Action against Builder for Delayed Possession

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Action against Builder for Delayed Possession

Delay in delivery of possession by the builder is when the builder fails/does not deliver the possession of the residential property within the stipulated time, as decided in the agreement between the buyer and the builder/developer. 
 

Delay in delivery of possession by builder

Let us understand the process in detail. A Builder-Buyer Agreement is signed between a builder and a buyer, whenever a person invests in an immovable property. The stipulated time within which the property/possession has to be handed over to the buyer is stated in this Agreement. When the possession is not transferred or delivered by the builder to the buyer within the stipulated time period (in some cases, even after the extension period), it is delay in delivery by buyer.

It has been seen many a times that the builder does not abide by this Agreement (by delaying the delivery of the residential property). Some builders delay the possession from the decided time also because of some malpractices such as shortage of funds. It has been seen that sometimes alterations in designs and plans of the property are also made without the knowledge of the buyer.

In case there are some genuine reasons for the delay in completion, the builder can seek an extension in time. However, if the property is not delivered even after the extension period, it is delay in delivery and/or possession of the property.

However, the liability of the builder arises only when the delay is due to his own fault. If the delay is due to any calamity, or situation which is beyond the control of humans, the buyer would not succeed in an action against the builder.

The question that now arises is whether these buyers remain remediless? Thankfully, the answer to this is a clear “NO”. The law has provided some remedies to ensure that the aggrieved buyers get justice and do not easily get duped by faulty builders.

What are the actions that a buyer can take against the builder in case of delay in delivery?

It is important that the buyers are made aware as to what remedies are available against the builders if they have been wronged. No specific statute providing for provisions and punishments against builders existed, until the passing of the RERA (Real Estate Regulation Act) in the year 2017.

A buyer should be aware of his rights in case he is duped. For this, understanding aspects of property law and contract law, along with RERA and consumer laws is necessary. Read on to understand the most important laws and the remedies available under them, for aggrieved buyers:-
 

1. RERA (REAL ESTATE REGULATORY AUTHORITY ACT)

Under RERA, each State is required to establish a “Regulatory Authority” – a special body to deal with matters relating to the real estate sector. Given below are the important provisions given under RERA that can help ensure justice to the buyer-
 

  • Compulsory Registration: Every builder/developer is required to register their projects with the Regulatory Authority, except in cases where the project is smaller/less than 500 square meters, and if the number of apartments is lesser than 8.
     
  • Publishing details of the project: After the Regulatory Authority grants registration, it is mandatory for the builder/developer to publish details of the project on the Regulatory Authority website. The registration is only valid for a period of time (as stated in the project application) which is required by them to complete that project. The Regulatory Authority has the right to revoke the registration, once the time period is over.
     
  • Buyer’s right to withdraw from project: If the builder/developer has not handed over the possession of the unit/property within the time period mentioned in the agreement, or in case the registration for the project has been suspended/revoked, the buyer has the right to completely withdraw from that particular project.
     
  • Buyer’s right to compensation after withdrawing:  A buyer has a right to get fully compensated (i.e. the entire amount one has paid till date, along with interest). This right is available with the buyer as soon as the date passes by. However, at this stage, there is no requirement to file a complaint or case against the builder. You should be compensated by him simply upon a request made by you.
     
  • Buyer’s right to compensation without withdrawing: If in case the buyer does not wish to withdraw from the said delayed project, he will have the right to get compensation with interest, for each month of delay. This interest amount differs from state to state.
     
  • Right to file complaint against builder: If in case the builder/developer refuses to compensate you, it is your right to file a complaint against him. This complaint is to be filed before the Regulatory Authority. An officer is required to be appointed by each Regulatory Authority. This officer would perform all the functions of a judge. He/She will conduct an enquiry and pass appropriate orders once it has been proved that the buyer should actually get the money spent and the interest. 

    Although you can appear yourself, it is advised that you appoint a lawyer to represent you. The Regulatory Authority is required to dispose of the complaint within 60 days, however, if the authority requires more time, it will have to give its reasons for doing so.

    If in case you are unsatisfied with the decision of the officer, you can file an appeal before the appropriate appellate tribunal (to be set up by each state) within 60 days.

    RERA being a fairly new law, each State has not implemented/carried out the functions as stated therein. Since the States are still in the process of doing so, it may be possible that Regulatory Authorities and Appellate Authorities may not have been set up. The buyer would have to check if the State in which the property is located, has set up these authorities or not. If such RERA authorities are not yet set up, the buyer can seek other remedies as stated below.
     

2. CONSUMER COMPLAINT IN CASE OF DELAY:

If the buyer has bought the property for the purpose of residence, or if the source of livelihood for the person is the rent from that property (for ex. if the builder is constructing the property on your/buyer’s land), the buyer has an option to seek redressal through the Consumer Court by making a consumer complaint, instead of going to the Real Estate Regulatory Authority.

A buyer is able to make a complaint in the consumer forum as a consumer as he/she has paid for a service from the builder and there is a deficiency (delay) from his end (in this particular service). A complaint can be filed in District, State or National Consumer Courts, depending upon the value of property and the compensation that a buyer is claiming.

The complaint should be filed as early as possible from the date upon which the buyer was supposed to get possession. Consumer Courts have been seen in the past to be aiding in getting faster relief than other authorities in case of builder delay. As has been evidenced, temporary relief, settlement with the builder party, and compensation are easier to get under this option.

It is advised to take the help of a lawyer to file a written complaint in the appropriate Dispute Redressal Forum/Commission under the Consumer Protection Act. A claim can be made for the losses even if the possession is delayed by just one day. In addition to this, when there is delayed possession, a buyer can even make a claim for interest upon the payment that has already been made for the flat. The step of approaching the Consumer Forum can also be preceded by a legal notice to the builder, with the help of a lawyer. Follow the steps given below to file a consumer complaint against a builder:
 

  • Legal Notice: Send a well drafted Legal Notice to the builder stating your reasons of discontent (delay, etc.)
     
  • Response: Await for a response for the stipulated time from the other party.
     
  • Complaint: Depending upon the response (or no response) prepare a petition/complaint, stating all the facts and evidences with the help of expert legal advice.
     
  • Filing of the Complaint: Approach the Consumer Court and file the petition against the builder.
     

3. CIVIL SUIT / WRIT PETITION IN HIGH COURT:

In States where Regulatory Authorities have been set up, no buyer can file a case before a civil court, or writ petition before High Courts. In recent times it has been seen that some High Courts have redirected cases filed before it, stating that the buyer must approach the appropriate Regulatory Authority in that particular State. However, since RERA is a new law, in case there is no such Authority, buyer may still have an option to file a civil suit.

A civil case, whenever appropriate, should be filed in the area where the property is located, or where the defendant/respondent (builder) carries on his business.
 

4. ARBITRATION:

If in the agreement, an arbitration clause exists, the buyer should refer the case to the arbitrator instead of going to a civil court. Arbitration is a process of resolving a dispute with the help of arbitrator(s) – a third party, which gives its decision via an award. Through this, the arbitrator(s)  would decide if the builder has deviated from the agreement or not.

The arbitrator, in his order would declare whether there is default by the builder, and the compensation he is liable to pay to the buyer, if any. However, this order may have to be brought into force by approaching a civil court.
 

5. CRIMINAL CASE:

A criminal case can also be filed in some cases for example when the builder/developer is purposely not handing over the property possession, only to keep the money. He/she could be criminally sued for cheating and/or criminal breach of trust, etc. under the Indian Penal Code. In criminal cases, if the builder is found guilty, he could be sent to jail and there is no assurance that the buyer would be getting monetary compensation.

Remedies that can be obtained in action(s) against the builder for delay in possession:

The buyer/complainant can seek the following reliefs through legal resources. However, a buyer should always consult a lawyer to understand what remedy should be sought in accordance with the facts and circumstances of the buyer’s case.

1Compensation: A buyer can claim compensation of upto 10% of the property price if in case the delay has been caused by the builder without any justification as given under RERA rules. Even under a consumer case, a buyer can claim compensation.

2. Refund: In cases wherein the construction has not even begun or is still in its initial stages, a complete refund of the amount paid can also be sought. A refund would enable you to buy another property. If the court is satisfied that the builder is at fault and that the buyer has had to go through hardships due to this, it can order the builder to refund the entire amount, along with a direction for the builder to pay the entire cost the litigation. Under RERA, builders are required to keep the money/funds received from the buyers in a special account. These funds can not be used for any purpose other than this.

3. Punishment: When there is delayed delivery, along with the builder being at a risk of losing the registration of the project, he/she is also liable to be imprisoned.

4. Completion of Project: The builder can also be ordered to complete the construction of the project as per the agreement between the buyer and the builder. The court can also grant the builder some extra time in order to complete the construction. This is generally a relief given by courts in civil suits.

5. Damages: In case your agreement has a clause stating that a certain fixed penalty must be paid in case the builder delays in delivering the possession, the court may order the builder to pay this penalty to the buyer. However, even if there is no such clause in the agreement, you can seek damages/compensation for the mental agony that has been suffered by you. Damages can also be sought for the rent that a buyer could have received (and couldn’t due to the delay), till the possession of the property is handed over.

6. Interest: A buyer can also claim interest on the payment that has already been made to the builder till date. Several States also have provisions to ensure protection of the buyers. An example of this could be the Maharashtra Ownership Flat Act, 1963, which states that if the builder cannot justify the delay caused by him in handing over the possession of the property to the buyer, he/she shall be liable to refund the amount of the buyer with an interest of 9%.
 

What are the problems faced by the homebuyers?

Buying a home is a dream for many. The entire journey from the idea of buying a property to finally moving into the new address is a wholesome experience. However, the most stressful part of putting your money in an under-construction property is the uncertainty of possessing that property.

Even though tall claims about the early transfer of property are made by the builders, more often than not, the wait is stretched and tiring.

According to the statistics and estimates, more than 14 Lakh flats / apartments / units have crossed the promised date of delivery of possession and are not yet handed over to the homebuyers / consumers in India. Many invest in homes, but are soon disappointed due to the delay and other tactics of the builders / developers to avoid delivery. The challenges faced by a homebuyer are many. The errant builders often sell defected projects to investors. The builders may also use several tactics to delay the possession of the property.

Some of the major concerns of the aggrieved homebuyers are:-

  • Delay in delivery of the unit for possession as discussed earlier.
  • Demand of extra charges based on excuses by the builder, at the time of handing over of the unit to the buyer.
  • Frustration of the purpose of purchase by the homebuyer, due to major changes in the layout plan / building plan, by the builder.

What are the other instances in which a buyer can file a case against a builder? 

A buyer can take a legal action against the builder in the following situations/cases:-
 

  • Non-Execution: In case the builder does not execute the relevant sale agreement despite having received a substantial advance amount.
     
  • Non-Issuance of Docs:  In case the builder fails to issue copies of all relevant documents viz.; development agreement, power of attorney, sanctioned plan (by concerned Regional Authorities), specification of construction materials/design as per sanctioned plan and/or any other relevant documents.
     
  • Charges: In case the buyer is charged higher than the amount agreed between the parties.
     
  • Receipt: In case the builder fails to issue receipt(s) against the paid amount.
     
  • Poor quality construction: In case the builder has used substandard or poor quality materials and/or products to build/construct the project.
     
  • Not complying with specifications: In case the builder delivers the house, not complying with the agreed specifications.
     
  • Parking space: In case the builder does not provide a free parking space within the premises.
     
  • Co-operative housing society: If in case no co-operative housing society was formed and handed over to the members.
     
  • Water storage tank: In case no storage tank for water has been provided in the residential premises.
     
  • Proper ventilation and light: In case no proper ventilation and light is available on the residential property.
     
  • Completion Certificate: In case the builder does not issue the requisite Completion Certificate at the time of delivery of the respective flats/house to its occupants.
     
  • Non-declaration of expenses: In case the builder/developer does not declare the expenses against which he collected money.
     

In case any project suffers from any defect as stated in the list above, the builder can be sued/ an action can be taken against him. In this article, however, the issue of delay in delivery of possession has been discussed in detail.

Should you hire a lawyer?

It is highly recommended that an aggrieved buyer hires a lawyer for any action against the builder. This is because a property lawyer would be able to assess what is the best remedy that you should seek, the best legal recourse that should be taken, etc. A lawyer can better draft your complaints/suits and would also be able to represent you better than you would be able to represent yourself. This is because he is experienced and has studied and has been taught how to draft and represent clients. In addition to this, a property lawyer knows the requisite laws, and can interpret judgements and research more effectively. Hiring a lawyer is thus a good practice which would only work in your favour.  
 

Frequently Asked Questions (FAQs)

1Why should a case be filed against the builder if he has delayed in handing over the possession of the flat?

If a buyer fails to take an action against the faulty builder/developer, he is putting his investment at risk. If a case is not filed by the buyer in such a situation, and the builder files for bankruptcy, the buyer will be at a risk of not being named as one of the creditors to claim his/her amount. When the court orders sale of the builder’s assets, the aggrieved buyer would not be eligible to attain reimbursement.

2. Can I claim interest amount in case of delay or non/delivery of possession?

Yes, you as a buyer can claim interest in case of delay or non-delivery of possession. Interest rates depend upon where the case is filed and the rules pertaining to it.

3. Is it possible for homebuyers to file a case as a group against delayed possession?

Yes, a class action can be taken against a particular builder delaying possession.

4Do I have to appear in person at every hearing date?

No, you do not have to appear in court at every date. The lawyer that has been appointed by you would represent you in court. However, you have to appear if you have been asked by the court to actually appear in person.

5Do I need a lawyer to represent me at RERA?

Under RERA, representation can be made either by a legal practitioner/lawyer, or by the complainant himself. However, it is highly recommended that a lawyer by hired for this action as a proper complaint needs to be drafted with proper annexures etc. Moreover, a lawyer would guide you best as to which court to appear at and what relief should be sought, keeping in mind the facts and circumstances of your particular case.

6Can I claim refund of the entire amount as paid by me to the builder, in a case of delayed possession?

Yes, in cases wherein the construction has not even begun or is still in its initial stages, a complete refund of the amount paid can also be sought. If the court is satisfied that the builder is at fault and that the buyer has had to go through hardships due to this, it can order the builder to refund the entire amount, along with a direction for the builder to pay the entire cost the litigation. Under RERA, builders are required to keep the money/funds received from the buyers in a special account. These funds can not be used for any purpose other than this. This makes the process all the more efficient.

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