Clauses In Buyer-Seller Agreement That You Should Take Note Of

Clauses In Buyer-Seller Agreement That You Should Take Note Of

Clauses In Buyer-Seller Agreement That You Should Take Note Of

There have been several instances when the competition watchdog has penalised real estate developers for using their dominant position the market to pressure consumers. While passing an oder in one such case in 2011, the Competition Commission of India (CCI) had slapped on a reputed Gurgaon-based developer a penalty of Rs 630 crore for misusing its dominant position in the real estate market. There is a lesson to be learnt from this. We are all trying to find the right property. While deciding what is right, we would surely think of the developer's reputation from whom we are buying this seemingly “right” property. However, even reputed developers can pen clauses that may be unfriendly to home buyers.

Here are some of such clauses that work against a homebuyer:

Developer's right to change the layout without notice

The Supreme Court has ruled that building layouts cannot be changed without consent of home buyers. Wherever it is necessary due to structural reasons, a competent authority should circulate a public notice in this regard. This authority will also be liable to address objections from homebuyers' associations and homebuyers.

Developer's right to increase/decrease super area

If a clause in your buyer-seller says that the developer can alter the size of the flat, this is something to worry about. If the developer decides to increase the unit size, it may result in your paying more money to the developer. In such a case, all your calculations would go haywire. In case the promoter decreases the size of the flat, you may end up having to settle for a smaller flat.

Claused on paying preferential location charges (PLC) 

After paying upfront PLC charges, homebuyers expect that a particular unit is reserved for them. However, in most cases this is not true. There might be a clause saying if the homebuyer does not get what he had wanted, he could get a refund at the end, without interest. This has been considered unfair by the CCI. If a unit cannot be reserved for you, the developer has no right to demand the money upfront.

Developer decides ownership rights of buyers

When you buy a property, you are buying both the constructed as well as a certain proportion of the land on which it is build. For example, if five apartments units of 1,000 sqft are built on 3,500 sq ft of land, your undivided share of land comes to comes to 700 sq ft. Do make sure that the buyer-seller agreement does not give the right to decide your share to the promoter.

Developer can decide to link this project with another one

According to the real estate law, every developer, who is undertaking a project, must reserve 70 per cent of the amount collected to be used only for construction-linked activities of the said project. The money cannot be used for another project. 

Buyers will pay undisclosed external or enhanced developmental charges

No homebuyer should be made to pay more than what has been disclosed to him. While some hidden costs such as club memberships, brokerage, PLC, etc., do pop up. However, buyers are briefed about these and most sale agreements will carry information about the same. New revelations in this regard should not be entertained.

No exit option for the buyer

You might want to exercise your right to exit if the developer fails to give possession on time. This is why, you should be allowed to exit if you find out that there are some legal issues with the project.

Developer can abandon the project without compensation

While we may understand that there could be reasons that can lead to a developer abandoning a project, he can under no circumstance get away with inadequate compensation to buyers. Even third party transfers should be made known to all homebuyers.

Last Updated: Mon May 15 2017

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