My comments against Union Territories of Chandigarh, Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep’ (Agreement for Sale) Rules, 2016 are as follows:
1. Rule 3(2) of (Agreement for Sale) Rules, 2016 stipulates
“Any application letter, allotment letter, agreement, or any other document signed by the allottee, in respect of the apartment, plot or building, prior to the execution and registration of the agreement for sale for such apartment, plot or building, as the case may be, shall not be construed to limit the rights and interests of the allottee under the agreement for sale or under the Act or the rules or the regulations made thereunder.”
My Comments:
Present form of rule 3(2) of (Agreement for Sale) Rules, 2016 is reproduction of contents of draft rule 9(3) of Real Estate (Regulation and Development) Rules, 2016 which has been made for the purpose of overriding previously signed allotment letter. It is submitted that Real Estate Act 2016 has not been made applicable retrospectively. Every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. It is well settled that rights and benefits which have already been earned or acquired under the existing rules cannot be taken away by amending the rules with retrospective effect. [See: N.C. Singhal v. Director General, Armed Forces Medical Services - 1972 (4) SCC 765; K.C. Arora v. State of Haryana - 1984 (3) SCC 281; and T.R. Kapoor v. State of Haryana - 1986 Supp. SCC 584]. IT is well settled that “Parliament and State Legislatures have plenary powers of legislation on the subjects within their field. They can legislate on the said subjects prospectively as well as retrospectively. If the intention of the legislature is clearly expressed that it purports to introduce the legislation or to amend an existing legislation retrospectively, then subject to the legislative competence and the exercise being not in violation of any of the provisions of the Constitution, such power cannot be questioned."
A stipulation or provision whereby limiting, reducing, restricting, enlarging, providing “any right” of / to a person is amounting to law. It is settle proposition of law that a rule neither provide nor limit a right of person. Clause (h) of sub-section (2) of section 84 read with sub-clause (i) of clause (g) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) does not provide any power to the Central Government to legislate rather it provides provide power / authority to make rules for carrying out the provisions of the Real Estate Act 2016.
Hence previously signed allotment letter prior to the execution and registration of conveyance / sale deed should not be allowed to be overridden. Arrangements between the parties based upon letter prior to the execution and registration of conveyance / sale deed would be adversely affected.
2. Clause 1.2 of annexure “A” i.e. draft of Agreement for sale mandates to provide break up of interalia proportionate cost of common areas
My Comments:
Neither it is not possible to provide proportionate cost of common areas nor is it advisable to provide the same as common area would of a project would be used by all the apartment owners in terms of applicable laws. There may be apartments of different area and as such apartment owners having greater area have to bear the more cost in compare to apartment owners having lesser apartment area. In this circumstances, there is apprehension that apartment owners having greater area may create hindrance in using the common area by apartment owners having lesser apartment area stating that apartment owners having greater area have paid more.
3. (a) Explanation No. (iii) of Clause 1.2 of annexure “A” i.e. draft of Agreement for sale mandates “The Promoter shall periodically intimate to the Allottee, the amount payable as stated in (i) above and the Allottee shall make payment within 30 (thirty) days from the date of such written intimation. In addition, the Promoter shall provide to the Allottee the details of the taxes paid or demanded along with the acts/rules/notifications together with dates from which such taxes/levies etc. have been imposed or become effective;”
(b) A promoter has further been imposed with liability to intimate the Allottee acts/rules/notifications together with dates from which such taxes/levies etc. have been imposed or become effective
My Comments:
Explanation No. (iii) of Clause 1.2 of annexure “A” i.e. draft of Agreement for sale imposes liability upon the promoter intimate to the Allottee periodically about the amount payable under the payment plan / schedule of payment. It is submitted that copy of proposed draft of Agreement for sale would be available with both the parties i.e. promoter and allottee. Basic rule of contract is that each party must made liable to perform its own contractual obligation to save its own interest. Since the particulars of agreement for sale is being prescribed by government as such a promoter should not be imposed with liability to intimate the Allottee periodically about the amount payable under the payment plan / schedule of payment. Section 61 of the estate act 2016 stipulates “If any promoter contravenes any other provisions of this Act, other than that provided under section 3 or section 4, or the rules or regulations made thereunder, he shall be liable to a penalty which may extend up to five per cent. of the estimated cost of the real estate project as determined by the Authority.”. Hence a promoter may be penalized which may extend up to five per cent. of the estimated cost of the real estate project if it fails to intimate to the Allottee periodically about the amount payable under the payment plan / schedule of payment. Failure of a promoter to intimate the Allottee may be due to non-updation of change of address by the Allottee or due to like nature.
In the present form of democratic setup, it is the liability of the government to make known to all applicable acts/rules/notifications together with dates from which such taxes/levies etc. have been imposed or become effective. It is not expected from the government to fasten some else to discharge the liability of the government. It would be nothing but an arbitrary exercise of power/authority by the government. As such a promoter should not be imposed with liability to intimate the Allottee about applicable acts/rules/notifications together with dates from which such taxes/levies etc. have been imposed or become effective especially when violation of such liability has been made penal with serious penalty.
4. Clause 1.3 of annexure “A” i.e. draft of Agreement for sale mandates “The Total Price is escalation-free, save and except increases which the Allottee hereby agrees to pay, due to increase on account of development charges payable to the competent authority and/or any other increase in charges which may be levied or imposed by the competent authority from time to time…………. the Promoter shall enclose the said notification/order/rule/
My Comments:
A universal mandate that price of an apartment ought not mandated by government escalation-free as due to frequent change in policy by the government and certain other reason, price of certain commodities, services, diesel, salaries, wages etc frequently changes. A promoter has to review price of an apartment to meet out increase in price of certain commodities, services, diesel, salaries, wages etc otherwise it would be nothing but corporate death penalty for real estate sector. Further apartment would be unnecessary costlier due to this clause that would be against the spirit of the Real Estate Act 2016. To achieve the intention of the government - escalation-free price, Circumstance may be created for escalation-free price by giving certain tax exemption to those real estate project that have escalation-free price.
In the present form of democratic setup, it is the liability of the government to make known to all applicable acts/rules/notifications together with dates from which such taxes/levies etc. have been imposed or become effective. It is not expected from the government to fasten some else to discharge the liability of the government. It would be nothing but an arbitrary exercise of power/authority by the government. As such a promoter should not be imposed with liability to enclose the said notification / order / rule / regulation while raising a demand on the Allottee.
5. Clause 1.7 of annexure “A” i.e. draft of Agreement for sale mandates “…………….If there is any reduction in the carpet area within the defined limit then Promoter shall refund the excess money paid by Allottee within forty-five days with annual interest at the rate specified in the Rules, from the date when such an excess amount was paid by the Allottee. If there is any increase in the carpet area allotted to Allottee, the Promoter shall demand that from the Allottee as per the next milestone of the Payment Plan……..”
My Comments:
This is against the spirit of the Real Estate Act 2016 that mandates “the rate of interest chargeable from the allottee by the promoter, in caseof default, shall be equal to the rate of interest which the promoter shall be liable to pay the allottee, in case of default;”
6. Clause 1.12 of annexure “A” i.e. draft of Agreement for sale mandates “The Allottee has paid a sum of Rs, __________________ (Rupees ______________________________
My Comments:
Section 13(1) of the Real Estate Act 2016 allows a promoter to collect “an application fee” but it does not provide that said application fee would be treated as part payment towards the Total Price. The Act only restrict that application fee would not be more than ten per cent of the cost.
As such mandate to treat booking amount as part payment towards the Total Price would be unnecessary hardship upon a promoter especially promoter is bound to pay different taxes / cees/ surcharges sometimes retrospectively.
7. Clause 7.6 of annexure “A” i.e. draft of Agreement for sale mandates “The Promoter shall compensate the Allottee in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed,………..”
8. Clause 8.(i) of annexure “A” i.e. draft of Agreement for sale mandates that promoter has to represents and warrants to the Allottee “The [Promoter] has absolute, clear and marketable title with respect to the said Land;
My Comments:
Neither there is any already established conclusive title system nor the Real Estate Act 2016 establishes a conclusive title system. There is neither any definition of the terms “legal title” to the land in the Transfer of Property Act 1882 neither there is any statutorily recognized procedure to ascertain “legal title” to the land. The Transfer of Property Act 1882 only uses the terms documents of title for conveyance deed. Judiciary used to define the term “title” case to case basis. It may be noted that the Transfer of Property Act 1882 uses the terms “property” while the Real Estate Act 2016 uses the terms “land”. Therefore either using the term “title”, the term ownership must be used or term “title” must be defined and a procedure must be recognized to ascertain “legal title” to the land. In absence of this, a promoter may be penalized for its no default on this account.
Always the land is not purchased and sometimes the builder also uses the Mode of Collaborations, Joint Venture. Therefore, in such a scenario who is going to submit the title document and non-encumbrance certificate.
In absence of this, a promoter may be penalized for its no default on this account. Hence this clause needs to be modified accordingly.
9. Clause 8.(iii) of annexure “A” i.e. draft of Agreement for sale mandates that promoter has to represents and warrants to the Allottee “There are no encumbrances upon the said Land or the Project”
My Comments:
As of now, neither there is any already established conclusive title system to ascertain whether a land is free from all encumbrances nor the Real Estate Act 2016 establishes a conclusive system to ascertain encumbrances upon land. There is no statutorily recognized procedure to ascertain whether a land is free from all encumbrances. Hence a competent authority needs to be created to keep the record of the details of all encumbrances in or over a land, apartment or building. In absence of this, a promoter may be penalized for its no default on this account. Hence this clause needs to be modified accordingly.
10. Clause 8.(iv) of annexure “A” i.e. draft of Agreement for sale mandates that promoter has to represents and warrants to the Allottee “There are no litigations pending before any Court of law with respect to the said Land, Project or the [Apartment/Plot];”
My Comments:
As of now, neither there is any already established conclusive title system to ascertain litigations pending before any Court of law with respect to a Land nor the Real Estate Act 2016 establishes a conclusive system for that. Hence a competent authority needs to be created to keep the record of the details of all encumbrances including pending litigation in or over a land, apartment or building. In absence of this, a promoter may be penalized for its no default on this account especially in case of a project based on collaboration / joint venture with land lord / land tenure holder with transferable right. Hence this clause needs to be modified accordingly.
11. Clause 11 of annexure “A” i.e. draft of Agreement for sale mandates “The Promoter shall be responsible to provide and maintain essential services in the Project till the taking over of the maintenance of the project by the association of the allottees. The cost of such maintenance has been included in the Total Price of the [Apartment/Plot]…..”
My Comments:
Due to aforesaid clause, apartment would be costlier that would be against the spirit of the Real Estate Act 2016. Further a clause must be inserted stating the liability of payment of maintenance charges if the association of the allottees refused to take over of the maintenance of the project.
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