Cancellation
2 months ago
I have book the flat 1bhk in 2017 with 5%booking amount on tripartite agreement with the possession of 2019 .At the start the first disbursement of 10,000,00/-was done by DHFL but in 2018 I have suddenly got terminated from job due changes in SAUDI LABOUR LAW .Due to which I have requested them to cancel the booking without any charges but they refused .And later in 2018 we had a meeting and they said if you can continue will work out for something .We had a meeting and they had given certain calculations but the things didn't work for me because I had no job and for further financing the registration was required as per RERA . After RERA formation I come to know that the legal suit is going on at that particular land .During the Corona there construction was at peak and they completed 22floor .During that time also I have sent a mail and spoken with there manager that I will do registration and will pay you a certain amount line 5lakh in that year .afterword loan account get activated rest will be done .but they refused because they were asking for big amount like 15000-20000/-.but it didn't work and post Corona work is at complete halt .And legal case is still legal case is going on .
Please let me know in that case what we can be done .
A.Dear Client,
In cases of contract breaches, the terms of the contract guide the court on handling the advance deposit. If specified, the deposit will likely be refunded if the seller or builder fails to comply. Investing in a RERA-approved project provides buyers with secured rights, ensuring legal compliance and possession timelines. If a buyer's loan application is rejected, they can claim the advance payment as a booking amount. Government regulations on house cancellation or refund are absent, making it subjective to builder terms. While recovering the advance payment is possible, a cancellation fee may apply, as outlined in the agreement. Legal advice is recommended if documentation is insufficient.
In cases of contract breaches, the terms of the contract guide the court on handling the advance deposit. If specified, the deposit will likely be refunded if the seller or builder fails to comply. Investing in a RERA-approved project provides buyers with secured rights, ensuring legal compliance and possession timelines. If a buyer's loan application is rejected, they can claim the advance payment as a booking amount. Government regulations on house cancellation or refund are absent, making it subjective to builder terms. While recovering the advance payment is possible, a cancellation fee may apply, as outlined in the agreement. Legal advice is recommended if documentation is insufficient.
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A.Builders and Developers – How to Recovery Advance paid to them
INTRODUCTION:
The concept of advance payment or deposit is part of a contractual relationship between a buyer and a seller in transferring immovable property. However, it differs from security money, which generally indicates a buyer's interest in said property. It is considered part of a 'purchase money', the due amount of which is supposed to be paid on a future date, complying with the agreement signed between the parties.
LEGAL RIGHTS OF PROSPECTIVE BUYER
Referring to the buyer's right under property law, a prospective buyer, under section 55(6)(b) of the Transfer of Property Act, 1882, is entitled to a charge on the property against the seller or anyone claiming it under him, for the amount of purchase money (advance deposit) paid by him as part of the sale agreement. Therefore, when the buyer has not defaulted or breached any terms of the contract thereof, he has all the rights to use legal remedies available to protect his rights against a seller, i.e., builder/contractor, to claim their money (advance payment) back or ask for specific performance if possible.
LEGAL RIGHT OF BUYER TO CLAIM COMPENSATION
In addition, as per section 21 of the Specific Relief Act, the party who suffers from a breach of a contract by any means is entitled to receive compensation for any loss incurred by the damages caused to him by the party who is at fault or broken a contract as a pecuniary compensation due to a breach or loss. In such instances where the seller or contractor refuses to fulfil contractual obligations, a buyer can also charge him for a penalty if a penalty clause is inserted in an agreement.
MODES OF MISUSING THE ADVANCE AMOUNTS BY THE BUILDERS OR DEVELPERS
The cases of payment fraud by the side of builders or developers are prevalent by several means, such as
● Delaying the possession of the property beyond a reasonable time.
● Using advance payment or deposit money for new projects or personal use.
● By misrepresentation, where the property does not meet promised specifications,etc.
The purview of applicable laws is explained hereunder:
RELEVANT ACTS
The Indian Contract Act, 1872
The primary provisions of law regulating advance deposit or earnest money are sections 73 & 74 of the Contract Act. As per the general rule of the contract, if a party infringes the terms of a contract by any means, the buyer has the right to cancel the contract and obtain a refund of the advance deposit along with interest and compensation for any loss incurred. Hence, a buyer of the property under a valid contract is safeguarded under this Act.
The Specific Relief Act, 1963
Under section 20 of the Specific Relief Act, a defaulting party under the terms of a contract can be held liable to perform precisely what has been mentioned in the contract. Therefore, in the instances where a buyer is cheated by a builder/developer of a property and if a builder takes an unfair advantage by which the buyer has extreme hardship, the Court in such cases may exercise discretion in granting specific performance as a relief to a defendant/buyer.
The Consumer Protection Act, 1986 and the Indian Penal Code, 1860
Consumer courts have imposed huge penalties in various matters and assured that the possession of the flat or property is handed to a prospective buyer at the earliest or the entire amount is refunded along with interest and compensation. In cases where the builder has cheated, or the developer has made false promises, the buyer can file a criminal case under the Indian Penal Code, 1860, for cheating, breach of contract, or delivery of poor-quality construction. He can also file a consumer complaint regarding deficiency of services, delay in possession, or non-delivery of property/flat.
The Real Estate (Regulation and Development) Act, 2016, and RERA (Real Estate Regulatory Authority)
The interest of home/property buyers is protected under this Act regarding safeguarding their rights where they can file a complaint against the builder or a developer. Under the RERA Act, a minimum of 70% of the buyer's money will be kept in a separate escrow account that will ensure that the fundscollected for a particular real estate project arenot diverted to other projects undertaken by the builder/developer. However, builders cannot ask for more than 10% of the property's value as an advance payment before the sale agreement is signed. It also states that claiming a refund of the payment or an advance deposit is an exclusive right of a buyer. Thus, in instances where a builder or developer has cheated or violated the terms of a contract causing any loss or inconvenience to a buyer, a buyer is eligible to claim an advance deposit made by him with interest or a full refund with interest post the due date for up to 10% every month until handing over the property. The methods you can use as buyers as a remedy to take legal action against a seller or a builder are mentioned below.
LEGAL METHODS FOR RECOVERY OF ADVANCE PAID
Send a legal notice
Sending a legal notice to a seller or builder is theforemost step in any property dispute,whether for payment recovery or for a specific performance where alegal breach of a contractual relationship has occurred. A lawyer or an attorney dealing with a property dispute or contract lawyer can assist in drafting a proper legal notice describing the appropriate grounds and reasons for it. If the builder refuses or doesn't respond within the stipulated time of sending such notice, he can take the next legal step in the procedure.
File a complaint under RERA
First, a buyer must check if the builder is registered under RERA. If yes, he can easily file a complaint online on the registered portal of RERA to raise a complaint against the seller to obtain relief and to claim a refund or advance payment.
Moving to a Consumer Forum
A buyer can also approach a consumer court to file a complaint against the seller for a criminal breach of trust or fraud. In addition, Consumer courts have ordered exemplary compensation like 65 lakhs and 18% interest compensation. In the matter of Unitech, Jaypee group was penalized with a 12% annual penalty for its NOIDA project.
Court Precedent
Videocon Properties Ltd. v. Dr Bhalchandra Laboratories and Others [(2004) 3 SCC 711]
In this case, the Supreme Court examined the nature of the advance deposit. The Court took the view that the words used in the agreement alone would not be determinative of the character of the "earnest money", but the intention of the parties and the surrounding circumstances must be considered to know whether an initial payment is an essential advance deposit.
Conclusion
When the contract contains a clause as to what is to be done with the advance deposit in the event of a breach of contract, the Court must be guided by the terms of the contract. Hence, the advance deposit will be refunded in case of non-compliance with the contract by the seller or builder. Additionally, when a buyer invests in a project approved by RERA, their rights as a buyer are secured. RERA ensures legal compliance and possession timings. Also, a buyer can claim an advance payment made to a builder as a booking amount if his loan application is dishonoured for any reason. One must know that the government lays out no rules or conditions regarding the cancellation of the house or refund the booking amount. It is subjective to your understanding of your builder or developer. So, the advance payment can be recovered in such cases, but a buyer might have to pay a cancellation fee, as mentioned by a builder in the agreement. If a buyer has not maintained the documents or documented the property purchase, he may not be able to get the refund. In this case, one can consider taking legal advice.
*****
INTRODUCTION:
The concept of advance payment or deposit is part of a contractual relationship between a buyer and a seller in transferring immovable property. However, it differs from security money, which generally indicates a buyer's interest in said property. It is considered part of a 'purchase money', the due amount of which is supposed to be paid on a future date, complying with the agreement signed between the parties.
LEGAL RIGHTS OF PROSPECTIVE BUYER
Referring to the buyer's right under property law, a prospective buyer, under section 55(6)(b) of the Transfer of Property Act, 1882, is entitled to a charge on the property against the seller or anyone claiming it under him, for the amount of purchase money (advance deposit) paid by him as part of the sale agreement. Therefore, when the buyer has not defaulted or breached any terms of the contract thereof, he has all the rights to use legal remedies available to protect his rights against a seller, i.e., builder/contractor, to claim their money (advance payment) back or ask for specific performance if possible.
LEGAL RIGHT OF BUYER TO CLAIM COMPENSATION
In addition, as per section 21 of the Specific Relief Act, the party who suffers from a breach of a contract by any means is entitled to receive compensation for any loss incurred by the damages caused to him by the party who is at fault or broken a contract as a pecuniary compensation due to a breach or loss. In such instances where the seller or contractor refuses to fulfil contractual obligations, a buyer can also charge him for a penalty if a penalty clause is inserted in an agreement.
MODES OF MISUSING THE ADVANCE AMOUNTS BY THE BUILDERS OR DEVELPERS
The cases of payment fraud by the side of builders or developers are prevalent by several means, such as
● Delaying the possession of the property beyond a reasonable time.
● Using advance payment or deposit money for new projects or personal use.
● By misrepresentation, where the property does not meet promised specifications,etc.
The purview of applicable laws is explained hereunder:
RELEVANT ACTS
The Indian Contract Act, 1872
The primary provisions of law regulating advance deposit or earnest money are sections 73 & 74 of the Contract Act. As per the general rule of the contract, if a party infringes the terms of a contract by any means, the buyer has the right to cancel the contract and obtain a refund of the advance deposit along with interest and compensation for any loss incurred. Hence, a buyer of the property under a valid contract is safeguarded under this Act.
The Specific Relief Act, 1963
Under section 20 of the Specific Relief Act, a defaulting party under the terms of a contract can be held liable to perform precisely what has been mentioned in the contract. Therefore, in the instances where a buyer is cheated by a builder/developer of a property and if a builder takes an unfair advantage by which the buyer has extreme hardship, the Court in such cases may exercise discretion in granting specific performance as a relief to a defendant/buyer.
The Consumer Protection Act, 1986 and the Indian Penal Code, 1860
Consumer courts have imposed huge penalties in various matters and assured that the possession of the flat or property is handed to a prospective buyer at the earliest or the entire amount is refunded along with interest and compensation. In cases where the builder has cheated, or the developer has made false promises, the buyer can file a criminal case under the Indian Penal Code, 1860, for cheating, breach of contract, or delivery of poor-quality construction. He can also file a consumer complaint regarding deficiency of services, delay in possession, or non-delivery of property/flat.
The Real Estate (Regulation and Development) Act, 2016, and RERA (Real Estate Regulatory Authority)
The interest of home/property buyers is protected under this Act regarding safeguarding their rights where they can file a complaint against the builder or a developer. Under the RERA Act, a minimum of 70% of the buyer's money will be kept in a separate escrow account that will ensure that the fundscollected for a particular real estate project arenot diverted to other projects undertaken by the builder/developer. However, builders cannot ask for more than 10% of the property's value as an advance payment before the sale agreement is signed. It also states that claiming a refund of the payment or an advance deposit is an exclusive right of a buyer. Thus, in instances where a builder or developer has cheated or violated the terms of a contract causing any loss or inconvenience to a buyer, a buyer is eligible to claim an advance deposit made by him with interest or a full refund with interest post the due date for up to 10% every month until handing over the property. The methods you can use as buyers as a remedy to take legal action against a seller or a builder are mentioned below.
LEGAL METHODS FOR RECOVERY OF ADVANCE PAID
Send a legal notice
Sending a legal notice to a seller or builder is theforemost step in any property dispute,whether for payment recovery or for a specific performance where alegal breach of a contractual relationship has occurred. A lawyer or an attorney dealing with a property dispute or contract lawyer can assist in drafting a proper legal notice describing the appropriate grounds and reasons for it. If the builder refuses or doesn't respond within the stipulated time of sending such notice, he can take the next legal step in the procedure.
File a complaint under RERA
First, a buyer must check if the builder is registered under RERA. If yes, he can easily file a complaint online on the registered portal of RERA to raise a complaint against the seller to obtain relief and to claim a refund or advance payment.
Moving to a Consumer Forum
A buyer can also approach a consumer court to file a complaint against the seller for a criminal breach of trust or fraud. In addition, Consumer courts have ordered exemplary compensation like 65 lakhs and 18% interest compensation. In the matter of Unitech, Jaypee group was penalized with a 12% annual penalty for its NOIDA project.
Court Precedent
Videocon Properties Ltd. v. Dr Bhalchandra Laboratories and Others [(2004) 3 SCC 711]
In this case, the Supreme Court examined the nature of the advance deposit. The Court took the view that the words used in the agreement alone would not be determinative of the character of the "earnest money", but the intention of the parties and the surrounding circumstances must be considered to know whether an initial payment is an essential advance deposit.
Conclusion
When the contract contains a clause as to what is to be done with the advance deposit in the event of a breach of contract, the Court must be guided by the terms of the contract. Hence, the advance deposit will be refunded in case of non-compliance with the contract by the seller or builder. Additionally, when a buyer invests in a project approved by RERA, their rights as a buyer are secured. RERA ensures legal compliance and possession timings. Also, a buyer can claim an advance payment made to a builder as a booking amount if his loan application is dishonoured for any reason. One must know that the government lays out no rules or conditions regarding the cancellation of the house or refund the booking amount. It is subjective to your understanding of your builder or developer. So, the advance payment can be recovered in such cases, but a buyer might have to pay a cancellation fee, as mentioned by a builder in the agreement. If a buyer has not maintained the documents or documented the property purchase, he may not be able to get the refund. In this case, one can consider taking legal advice.
*****
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A.Dear Client,
The RERA empowers the homebuyer to cancel an allotment of the apartment booked with a builder at any stage even if there is no default on the part of the developer. It binds the builder to return the money collected from the buyers within 45 days of such cancellation after deducting the booking amount. Without an agreement to sell, the builder can accept up to 10% of the amount of cost of the flat as booking money and if you cancel the booking without the builder's fault, the builder is entitled to forfeit the booking amount since they have experienced a loss due to the booking cancellation. It is cited in a recent MahaRERA circular, which states a promoter/builder is allowed to forfeit just 2% of the amount in case of cancellation of a booking by an allottee. MahaRERA issued a circular in August last year regarding the prescribed format for allotment letters, which permitted the promoter to forfeit only 2% of the consideration amount if the booking is cancelled 61 days after issuance of the allotment letter. In the given situation, if the housing project is approved by RERA, for any deviation or deficiency in service on receipt of the cost of service on the part of the Builder/Developer, he shall be held accountable for the same. If the matter is not resolved from the end of the Builder/Developer despite your tireless efforts, then serving a legal notice, file a complaint individually or collectively with other buyers who are equally affected by such deficiency under Sec.31 of the Real Estate (Regulatory and Development) Act, 2016 before the Adjudicating Officer claiming compensation for the deficiency and deviation in construction. Or else you can file a complaint against the Builder for deficiency in service and unfair trade practice before the Consumer Court under Sec.35 of the Consumer Compensation Act, 2019 serving a legal notice claiming compensation for harassment and cost of litigation and/or file a civil suit for specific performance against the Builder/Developer before a Civil Court for appropriate relief in the matter. The complaint should be filed before the Consumer Court within two years from the date of the cause of action, i.e, from the date the Builder failed to your booking money or failed to deliver the possession as per the deadline. It may be noted that you cannot raise your complaint/claim simultaneously before the Consumer Court and RERA for the same cause of action at a time. Reach out to an experienced Advocate handling Consumer cases and RERA cases for guidance and steps.
The RERA empowers the homebuyer to cancel an allotment of the apartment booked with a builder at any stage even if there is no default on the part of the developer. It binds the builder to return the money collected from the buyers within 45 days of such cancellation after deducting the booking amount. Without an agreement to sell, the builder can accept up to 10% of the amount of cost of the flat as booking money and if you cancel the booking without the builder's fault, the builder is entitled to forfeit the booking amount since they have experienced a loss due to the booking cancellation. It is cited in a recent MahaRERA circular, which states a promoter/builder is allowed to forfeit just 2% of the amount in case of cancellation of a booking by an allottee. MahaRERA issued a circular in August last year regarding the prescribed format for allotment letters, which permitted the promoter to forfeit only 2% of the consideration amount if the booking is cancelled 61 days after issuance of the allotment letter. In the given situation, if the housing project is approved by RERA, for any deviation or deficiency in service on receipt of the cost of service on the part of the Builder/Developer, he shall be held accountable for the same. If the matter is not resolved from the end of the Builder/Developer despite your tireless efforts, then serving a legal notice, file a complaint individually or collectively with other buyers who are equally affected by such deficiency under Sec.31 of the Real Estate (Regulatory and Development) Act, 2016 before the Adjudicating Officer claiming compensation for the deficiency and deviation in construction. Or else you can file a complaint against the Builder for deficiency in service and unfair trade practice before the Consumer Court under Sec.35 of the Consumer Compensation Act, 2019 serving a legal notice claiming compensation for harassment and cost of litigation and/or file a civil suit for specific performance against the Builder/Developer before a Civil Court for appropriate relief in the matter. The complaint should be filed before the Consumer Court within two years from the date of the cause of action, i.e, from the date the Builder failed to your booking money or failed to deliver the possession as per the deadline. It may be noted that you cannot raise your complaint/claim simultaneously before the Consumer Court and RERA for the same cause of action at a time. Reach out to an experienced Advocate handling Consumer cases and RERA cases for guidance and steps.
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