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Interest for delay in possession of flat cannot be denied merely because no registered sale agreement was signed: MahaREAT

Other documents such as an allotment letter, brochure or email mentioning the date of possession can be considered to work out the delay in possession, the tribunal said, directing a developer to pay interest to homebuyers.

In an order passed last week, the Maharashtra Real Estate Appellate Tribunal (MahaREAT) observed that merely because there is no registered agreement between a developer and home buyer, interest relief for delayed possession under section 18 of the Real Estate Regulatory (RERA)  Act cannot be denied.

In the absence of a formal agreement, any other document, such as an allotment letter, brochure, pamphlet or email communication mentioning the date of possession, can be considered to work out the delay in possession, the tribunal said in its order.

Homebuyers Jervis Creado and Rose Creado had signed an unregistered agreement to purchase a 456 sq ft apartment in the Andheri area of Mumbai in February 2017. The agreement stated that possession of the apartment, in a project being developed by Aishwarya Light Construction Company, would be handed over in December 2017.

However, the developer neither registered the agreement for sale nor handed over possession of the flat, forcing the homebuyers to approach the MahaRERA, which in its December 2019 order denied interest to the homebuyer for delayed possession, pointing out that the agreement was not registered.

However, the MahaREAT, in its June 17, 2022 order, set aside the MahaRERA order and asked the developer to pay interest for delayed possession starting January 2018 till the actual date of possession.

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What the order specifies

In its order, the MahaREAT stated (verbatim text follows): "Learned authority (MahaRERA) erred in holding that there is no registered agreement for sale executed between the parties showing any agreed date of possession therefore there is no violation of Section 18 of RERA by respondent. There is no mention of word 'registered' in section 18 of RERA therefore merely because no registered agreement for sale has been executed by the parties the relief of interest for delayed possession cannot be denied to the allottees."

The order further reads, "It is worthy to note that though the agreement for sale was undated, but the fact remains that one of the partners of the respondent has agreed to handover the possession of the subject flat to allottees by December, 2017. The respondent has not disputed the execution of undated agreement for sale by one of the partners of respondent with the allottees. An act of the partner is binding on the partnership firm. Therefore, we are of the view that by virtue of undated agreement for sale the respondent agreed to handover possession of the subject flat to allottees by December, 2017."

In the instant case, an undated agreement for sale had been executed by one of the partners of the respondent with the allottees, disclosing the date of possession as December 2017.

Harmeet Singh Gupta of Aishwarya Light Construction Company, the developer, told Moneycontrol: “I will comply with the order of the tribunal and will also be in a position to give possession to the homebuyers in the next 10 to 15 days.”

The MahaREAT ruling is being called a landmark judgment.

"It is a landmark judgment where the tribunal has said that any document apart from the registered agreement representing a particular date of possession can be considered as a promise by the developer to the buyer," said Godfrey Pimenta, the lawyer representing the buyers.

Developer asked to pay interest

Further, MahaREAT directed the developer to pay interest at the rate of State Bank of India’s highest Marginal Cost Lending Rate plus 2% on the amount paid by the allottees from 1st January, 2018 till they get actual possession of their flat.

The developer was also directed to pay costs of Rs 10,000 to the allottees.
Mehul R Thakkar
first published: Jun 22, 2022 11:51 am
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