Wednesday, July 10, 2013

BUILDER BUYERS AGREEMENT- IN HARYANA

Dear Friends,

This is in continuation of  understanding the Jargon's used in Real Estate Industry. One of which is the Builder-Buyer Agreement. In essence the Builder Buyer Agreement is a Contract between the Builder to provide services as specified for a consideration and the Buyer for fulfilling his end of the promise to pay for the services rendered by the Builder as promised and accepted by the Buyer. Ideally the Agreement should be made available to the Buyer at the time of booking of the said property but in Haryana this good practice is not adopted by any of the Builders, the main reason for this is that 100% of the times the property on sale is on Pre-Launch, therefore the Builder can not get into any legal contract with its Buyers.This acts to the detriment to the interest of the Buyer, as often, at the time of booking the sales staff of the Builder assures that the said project would be complete within 30 months of 36 months, but when the Builder finally proposes the Agreement to the Buyer, already 1 or 2 years have gone by and thus the dream home remains a distant dream for which the Buyer is compelled to pay extra costs in terms of increased cost of material, Govt. Taxes, enhanced EDC etc.

At the time when the Builder finally proposes the agreement to the Buyer, the Buyers generally do not go through the clauses of the agreement which form the basis not only of the way the transaction between the two parties would be concluded but also which defines the character of the ownership of the Buyers in the said residential colony. Thereby, surrendering all rights and interest in favor of the Builder even before a brick is laid in the project. That is why it is most important to go through the agreement carefully or by taking assistance of a lawyer. A small amount of professional charges of the lawyer would help you save the lakhs of hard earned rupees that you have agreed to pay for availing services from the Builder.

A typical Builder Buyer Agreement Should be one, which safeguards the  interest and title of all the parties to the agreement. It should be balanced and not favoring any one party or putting onus on only one party to comply with terms and conditions and sparing the other from any contractual obligations, it should be equitable, transparent and enforceable by law. Since we are discussing only the Builder Buyer Agreements for properties in Haryana, the Agreement should further be consistent with provisions of the Haryana Apartment Ownership Act, 1983, Haryana Development and Regulations of Urban Areas Act, 1975 and rules framed therein and the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963 and rules framed therein. These Acts provide for all necessary sanctions and
 permissions the Builder needs to construct the group Housing Colony or Plotted Colony. These Acts define the Population Density per acre for each category of urban estate of Haryana, according to which the Builder can present his plan for approval from the Competent Authority, which is the DTCP. The Apartment Ownership Act defines all Common Areas and facilities and the rights and liabilities of the owners of the colony. Therefore the Builder Buyer Agreement should be Consistent with these Acts and Rules that govern the urban development in the state of Haryana.

Most of the Builder Buyer Agreement Prepared and presented by the Builders to the Buyers are Void Contracts as they are heavily loaded in favor of the Builder and against the Buyers. They do not give ownership rights of all the common areas and facilities, they are inconsistent with the prevailing laws and provisions. For example a case where the Builder says that In a group Housing Project the area of the dwelling unit sold is tentative and could increase by 10% or more and for which increase in area the Buyer would be liable to pay at the present BSP or on the Rate in future. This clause in not enforceable by Law. As in Haryana, the maximum a Builder can build over the approved plan is only 5% for group Housing and 10% for plotted colony. Therefore when the Competent Authority does not allow any increase in area beyond 5% then to make the Buyer agree on an increase in area beyond which the law of the land does not sanction is unlawful. The reason why the Builder chooses to put this clause is that at the stage of presenting the Agreement to the Buyers, its plan are still not approved and it fully knows that the size of the apartment it is going to get approved would be more than 10% of the area sold to Buyers 1 or 2 years back. The Builder sold the apartments at a ticket size which would lure middle class people to buy into his project. Once it is all sold and the Builder has collected 25 to 40% (in some cases the Builders before executing the agreement have even taken 50% from the Buyers) it becomes easier for the Builder to dictate its terms which are only aimed at gaining exponentially at the cost of the allottee. Hence such clauses are suppressio veri and the Buyer should be weary to sign the dotted lines, where such clauses are a part of the Agreement.

In most Agreements the terms of payment are also skewed in favor of the Builder. Lets take an example where the Buyers of a project have paid 30% to the Builder before executing the agreement, the rest 65% is demanded by the Builder after executing the agreement therefore binding the Buyer Contractually to pay by the end of internal  or external plastering of the said flat  or by the time of laying of the roof slab. Which means that Builder would pocket 95% payment with respect to the said unit while the work executed by such time would not be even 60% on the project. it is important to understand that the Buyer is being charged at Super Area, therefore it means that when the Buyer has paid 95% of the payment the Builder should have completed 95% of the construction and development work at the site.  Therefore such type of payments plans that help the Builder to amass 95% payment without proportionate work on the site, favor the Builder and are against the interest of the Buyer. The Buyer should insist that the Builder should  have a payment plan that reflects the work done on the whole of the project after all the Buyer is not buying four walls of the apartment but paying for other areas within the project as well. Such a plan would be beneficial not only cause the cost paid by the Buyer is reflecting the true work done on site but also will  help in timely execution of the project with all facilities by the time possession is offered and balance 5% is demanded.

Another Financial Implication could be the Delay Clause. The parties in the contract should be on the same level field. If the consumer delays in fulfilling its part of the contract then he should be charged at the same rate at which the Builder when he defaults in meeting the possession date. It has been observed that generally the industry practice is to charge 18% to 24% for delay in payment by Buyers but when it comes to paying for delay in Possession the Builders agree to pay only Rs. 5 per sq. ft. which is totally one sided and hence should not be agreed by the Buyers.

Often the Builders put the onus on Buyers,of knowing all relevant documents, title deeds,sanction plans etc  of the project. Even when the Builder has never shown them even a single document with regards of any approval or sanction of the project. Buyers should be averse to signing such clauses. These have serious consequences at a later stage when after years the Buyers get to know the plans shown in the Brochure etc were not the plans approved by the Builder but a totally different plan was presented for sanctioning by the authority. Buyers have to realize that purchasing a home is one of the biggest transaction in a persons life, to sign an agreement without going through it thoroughly would result in grave consequences. A person paying lakhs of rupees for the property has every right to get copies of all relevant papers that the Builder is saying in his agreement the Buyer has already satisfied himself with. These papers should be the Land ownership papers of the Builder of the said land on which the project is coming up, the license of the colony to be developed, The LC-IV (A) in case of group Housing projects and LC-IV(B) in case of plotted development, The copies of clearances from the Ministry of environment and forests, Commencement of Construction work BR-III, sanctioned lay-out plan of the colony, etc. These papers are a must for each Buyer to get, even if it means paying an additional Rs. 500/- for a set of copies to the Builder. If the Builder is not providing these then the Buyers should be aware that even while getting the Agreement executed the Builder is willfully deceiving the Buyers.

The list of what should be an Ideal Agreement is long as is the case with any such draft which is usually of about 30 odd pages. So for sake of brevity only a few points have been elaborated upon here which I feel should take care of creating awareness about the subject. One Final aspect of the Agreement should be, an even and equitable exist plan for the Buyer. In most cases the Builders put such clauses where the onus of Builder of not providing the promised facility is shifted on to the Buyer and therefore the Buyer is stuck into paying further installments even if the Buyer wants to withdraw from the scheme as the clause of forfeiture of earnest amount and further clause of Builder cancelling the unit at its own discretion acts as a detriment to allow the Buyer save and secure exit. Therefore it is very important that the Agreement should not allow such clauses which would empower the Builder at the cost of the Buyer and the Buyers either collectively or separately ( with the help of a lawyer) should go through the entire agreement in its completeness and  make all efforts to have only such clauses in it, which put the Buyers at the same level as that of the Builder and enjoy same rights and liabilities so that no clause is prejudicial to either party and both parties rights are protected and the responsibility defined in clearest of manner.

Acts:-
The Haryana Apartment Ownership Act, 1983...http://tcpharyana.gov.in/CIM/HaryanaApartmentOwnershipActRules1983.htm

The Haryana Development & Regulations of Urban Areas Act, 1975
http://tcpharyana.gov.in/CIM/HaryanaDevelopmentAndRegu.htm

The Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963
http://tcpharyana.gov.in/CIM/PunjabRoadsAndControlledAreasAct.htm

3 comments:

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