A new law must to protect flat buyers’ interest
Nov 08, 2013
Source : The Times of India


MUMBAI: The Campa Cola case highlighted the lack of law to protect hapless flat buyers, said legal experts.

To protect owners, lawyers said, there had to be a regulatory mechanism to ensure that a developer could not sell a house until the statutory permissions were in place and that housing societies got the rights to the land when there was a breach of law by a builder. “There is a need for a change in the law to ensure that construction has been conducted according to the plan. It has to provide that the society will get the rights to the title in case of a breach of law on flat sales,” senior counsel Milind Sathe said.

Under the Maharashtra Ownership of Flats Act (Mofa), a builder cannot sign a sale deal until plans are sanctioned and so, flat-buyers can assume that all provisions are in place, said Sathe. The Campa Cola owners said the agreements did mention that plans were pending approval, and they assumed the sanctions were inevitable. But the Mofa provides only for damages in cases of a breach or for refund or another flat. It does not allow for regularization of illegal structures, as the Supreme Court has held. “Regularization is a right of the owner or property developer, which comes under the MRTP Act. The consumer has no locus,” said Sathe. Citing the Campa Cola case, he said an amendment to the law was required to deal with a situation where for illegal constructions by developers, the eventual razing of illegal floors ought not take away the buyers’ rights.

“The moment there is a breach in Mofa, there should be an immediate transfer of title to the housing society so that they can exploit the rights to the land,” said Sathe, adding under the current law, Campa Cola did not have the rights to redevelopment on the plot. “If they did, they could have sought permission to construct another building on the plot.”

The city civil court had upheld the BMC’s demolition orders in an interim application in a suit filed by the residents. The suit is still pending. “The society can technically show it is entitled to the rights of the land, but it may take 20 years to establish that,” said Sathe. It would also be technically possible, said experts, to hold Pure Drinks responsible as a promoter who would be liable to convey the land to the society and pay damages.

The Supreme Court in February held “the buyers had consciously occupied the flats illegally constructed…”, and the “only remedy available… is to sue the lessee and developer for return of money or damages”. They cannot seek regularization. Demolition of illegal flats may be the immediate consequence, but eventually in the pending suit, Campa Cola can succeed in three things, said experts. The first is to get damages from the builder and promoter, the second is getting the land title and the third will be to get an order for construction with an amended sanction plan to use the unutilized FSI on the land, said Sathe.

Experts agreed the SC order was a wake-up call to those who seek regularization of illegal structures. Leading solicitor Fereshte Sethna said it was “essential to protect owners with a regulatory mechanism for sale of flats, to be followed by an escrow deposit on monies collected from investors, pending completion and lawful timely certificated hand-over of the new construction, coupled with liquidated penalties for delays, defaults”.

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