Q. Your Consumer Connect column of June 29, discussed homebuyers’ rights regarding the 3% plus/minus carpet area variation contained in the model agreement for sale prescribed by MahaRERA. You explained the 3% variation cap and clarified that even if there is a 1% shortage in carpet area, the builder must reimburse the homebuyer proportionately, with interest. Does this rule also apply to rehab members of societies undergoing redevelopment? Some redevelopment projects contain a clause in the development agreement contrary to the clause in the model agreement for sale. It states: “In case of increase or decrease in the actual final carpet area to the extent of 3% plus or minus of the area mentioned in the DA, neither party shall be entitled to claim any compensation from the other party for such increase or decrease in carpet areas (‘Tolerance Limit’). If there is any decrease in carpet area of any member’s new flat beyond the tolerance limit of minus 3% (‘shortfall area’), then the Developer shall compensate such member by paying compensation at the rate of `30,000 per sq ft over and above the shortfall area, at the time when the member takes possession of his flat.” The rate differs from society to society. Should developers not adopt the same policy for homebuyers and rehab members? Is waiver of compensation for up to 3% area shortfall not exploitative? Can such a clause be challenged before MahaRERA? – Hrushikesh Mukhtyar, Vile Parle (West)
A. Every square foot of carpet area matters. Parliament has ensured that state RERAs prescribe a clause in their Model Agreement for Sale under which, even if there is a shortfall of just one sq ft, the developer must, while handing over possession, inform the buyer and reimburse the proportionate amount based on the purchase price, with interest at the prescribed rate, within 45 days.
Developers often misinterpret this clause and deny homebuyers rightful reimbursement. Similar practices are followed while drafting development agreements for societies and rehab members.
RERA has not prescribed any model development agreement for societies undergoing redevelopment. MahaRERA also does not entertain complaints by rehab members. The provisions in a draft DA are negotiable between the society and developer. Societies should refuse any clause allowing developers to escape liability for a shortage of up to 3% carpet area per flat.
Developers often provide that compensation will apply only if the shortfall exceeds 3%, and then only to the excess beyond 3%. Thus, if there is a 5% shortfall, the developer may offer compensation only for 2% – that is, 5% minus 3%. Housing societies should not accept such an unfair clause and must insist on the same protection contained in MahaRERA’s Model Agreement for Sale.
An affected society may challenge such a clause as unfair, unreasonable and exploitative, and inconsistent with and contrary to the model AFS prescribed under RERA. The Consumer Protection Act, 2019 empowers State Consumer Commissions and the National Consumer Commission to strike down unfair contract terms.
However, since a DA is a mutually negotiated document, there should be written evidence showing that the society objected to the clause and proposed a modification. Without such objection or protest, the developer may try to rely on the clause in a legal dispute.
(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)
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