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MahaRERA orders developer to deduct 2% , not 10%, of the price of apartment for cancelled booking

The ruling will help buyers make a case for paying a lower amount should their home allotment letters specify a higher forfeiture in case of cancellation of bookings

Representational image.

Representational image.


The Maharashtra Real Estate Regulatory Authority (MahaRERA), in a recent order, directed the developer of Kalpataru Avana,  a luxury real estate project in central Mumbai, to deduct 2 percent of the total price of flats, and not 10 percent, for cancellation of booking by homebuyers.

The ratio mentioned in the letter of intent (LOI) signed between homebuyers and Kalpataru Limited, the developer, was 10 percent. MahaRERA said the proportion mentioned in one of the clauses of the LOI appears to be unreasonable.

The case

MahaRERA received six separate complaints from individuals and a company in August 2020, seeking directions to the developer to refund the entire amount paid by them along with interest and compensation under section 18 of the Real Estate (Regulation & Development) Act, 2016.

The complainants said they had not signed a sale and purchase agreement, but an LOI in 2015 which was effectively an allotment letter under settled case law.

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Although no date of possession was mentioned, a period of three years had been cited as a reasonable date for completion of projects in previous rulings, the homebuyers said.

They said they had informed the developer they wished to withdraw from the project and requested a refund along with interest and compensation in July 2020. The developer got the occupation certificate for the flats in October 2021.

In response, Kalpataru filed six complaints in February 2021, seeking directions from MahaRERA to the buyers to execute an agreement for sale and purchase under section 13 of RERA and also to pay the remaining amount due to the developer with interest.

MahaRERA did not find merit in the complaints, saying the buyers had already decided to withdraw from this project and approached the authority for cancellation of their booking, alleging violation of various provisions of RERA.

MahaRERA said the developer had filed complaints after the buyers had filed theirs. In such a scenario, the buyers cannot be forced to remain in the project and execute the agreements, it ruled.

MahaRERA shoots down interest plea

MahaRERA shot down the plea of homebuyers for payment of interest for alleged delayed possession, noting they had not signed an agreement despite multiple reminders by the developer.

MC Explainer: Everything you need to know about Maharashtra RERA’s model allotment letter

The developer argued that there was no contractual stipulation to pay interest.

"In this case, admittedly, the allottees have not acted or responded to any of the letters issued by the promoter for the execution of the agreements for sale. Hence, the MahaRERA is of the view that the party who is at default, cannot be permitted to take such defence to get the favourable order under the provisions of RERA," MahaRERA said.

MahaRERA noted that the buyers were not the end-users of the flats and the booking had been done in the name of the company. The judgments relied upon by the buyers to cite as precedents cannot be applicable in their case, it ruled.

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

Forfeit 2% and not 10%

"Clause no. 20 of the said LOIs mentions the forfeiture of 10% of the total consideration value of the said flats. However, ... the said booking application form provides that upon cancellation of the said flats, the promoter is entitled to forfeit 2% of the total consideration of the said flats," MAHARera said.

It added: "Such forfeiture clause as mentioned in the LOIs appears to be unreasonable, after commencement of RERA and even it does not seem to be in consonance with the recent MahaRERA Order No. 35 in August 2022, issued with respect to the prescribed format of allotment letter, which permits the promoter to forfeit 2% amount."

Also Read: Booking amount can’t be forfeited if buyer cancels purchase, says Maharashtra real estate tribunal

In August 2022, MahaRERA issued an order prescribing the number of days and amount that can be deducted in case of cancellation of a booking. According to the order, no amount can be deducted for cancellation within 15 days of booking, 1 percent of the cost of the unit for cancellation between 16 days and 30 days, 1.5 percent between 31 days and 60 days and 2 percent after 61 days.

An email query sent to Kalpataru elicited no response.

Also read: MahaRERA order to allow developers to cut over 2% amount from buyers in booking cancellation

Significance of the order 

"This ruling will be of assistance to allottees if a higher rate of deduction for forfeiting the consideration amount is mentioned in the allotment letter," advocate Trupti Daphtary said.

Advocate Nirav Jani, a partner at Vigil Juris, said: "MahaRERA has further legislated contractual terms between the parties wherein the allottee (home buyer) will only be penalised up to 2 percent of the consideration in case of default by allottee as well. The ruling rewrites the contract previously executed between the parties. This may be an impediment for parties to enforce clauses which have been agreed between the parties and arrive at a commercial understanding."
Mehul R Thakkar
first published: Sep 6, 2022 04:54 pm
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