Our society with 120 members is going for re-development. We are in the process of finalising development agreement with the builder. However, the builder's legal team is opposed to including termination clause in the event of long delays or breaches of DA terms. Builder says that after investing a lot of money, they wouldnt like to have uncertainty of being terminated. What should we do in such cases?
Shirish Belose, Mulund
It is true that normally builders undertaking re-development projects are reluctant to include the clause of termination. However, it is equally true that today we find around us several redevelopment projects stuck half-way with builders not paying transit rent after some time, unable to complete construction work for want of funds, etc. Your society must impress upon your builder that “time is essence” of the development agreement.
You should also specify in the DA time lines for each phase. For example, after appointment of the builder for the project, the time lines for (a) executing and registering the development agreement, (b) getting the IoD (or IoA in case of SRA schemes), (c) getting first commencement certificate (CC) and (d) getting final occupancy certificate (OC). There should be mutually agreed time lines for all these stages. The society should also consider reasonable extension of these time lines in case of any genuine delays in adhering to these time lines. But after such extension, the DA should provide per day penalty payable by the builder to the Society. Such penalty is not meant for enriching the society but to ensure that the builder doesnt take his job lightly.
It is also a common experience that after demolition of the old buildings first one or two years builders pay the rent regularly. But thereafter the rent default begins. Many builders even avoid giving bank guarantees. In such case, how far the society and its members should continue with the builder? In such case termination of such defaulting builder becomes vitally necessary. Hence, your society must firmly insist on including the clause of termination of the developer. However, it should also specify which all circumstances in which the society shall be entitled to invoke this termination clause. The societies are also cautioned that termination of the Developer in the re-development project is a very serious matter and such termination should not be resorted to on flimsy grounds.
I booked a 2-BHK with a developer in a re-development project in Goregaon in June 2018. I have so far paid Rs40 lakh to the developer and the agreement for sale has also been registered. Due to several breaches, the society has terminated the development agreement of this developer. The society is now negotiating with a new developer for this project. However, the new developer is not ready to recognise buyers like me who had booked flats with the earlier developer and not ready to accommodate us in this redevelopment project. The new developer quotes Vaidehi Akash judgment of the high court to deny the old homebuyers their right to get flats in this re-development project. What exactly is the legal position?
Aneesh Karkare, Goregaon
It is true that the Vaidehi Akash judgment has said that the new developer is not obliged to accommodate the buyers who had booked flats with the erstwhile developer. The HC had also expressed the view that such buyers can seek refund of the amounts paid by them with interest from such erstwhile developer whose services have been terminated.
However, it is pertinent to note that this is the pre-RERA judgment under the MOFA regime. Obligations of the developers/promoters have been very clearly outlined under RERA and the homebuyers' right has been adequately protected. Section 15 of RERA specifically deals with obligations of promoter (developer) in case of transfer of a real estate project to a third party.
Proviso to Section 15 categorically states that “such transfer or assignment shall not affect the allotment or sale of apartments made by the erstwhile promoter”. Section 15 no doubt deals with a “transfer” of a project by one developer to another developer and admittedly does not directly cover the case of “removal” of the developer by the society in re-development project. If in case of transfer of the developer, the allotment or sale of apartments made by the erstwhile promoter is not going to affect then why they should get affected adversely in case of removal of the developer by the society in any re-development project?
In my opinion, using Vaidehi Akash judgment in your situation is patently wrong, unfair and unjust. In case of termination of the earlier developer, the society must move MahaRERA Authority for revocation of the MahaRERA Registration of the earlier developer, under Section 7 of RERA. Sec. 7 (4) (d) empowers MahaRERA authority to issue such directions as may be necessary “to protect the interest of the allottees”.
Further, once the registration of the earlier developer is revoked, the first right to complete the remaining work goes to the association of allottees as per Section 8 of RERA. Vaidehi Akash judgment being pre-RERA judgment, the rights of the allottees (buyers like you) were not formally recognised and protected as they are under Section 7, 8 and 15 of RERA.
If the new developer is refusing to accommodate you in this re-development project despite having a registered agreement for sale, you should challenge such action in the high court.
(Advocate Shirish V Deshpande is a chairman of Mumbai Grahak Panchayat.)
