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What to do when a Builder Delays Possession of Property?

With the launch of RERA when there has been a lot of confusion for choosing the right forum to opt for, this blog share details on all three legal remedies available for the aggrieved home buyers if the builder delays possession of the flat.
Written by:
Prachi Darji
Published on
20-Sep-19

Buying a flat, a house or any property from your hard-earned money and not getting it on time can be very frustrating. Moreover, when the builder stops taking your call and keeps on delaying the possession of your dream house, it takes away all your energy, focus and mental peace. You not only lose your money in EMIs and rent payments but also this mental agony could disturb your household and harmony. Fighting a legal battle is both tedious and tiring. The idea of sending a legal notice to the builder gives you nightmares. 

The real estate sector has been suffering because of this chronic problem for years. This is one of the reasons why the Government felt the need for a sector-specific forum and RERA was born. As per the estimates, in Delhi NCR alone, more than 3 lac home buyers are waiting for possession despite making 90% of their price. It's hard to keep paying interest to the bank while you are staying on rent. The great Indian dream of having your own house turned into a nightmare.

The RERA has empowered the buyers; however, the recent awareness to reach out to various forums such as NCLT and NCDRC has caused panic amongst errant builders and turmoiled real estate sector. But once the dust settles, owning houses and flats will become easy for the buyers.

Table of Content:

  1. Real Estate Regulatory Authority (RERA)
  2. Consumer Forum
  3. National Company Law Tribunal (NCLT)
  4. Comparative analysis of the legal options available to an aggrieved home-buyer
  5. What are the benefits of filing in RERA vs. NCDRC
  6. Frequently Asked Questions

In this blog, we talk about the legal remedies available to you as a buyer if your flat possession is indefinitely delayed by the builders. “If you buy a flat and the builder continues to delay the possession of the flat, then you can send a written complaint to the appropriate dispute redressal forum as per the value of your flat, or the amount of the damages you have suffered. The disputes between 20 lakhs to 1 crore can be filed before the SCDRC while the disputes over Rs. 1 crore can be filed with the NCDRC in New Delhi,” recommends Advocate Mohd Faris.

“You can also file a complaint to RERA of your respective state claiming your refund along with the interest or damages,adds Mr. Faris.

A buyer can file a case and send legal notice to the builder for delay in possession under the RERA Act, 2016 or transfer their case from a CDRC to the State Real Estate Regulatory Authority. According to this Act, a builder will have to pay 10% interest on the value of the property for delayed possession of flats. Aggrieved home-buyers can approach three forums for resolution of their grievances:

  • Real Estate Regulatory Authority (RERA): 

    RERA is a dedicated court for the resolution of disputes arising in the real estate sector. Established in 2016, the RERA Act is still in its development phase. With its appellate body, RERA Appellate Tribunal, its jurisdiction lies in all real estate matters. The complaints under RERA can be filed for any claim amount but in the cases where the occupancy certificate has already been granted, then a complaint can not be filed. It allows the buyers to get the total Refund of payment with interest or Monthly interest till handing over of possession by the builder.

    RERA Act clears out each case typically within 60 days and its court fees vary from Rs. 1,000 to Rs. 5,000 for different states with the litigation costs within Rs. 25,000 to Rs. 75,000 (with execution).

  • Consumer Forum:

    Passed in 1986, Consumer Protection Act enables the buyers to file a complaint for ‘deficiency in service’ against the builder. Continuing from 1986, this act is successfully established with its Appellate Body District Forum to SCDRC (State Consumer Dispute Resolution Commission), SCDRC to NCDRC (National Consumer Dispute Resolution Commission ) and NCDRC to Supreme Court. Under this act, the buyers can file complaints in the Dispute forum claiming up to Rs. 20 Lakh, while filing the complaint in SCDRC for Rs 20 lakh to Rs. 1 Crore and in NCDRC for more than Rs. 1 Crore. It enables the buyers to get a refund with interest or possession with delay compensation for mental harassment, litigation costs, etc.

    As per the act, the Consumer Forum takes about 1 or 2 years to solve a case and its court fees vary from Rs. 2,000 to Rs. 5,000. The litigation of District Forum costs about Rs. 10,000 - 20,000, Rs. 30,000 - 60,000 for SCDRC and Rs. 60,000 - 2,00,000 for NCDRC.

  • National Company Law Tribunal (NCLT):

    In case the builder is unable to continue or finish the real estate project, insolvency proceedings can be initiated by the buyer under the insolvency and Bankruptcy Code established in 2016. This well-established law with its appellate body National Company Law Appellate Tribunal (NCLAT) solves cases for the registered companies having a bad financial condition with a disputed amount of above Rs. 1 lakh. It compensates the company owner with the dissolution of the company and enables them to claim their share upon liquidation.

    The average time of judgment (as per the act) taken to resolve a case is typically within 9 to 12 months. Its court fee is Rs. 25,000 with the litigation cost varying for any individual from 60,000 to 1,50,000 and for NCLT Group (10+) from 30,000 to 50,000 per person.

 

Comparative analysis of the legal options available to an aggrieved home-buyer.

Points of difference

Real Estate Regulatory Authority (RERA) Consumer Forum National Company Law Tribunal (NCLT)
Legislation/ law Real Estate (Regulation and Development) Act, 2016 Consumer Protection Act, 1986 Insolvency and Bankruptcy Code, 2016
Establishment New law; still in development phase Well established Well established
Appellate Body RERA Appellate Tribunal District Forum to SCDRC* SCDRC to NCDRC** NCDRC to Supreme Court National Company Law Appellate Tribunal (NCLAT)
Jurisdiction All real estate matters. However, if the occupancy certificate has been granted, then a complaint cannot be filed. It can be filed for any claim amount. File in Dispute forum – Claims up to Rs. 20 Lakh File in SCDRC – From Rs 20 lakh to Rs. 1 Crore File in NCDRC – more than Rs. 1 Crore  The bad financial condition of a registered company with a disputed amount above Rs. 1 lakh
Compensation Refund of payment with interest OR Monthly interest till handing over of possession Refund with interest OR Possession with delay compensation for Mental harassment, litigation costs, etc. Dissolution of Company, and claiming your share upon liquidation
Time frame of judgement (as per Act) Typically within 60 days Typically within 1-2 years Typically within 9-12 months 
Implementation of orders Weak (Execution can be filed in cases where orders are not implemented) Strong Strong
Court Fees Varies from Rs. 1,000 to Rs. 5,000 for different states Rs. 2,000 to Rs. 5,000 Rs. 25,000 
Litigation Cost Rs. 25,000 - 75,000 (With Execution) District: Rs. 10,000 - 20,000 SCDRC: Rs. 30,000 - 60,000 NCDRC: Rs. 60,000 - 2,00,000 Individual: 60,000 - 1,50,000 NCLT Group (10+): 30k-50k per person 

** NCDRC – National Consumer Dispute Resolution Commission

* SCDRC – State Consumer Dispute Resolution Commission

  • Prior to the enactment of the Real Estate Regulatory Authority Act, 2016, aggrieved home-buyers had the option of approaching the consumer court to address their grievances.

  • However, with the enactment of the RERA Act and the Insolvency and Bankruptcy Code, 2016, aggrieved home-buyers now have access to even more fora for speedier remedial actions.

  • The protection provided by the Insolvency and Bankruptcy Code through NCLT is limited in nature and is only relevant when a company becomes insolvent or bankrupt or is in any manner, not able to pay the debt owed by it.

  • The adjudicating mechanism under RERA is still in its nascent stage and is under development. There have been several instances where enforcement and implementation of orders of RERA have been an issue.

  • Hence, currently, home-buyers are best served by seeking relief from the developer/ builder under the consumer protection laws by approaching the appropriate consumer court.

What are the benefits of filing in RERA vs. NCDRC?

RERA is a dedicated court for cases from the real estate sector. Hence, it is expected that the speed and rate of disposal of cases would be significantly faster. On the other hand, NCDRC is a consumer forum and has jurisdiction over all kinds of consumer disputes. The primary differences between RERA and NCDRC are:

Issue

Real Estate Regulatory Authority (RERA) National Consumer Disputes Redressal Commission (NCDRC)
Prescribed time period for  judgment 60 days No prescribed time period
Financial jurisdiction Dispute of any amount can be filed Only disputes of more than Rs. 1 crore can be filed
Action Against Builder Errant builder can be imprisoned for up to three years Does not have the power to imprison a builder
Appellate body An appeal can be filed to real estate appellate authority and after the appellate authority to the High Court of the state where the property is situated and then finally to the Supreme Court. Supreme Court
Enforcement of orders Weak; as the legislation is still in its nascent stage Strong; well-established mechanism
Cognizance Can take issue notice to errant builders on its own motion Can act only on complaints
Investigation Can conduct investigation Cannot conduct investigations

 

Frequently Asked Questions:

How and where can I appeal against an unfavorable RERA judgement?

An appeal against a RERA judgment can be filed to Real Estate Appellate Authority as a matter of right. In case of an unfavorable judgement in Real Estate Appellate Authority, it can be appealed in the High Court of the state where the property is situated and then finally to the Supreme Court. However, the High Court and the Supreme Court can refuse to admit the appeal in case the grounds for appeal are not well established by the appellant.

How and where can I appeal against an unfavorable NCDRC judgement?

An appeal against NCDRC judgment can be filed directly in the Supreme Court.

Why are RERA orders not implemented?

There have been various media reports stating that there is a problem in the implementation of orders given by RERA. This simply means that while the time taken for RERA to give an order is short, the builder/ developer do not readily comply with the order and delay its implementation. Hence, the home-buyer has to take an additional step of filing an execution petition to get the order enforced.

However, these problems are prevalent as the RERA is a new legal mechanism and is still in the nascent stage. Regardless of the slow implementation and various challenges, RERA is game-changing legislation for the real estate industry. Once the adjudicatory and regulatory mechanisms are in place and fully functional, home-buyers will be able to get justice quickly.

Why should I file in NCLT as an Individual rather than a group as the cost of litigation is very high in filing individually?

If you initiate insolvency proceedings against the builder in National Company Law Tribunal (NCLT), the entire corporate entity of the builder can get dissolved. In case of an individual filing, the chances of a builder offering an out-of-court settlement become higher to prevent his company from getting wound up. On the contrary, the builder may not be in a position to offer an out-of-court settlement to a large group of home-buyers.

How and where can I appeal against an unfavorable SCDRC judgement?

You can appeal against the judgment/ order of the state consumer forum in the national commission i.e. The National Consumer Disputes Redressal Commission (NCDRC) within a period of 30 days from the date of the order. The appellant is required to enclose the original copy of the order against which the appeal is being preferred along with the Appeal petition and annexures. If a person wants to appeal against the order of the State Commission to the National Commission and he is directed to pay the compensation amount as per the SCDRC order, then the person is required to deposit 50 percent of the compensation amount of Rs. 35,000/-, whichever is less with the National Commission. However, there is no separate fee for filing an appeal before the national commission.

How and where do I file a complaint against a builder?

The builder needs to be a CREDAI member in order to file a complaint against him or her. A Consumer Grievance Redressal Forums has been established by CREDAI enabling an affected buyer to register his complaint against the builder. This complaint can be filed online – directly on the official website.

What happens if the Builder does not follow the RERA order?

In case the builder fails to enforce the order passed by the RERA Authority in favor of the home buyer, the home buyer can file an application for the execution of the RERA order against the builder with the same RERA Authority.

How long can a builder delay?

The builder can delay to almost six years or more, with no possession in sight.

What are the RERA penalties for the delay in possession?

Under the RERA act, builders can be imprisoned for up to three years, or have to fill a fine extended to 10% of the estimated cost of the real estate project, or both, if being non-compliant with the Act. Also, the developers are liable to rectify the structural defects arising within five years of handing over the possession of the project to buyers without any charges.

What is the format of the legal notice sent under RERA against the builder for delay in possession?

Here is the RERA format of the legal notice against the builder for delay in possession:

MyAdvo_Complaint Draft Under RERA