8 Lesser-Known Rules Of Real Estate Law That Are Binding On Every Seller
By now, all of us are aware that the newly enacted real estate law would be a game-changer and usher in transparency into the sector. Most of all, it would safeguard the interests of homebuyers. While you might be broadly familiar with the much-talked about provisions, there are some clauses in the Real Estate (Regulation and Development) Act, 2016, that need your special attention as a homebuyer.
Developer must pay 10 per cent for delayed projects
The Real Estate Regulatory Authority (Madhya Pradesh) has prescribed the rate of 10 per cent for delayed projects during the period of delay. This comes as a relief to those buyers, who had invested into projects but were unsure as to how much is the developer's responsibility with respect to delays. Often, sale agreements would keep rates at Rs 5-10 per sq ft. Moreover, projects will be registered with the RERA only if the developer agrees to this provision.
The prescribed rate of 10 per cent is two per cent higher than SBI's Marginal Cost of Funds-based Lending Rate (MCLR). Therefore, real estate developers would have to pay 10 per cent on the home buyer's invested amount. An equal rate is applicable on homebuyers, who delay payments and dues from their end. Other state regulators are also expected to follow the same rate.
Developers to get one last chance
In case of ongoing projects, the regulator provides for a last chance to the developer to regularise delays. The developer may set a reasonable deadline failing which he would be liable to pay penalties as per the regulator's prescribed rates. Non-compliance to this rule can also lead to imprisonment.
Developer liable to correct structural flaws even after sale
The Central law clearly mentions that it would be the responsibility of the developer to fix structural defect without charging anything even after the conveyance deed of the all the apartments, plots, buildings have been executed. This responsibility stays with the promoters for a period of five years after giving possession.
Previously, developers extended a two to five-year warranty period in this regard. However, it was not binding on the developer. It usually worked out for the benefit of those buyers who bought furnished flats and were unhappy about the defects in them, mostly related to the appliances and fittings.
Developer responsible for obtaining lease certificate
Just like completion certificate and occupancy certificate, obtaining the lease certificate in case where the real estate project has been developed on leasehold land is the developer's responsibility. The certificate should mention the period of lease and other payment details. The document should then be made available to the allottees.
Not obtaining a leasehold certificate can pose to be a problem in the future. This is because, if the leasehold property was bought for, say, 99 years, the landowner (developer) is said to own the land for that period only. If you as a buyer do not obtain a transfer memorandum from the developmental authority, your stake on your own property stands negated.
Developer must pay all outgoings bills till offering possession
Until the property is transferred to a buyer or the association of homebuyers, all dues and payments have to be settled by the seller. This includes land cost, ground rent, municipal or other local taxes, charges for electricity and water, maintenance charges, the mortgage loan, the interest on mortgages, the liabilities payable to competent authority, banks and financial institutions, etc.
The real estate Act makes clear that if a promoter fails to comply, he will be liable to pay these charges even after the transfer of property to homebuyers or the association, including late payment charges. The cost of any legal proceeding against the promoter will also be borne by him.
Initially, promoter cannot raise more than 10% of project cost
The Act makes it mandatory that heavy transactions can happen only if these are documented. No promoter can accept a sum more than 10 per cent of the cost of the project, plot, apartment without an agreement of sale. Also, such an agreement should specify work and external development work, dates and the manner in which payments should be made, possession timeline of the project and rate of interest on payments by either in case of defaults.
Authority should sanction alterations
According to the Act, no deviations in the advertised and registered project will be entertained. Any alteration would be subject to penalty for noncompliance on the developer's side. However, there is an exception. Developers can make certain alterations given the requirement of the buyer or stemming out of an architectural or structural need. But such alterations cannot be done at will. These must be verified by an authorised architect/engineer and all allottees have to be intimated about the change.
These alterations exclude major changes such as change in height, removal of a part of the building, change in structure such as cutting into a wall, partition, column, beam, joist, floor including a mezzanine floor or other support, changes to fixtures or closure/changes in any means of entry and exit.
Promoter cannot sell his rights to a third party without consent
There have been many instances in the past where homebuyers have complained about sellers transferring their majority rights to a third party without their consent. The real estate law provides that no such transfer of rights will be honoured if two-thirds of the allottees are not happy with the decision. Also, despite the number of units an allottee holds in the affected project, every homebuyer (family) has one vote.