissible.

Quitting the
Project- There being no provision under MOFA for
quitting the project, it is debatable whether an allottee can be permitted to
quit as per section 18 of RERA. Although, the Authority constituted under RERA
do allow the Allottees to quit and receive interest.

Section 88 of RERA
provides that the provision of this Act shall have effect, notwithstanding
anything inconsistent therewith contained in any other law for the time being
in force. With such a provision, in our view, it should not be impermissible to
decide the above issues in accordance with the provisions of the RERA and the
rules and regulations made thereunder.

ONGOING PROJECT

Q.9. Will a
project which was completed and occupied by the buyers but no OC was received
before 01.05.2017 qualify as an ongoing project required to be registered.
Also, whether the project which is completed with OC but the promised amenities
and facilities are yet to be provided, will qualify as ongoing?

MahaRERA in their
clarification through FAQs had taken the view that the projects which are
completed and occupied by the purchasers are not required to be registered as
ongoing projects, even if the OC has not been received. However, the Authority
in the decision, given by its Member Shri Kapadnis in Parag Pratap Mantri
vs. Green Space Developers has taken a different view holding that the
promoters of the buildings which are occupied by the residents without OC, must
register such projects with MahaRERA. The decision is of far reaching
consequence, at least in Mumbai where thousands of buildings are occupied but
are without the occupation certificate.

A view can be taken
that a project of a building with OC but without amenities like swimming pool
/office is not complete project. Such projects should be registered.

Q.10. If an
ongoing project is registered with MahaRERA, then will the Act be applicable
for the entire project or will it be applicable only to units sold after
registration?

Registration is of
the Project/Phase as a whole. The ongoing project is registered in its
entirety. Hence, the provisions of the Act are applicable to all units of the
Project/Phase irrespective of whether the agreement in respect of those
apartments was entered into prior to or post RERA.

REMEDIES U/S.18

Q.11. Does the
issue of OC debars the allottee to seek remedy u/s. 18 of RERA? Whether all the
provisions of RERA or certain provisions only, cease to apply after the receipt
of OC?

There is no
provision in the Act which takes away its jurisdiction in cases where OC is
received. The only exception is in respect of the project which were complete
before RERA came into force and OC was received.  The object of the Act is to safeguard the
interest of the apartment buyers and protect them against the default committed
by the promoters/agents irrespective of whether the OC was received or not when
they entered into contract with the promoter. Non-receipt of OC is a violation
of the provision by the promoter for which he is subjected to penalty. The law
does not discriminate between the buyer who files complaints before receipt of
OC and one who files complaints for getting remedy u/s. 18 after OC. In the
absence of any provision to this effect, the protections under RERA are
available to both.

In a decision
MahaRERA has based the order on the premise that once the project is completed,
the rights of the buyers for remedy u/s. 18 cease. If the project is complete
and OC received, the buyer will cease to have remedy u/s. 18 even if the
possession was not delivered in time. The Authority has relied on the word “
is” used in section 18 which, according to it, rules out its application in
case of defaults if the project is complete and OC issued. In our view, the
Authority has misconstrued the import of the word ís’ and has failed to
appreciate that every word in the statute which needs to be construed in the
context in which it occurs.

In our view, the
only provision that ceases to be applicable, after the issue of OC, is the
provision to deposit 70% of the proceeds in the separate bank account. It is
because once the project is complete, the very purpose of the provision ceases
to exist. The Rules also provide that the money remaining in the bank account
can be withdrawn after the OC is issued. All other provisions of the Act
continue to be applicable even after the issue of OC.

Q.12. Whether
relief u/s. 18 can be claimed where no date of possession is mentioned in the
agreement of sale executed before the coming into force of RERA?

In Aparna Arvind
Singh vs. Nitin Chaphekar (10448) where the agreement was made under MOFA
and no date of possession was mentioned in the agreement, the Mumbai Tribunal
applied the provisions of section 4(1A) of MOFA and held that the promoter
committed breach of the provision by not mentioning the date of possession in
the agreement.

Going by the
cumulative effect of section 71(1), 72(d), 79 and 88 of RERA and the provisions
of MOFA, it was held that effect will have to be given in favour of the cause
propounded by the affected party. Beneficial legislation cannot be extended in
favour of a deceit against the docile flat purchaser/allottee.

Q.13. Is it
possible to claim relief u/s. 18 and other sections of RERA on the basis of
allotment letters?

In Ashish
RajkumarBubna vs. S R Shah Developer [0251] where there was specific
reference of flat number., its area, consideration, mode of payment, date of
possession and other necessary details given in the allotment letter itself,
the Mumbai Tribunal held that the parties were under an obligation to adhere to
the allotment letter.

Q.14. Whether
the refund of money envisaged u/s. 18 on failure of the promoter to complete
the project and deliver possession in time includes refund of service tax, VAT
charged from the allottee?

There are contrary
decisions of the Mumbai Tribunal on this issue. In Venkatesh Mangalwedhe vs.
D. S. Kulkarni [10409] the promoter was directed to refund the amount of
VAT and Tax charged from the purchaser. In the later decision in Ashutosh
Suresh Bag vs. MahaRERA [0120] , the Tribunal held that the refund of VAT
could not be given by the promoter as the tax amount is credited to the State
government in the name of the allottee. The promoter cannot be held responsible
to refund the VAT amount.

In this connection,
it may be relevant to refer to the provisions of section 72 which contains the
factors which the Adjucating Officer is required to take into account in
adjudging the quantum of compensation or interest. Clause (b) of the section
mentions ‘the amount of loss caused as a result of the default’. On
cancellation of Agreement VAT, GST paid by the purchaser is a loss to the
purchaser but not a gain for the promoter. Hence, final verdict will depend
upon the view taken by the High Court.  .

CHANGES IN SANCTIONED LAYOUT

Q.15. Rule 4(4) 0f the Maharashtra Rules permit
inclusion of contiguous land parcel to the project land. Will it involve
obtaining written consent of at least two-third number of allottees and
revision of the original registration? Or, the contiguous land piece should be
registered as independent project or phase of the project even when the same is
dependent on the earlier project in certain matters including the right of way?

Since the rules
permit the amalgamation of a contiguous piece of land with the main project
land, there should be no legal necessity of obtaining the consent of at least
two-third of the number of allottees unless there will be changes in the
layout plan consequent to such amalgamation. The Rule permits separate
registration of the project either as independent project or as a phase of the
project.

Third proviso to Rule 4 states consent of 2/3^rd allottees may not be
necessary for implementation of proposed plan disclosed in the agreement prior
to registration and for changes which are required to be made by the promoter
in compliance of any direction or order by any Statutory Authority.

Q.16. If due to
a change in government policy, the promoter is entitled to additional FSI etc.,
can the promoter build additional floors in a registered ongoing project where
initially those floors were not planned?

Yes, but subject to
the approval of the Competent Authority and the consent of at least two- third
number of allottees as required u/s. 14 of RERA.

Q.17. Can the
promoter change the plans of subsequent phases after registration of the 1^st
phase?

If a subsequent
phase has not been registered, the promoter can change the plans of the
subsequent phase without obtaining consent of the allottees from the allottees
of registered phase. However, if the subsequent phase is also registered,
consent of allottees, of the concerned phase, would be needed if the change in
the subsequent plan impacts the interest of the allottees of the registered
phase.

There are
situations where, when a project is divided in phases and registered
separately, the amenities and facilities in respect of all the phases are
concentrated in the last phase In such a case any change in the sanctioned plan
of the last phase will necessitate the consent of atleast two-third of the
number of allottees of all the earlier phases.

END USER VS. INVESTOR

Q.18. Whether
RERA differentiates between the end-user and the investor in matter of
application?

In PIL
developers vs. S R Shah [10411], the purchaser purchased 11 flats and a
plea was taken by the promoter that the purchaser was not an allottee under the
Act, but an Investor. The Mumbai Tribunal held that the Act nowhere makes a
distinction between the investor and actual user.

POSSESSION

Q.19. Whether
possession given for fit out is to be treated as possession given to the
allottee under the Act?

In BhavanaDuvey
vs. Teerth Realities [054] the Mumbai Tribunal held that Fit out possession
without occupancy certificate is not the contemplated possession under the Act.
Under RERA/MOFA the Act, possession can be given only after the issue of OC and
any possession given for whatever purpose before the issue of OC will not be in
accordance with the law.

PAYMENT BEFORE AGREEMENT

Q.20. Sometimes
buyer is ready and gives undertaking that he is okay with giving money beyond
10% but he does not want to register the agreement and pay stamp duty. Should
it be allowed?

No. Section 13(1)
of the Act prohibits the promoter from taking more than 10% of the cost of
apartment without entering into a written agreement for sale, duly registered.

CONVEYANCE

Q.21. If a phase is considered up to certain
floors as envisaged in the rules, then how & when will conveyance take
place. Assuming the next phase approvals for upper floors are not obtained in a
timely manner, what will be the position for effecting conveyance for the
floors constructed for which O.C. received?

Conveyance of the
structure (floors) contained in the phase is possible. As per section 17 the promoter
shall execute conveyance of the structure in favour of the Allottees and common
areas to the association of the Allottees. Thus, conveyance of the structure of
existing floors is possible as per section 17 of RERA.

In case the
amenities and facilities and other common area is tagged on and can be
determined only after the upper floors are constructed, the apartments in the
phase can be conveyed but conveyance of the common area to the Apex society
will wait till they are constructed.

VARIATIONS BETWEEN PROVISIONS OF RERA AND RULES

Q.22. What
should be the approach in matters where the rules framed by the State
Legislature are at variance with the provisions of RERA?