MC Explains: Madras HC clarifies on homebuyers' share of common areas in the project land

The Madras High Court (HC) has held that during the development of a project, the ownership of the common area and common amenities belong solely to the apartment owners and not the developer.

Disposing of a public interest litigation (PIL) filed by Abbotsbury Owners Association in Chennai, the court said, "Once the land is shown as a common area and common facility is developed, the land will belong to the owners of such common facility. If there is a mistake in the calculation of the UDS (undivided share of interest), it has got to be rectified by the builder."

The order dated January 20 further directed the builder, Ramaniyam Real Estates Limited, to ensure the execution of rectification deeds for in favour of each apartment owner. Additionally, the order asked Chennai Metropolitan Development Authority (CMDA) to hand over the vacant non-FSI building to the flat owners' association.

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The case

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In 2001, the developer had obtained a sanction plan for the construction of about 77 residential apartments in Alwarpet.

Additionally, the developer had proposed to construct a software technology park with a built-up area of about two lakh square feet (sq ft) in the common area, along with SRA Systems, a tech company based out of Chennai.

However, after failing to obtain the required permissions, SRA Systems dropped the proposal.

Going forward, the developer constructed one more building on the location after getting the revised plan approved by CMDA.

"The proportion of undivided share was conveyed to all the 77 flat owners, taking the total built-up area to two lakh sq ft. It is claimed that all the owners had confirmed in the handing over agreements that the non-FSI building is not part of the common area and the builder retains the same," the HC order mentions.

Floor Area Ratio (FAR) is the ratio of a building's total floor area to the size of the piece of land upon which it is built. It is often used as a regulation in city planning, along with the building-to-land ratio.

Additionally, FSI is crucial for homebuyers to determine their undivided share of interest (UDS) in a residential project.

In this case, in 2014, the association filed another writ petition alleging violation of the planning permission concerning the user of the non-FSI structure. In the same hearing, the developer, in an affidavit, told the high court that there had been an error in calculating the FSI.

At this point, the association came up with another writ petition, requesting to hand over possession of the building.

A list of questions has been sent to the developer and homebuyers. Moneycontrol will update the story when response is received.

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What did the HC say?

The court noted that the conveyance of an undivided share in the land, along with a non-FSI block to the private company by the developer itself is highly irregular and against the sanctioned planning permission.

"Though it is contended that there was a genuine mistake in the calculation of the undivided share of the land and the total construction area was taken as two lakh sq ft instead of 1.3 lakh sq ft, by oversight, we are unable to buy that argument," the order added.

The court reiterated that the undivided share of interest is calculated by dividing the land area by the total constructed area and multiplying it with the size of the apartments.

Thus, the Madras High Court concluded that by increasing the total built-up area to two lakh sq ft, the apartment owners did not get their actual entitlement of the undivided share in the land.

"If there is a mistake in the calculation of the UDS, it has got to be rectified by the builder. The builder cannot take advantage of the mistake and claim that the homebuyers must pay for the unsold portion of the UDS," the order said.

Thus, the HC directed the developer to rectify the sale deed with the correct UDS within three months of the order and also asked the CMDA to hand over the vacant non-FSI building to the resident welfare association.

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The problem at hand

According to advocates, for a residential project, the entire land area is divided proportionately among the homebuyers depending on the number of bedrooms.

Advocate Abhilash Naik added that every city has its own FAR (or FSI) ratio, and if the developer exceeds the FAR ratio, then the homebuyers will not get their due undivided share of interest.

Chandrachur Bhattacharyya, another advocate, added, "Every homebuyer pays for the carpet area along with the common areas. In such cases of irregularities, the developer continues to enjoy ownership of the common areas while collecting money for it."

Naik said that in cases of such irregularities, the problem arises during the redevelopment of the project. "Additionally, to get it rectified, the homebuyers will have to pay more for the stamp duty. Homebuyers should ask the developer to provide the calculation of the UDS as per the plan sanctioned," he added.

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Dhananjaya Padmanabhachar, a homebuyer in Bengaluru, believes that the Madras High Court judgment on common area ownership is landmark in nature.

"In Karnataka, several developers are constructing additional buildings and malls in common areas that legally belong to the flat owners. The Mantri Serenity apartment is a classic example, where the promoters have not conveyed the land rights to thousands of home buyers while executing the sale deed during the registration process," he added.

Mantri Serenity Home Buyers Forum, a representative body of homebuyers of Mantri Serenity, has complained to the Inspector General of Registration (IGR) about the irregularities in the homebuyers' undivided interest in the project land.

Responding to the request, IGR has notified all district sub-registrars in Karnataka to validate the registration guidelines and take action accordingly, a document dated January 21 accessed by Moneycontrol, shows.

Additionally, IGR also ordered the sub registrar offices to report back to it with their findings on the irregularities. At the National Consumer Disputes Redressal Commission (NCDRC), another case on the above matter is pending.