Buying a Flat? Read this Article!

The word ‘Service” has been defined in U/S 2(o) of Consumer Protection Act (C P Act), which includes House and Construction. Thus on plain reading of the said definition read with the Section 2(d) i.e. the definition of Consumer, it would be evident, that if the ‘premises’ is taken for the Commercial Purpose, the same would not be covered under the ambit of CP Act save and except when the same is exclusively for the purpose of earning his “livelihood” by way of “self employment”.

Thus, the large business entities cannot seek protection under the C P Act as against the Builders in respect of office/business space as it would not qualify as a ‘self employment’ or for earning ‘livelihood’; the real intent being to protect unsuspecting innocent“End Users” of the premises who fall prey to tall promises by Developers.

Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA):

Considering the malpractices, abuses in relation to construction and sale of flats by the developers the said Act of MOFA was enacted to protect the flat purchasers in the cities of Maharashtra where the prices of real estate and malpractices started increasing at the relevant time.

MOFA truly succeeded in its purpose and object, only after the advent of Consumer Forums in Maharashtra at the district level.  The provisions of the Act are mandatory and in addition to the existing Law viz. mainly Transfer of Property Act, and it over rides any contract to the contrary as provided inU/S 16.

The builder/developer is under obligation U/S 3, to make full and true disclosures of the nature of his title to the land and /or any encumbrances thereon. The most relevant provision affecting the Consumer, is about “Possession” which must be specified in writing U/S 3(f) and not to allow a Person to enter into possession until the Completion of Certificate(CC) is duly given by the Local Authority U/S 3(i).

The Municipal Act allows possession to be given after “Occupation Certificate” (OC).

Similarly, the carpet area of the flat must be disclosed U/S 3(m)(i). Thus, the Consumer must look for the above details and insist for the Occupation Certificate(OC) and the Completion Certificate (CC) as he is also required, not to take possession until such “OC” or ‘CC’ has not been obtained.

Section 4 mandates that the developer must enter into registeredagreement before he accepts any payment of more than 20% of the sale price.

Section 7 requires prior consent of the flat purchasers for any additions or alterations to be made qua the plans of the building/s approved by the Authority has been disclosed to the flat purchaser at the time of sale.  Thus, it implies that even in case of phased development such scheme and plans must be disclosed.

The standard clauses of the Agreement for Sale, do contain certain declarations and purported disclosures of plans etc. However in practice, the said purported plans are neither attached with the Agreement nor disclosed.

Invariably the flat purchasers even do not bother to seek inspection of approved plans or copy thereofand therefore builders take undue advantage thereof and utilize the FSI available on the plot by not conveying the property to the Society which is mandatory U/S 11 of the Act.

There are a plethora of case Laws laying down the following principle (Bombay H.C. judgment in case of Malad Kokil Co-operative Housing Society Ltd v/s. The Modern Construction Co. Ltd. and ors) as reproduced hereunder;

“The prior consent of the flat owner would not be required if the entire project is placed before the flat taker at the time of agreement and that the builder puts an additional construction in accordance with the layout plan, building rules and Development Control Regulations. It is, thus, manifest that if the promoter wants to make additional construction, which is not a part of the layout which was placed before flat taker at the time of agreement, the consent as required under section 7 of the MOFA, would be necessary.”

Section 10 mandates formation of “Society” by the developer/ builder.The flat purchasers i.e., at least 60% of the flat takers can initiate the formation of Society if builder fails to take steps.

MOFA is only a substantive piece of legislation without providing any Regulatory Authority. The Civil Courts and the Consumer Forums have been applying the provisions of MOFA for the benefit of flat purchasers. There are also penal provisions against builder as provided u/s 13.  For the contravention of the provision Section 3,4,5, 10 or 11 for which the builder can be sentenced for  imprisonment which may extend to 3 years or fine or both. And for criminal breach of trust in respect of amount of deposit or the advance payment, the imprisonment could be 5 years.

Parking space, common amenities etc.The Development Control Regulations(DCR) compulsorily require for creation of space for common amenities and parking space. It is well settled law that, though the parking slots under the stilt or in open may be allotted by the builder, however, the same must be in consonance with DCR 36 which stipulates creation of parking space of certain dimensions and entitlement for the flat purchasers depending upon the carpet area of their flats.

It may not be misunderstood that there is entitlement of parking slot for each flat purchaser irrespective of the area of the flat. Therefore the consumer/ flat purchaser must know the exact carpet area as described in the sanctioned plan so as to know entitlement or otherwise for the parking space.It is also well settled law that the builder cannot sell the parking space even under the stilt norhe can sell the common terrace of the building.

A new Act called Maharashtra Housing (Regulation and Development Act, 2012) has been passed which purports to regulate and promote construction, sale, management and transfer of flats and establishment ofHousing Regulatory Authority and also an Appellate Tribunal.

MOFA would stand repealed when the new Act comes into force, however the relevant rules have not been so far published. The provisions of the new Act are similar to MOFA and supposed to be improvement thereupon.  However, the MOFA has stood the test of time andhasbeen utilized by the Courts and Consumer Forums for the benefit of flat purchasers.

We may hope that the new Act would also serve its noble purpose.

This article has been written by S. R. Singh, Advocate.