Consumer Connect: 'Builder Cannot Deduct More Than 2% As Cancellation Charge,' Says Expert

Consumer Connect: 'Builder Cannot Deduct More Than 2% As Cancellation Charge,' Says Expert

The questions are answered by Adv. Shirish V. Deshpande, Chairman – Mumbai Grahak Panchayat.

FPJ News ServiceUpdated: Monday, April 15, 2024, 09:35 AM IST
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Consumer Connect | FPJ

We had booked a 2-BHK in Mulund in December 2023. The total price was Rs2.2 crore. The promised date of possession is December 31, 2026. We have so far paid Rs21 lakh. However, due to some personal difficulty, we have to withdraw from the project and hence we requested the developer to refund our money. The developer had issued an allotment letter in which it is mentioned that in case of cancellation by the buyer, 5% of the price of the flat shall be deducted and balance, if any, shall be refunded. It means out of Rs21 lakh paid by me, the developer will deduct Rs11 lakh and return only Rs10 lakh. It’s our hardearned money. Is such a heavy cancellation charge fair?

Manisha Dedhia, Ghatkopar

MahaRERA has issued an order (No 30/2022 dated June 3, 2022) wherein the format of model allotment letter is given. As per this, the developer cannot deduct any amount in case the allottee cancels the booking within 15 days from the date of issue of the allotment letter. If the cancellation is made within 16 to 30 days, the developer can deduct 1% and in case of cancellation within a period of 31 to 60 days, the cancellation shall be 1. 5% of the flat cost. Cancellation after 61 days allows the developer to deduct only 2% of the flat cost and no more.

Our society executed a development agreement (DA) with a developer in May 2021. He had promised to get the IoD within six months and complete the project within three years thereafter. However, till date he has not got the IoD. Some of the members, including myself, are asking our committee to terminate the agreement. But our secretary tells us that there is no termination clause in the DA and if we still terminate then it will be challenged in the court by the developer and this will delay the redevelopment further. What is the way out?

Ujwal Shah, Borivali

The developers invariably prevail upon the societies not to include the termination clause by giving some reason or the other. However, it is a settled position in law that notwithstanding the absence of the termination clause, if there are defaults or breaches of clauses in the agreement, the other side gets a natural right to terminate such contract as per the Contract Act.

In such cases one has to, of course, proceed very carefully. The society has to issue a legal notice pointing out the breaches, seeking an explanation for the delay and offer a specific time, say 30 days, within which the developer should be given an opportunity to get the IoD, failing which he should be informed that the society shall be constrained to terminate the DA.

If the developer gives a satisfactory explanation for the delay, the general body may consider granting him a grace period of a few months. If he fails to comply even then the society may terminate the DA. In recent times the Bombay High Court has taken a firm stand against such builders.

(Advocate Shirish Deshpande is the chairman of the Mumbai Grahak Panchayat. Queries may be sent to him at shirish50@yahoo.com)

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