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Home > Real Estate, Wills, Probate and Trust > Remedies against unfair practices of builders and real estate developers
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Various Defaults Committed by Builders and Developers and their Remedies
1. Sub standard work:
  • In one of its judgment the Supreme Court of India has held that if a builder uses sub-standard material in construction of a building or makes false misleading representations about the condition of the house then it is denial of the facility or benefit of which a consumer is entitled to claim value.
  • In cases where the end product delivered to the allottee is of substandard quality the allottee has the remedy to file a consumer complaint in the consumer forum against the allottee for deficiency in services. In such cases the consumer forums have ordered the builders to remove the defects and also pay compensation to the allottee. The allottee also has an option to file a civil suit against the builder claiming damages for breach of obligations.
2. Construction without approvals:
  • The consumer forums have held that where the plot has been sold by the authorities without taking proper approval of the layout plans and as a result of which the possession could not be delivered to the prospective allottee, such an act on the part of the builder amounts to deficiency in service.
  • In case where the builder constructed the property without the required approvals from the authorities, the allottee can file a consumer complaint against the builder for deficiency in service. He can also file a civil suit against the builder for refund for amount. In such cases the allottee can also approach the regulatory authority that was to issue the required approval which can statutorily force the builder to obtain the approval.
  • In such case, subsequent to allotment of the plots, the Supreme Court had banned the construction activity in five km radius of Badkhal Lake and since the complainant’s plot fell within the said Supreme Court directions and the Commission directed the builder/developer to refund the amount along with interest, holding that the complainants/ allottees were entitled to compensation.
3. Construction on illegally acquired land:
  • In cases where the construction has been made on illegally acquired land, the allottee can approach the consumer forum or the civil court for his redressal. In such cases the allottee can either claim the refund of the amount invested by him in the property or he can ask for an alternate accommodation by the same builder.
  • The Supreme Court has held that even the advertisements inviting applications for allotment without having title to the land was deceptive and unfair trade practice of the builders.
4. Fraud in booking:
  • In cases of fraud in booking, the allottee can file a complaint against the builder in the consumer forum or file a civil suit in civil court. In case of fraud the allottee can also file a criminal complaint before the police.
  • In a case the Supreme Court has held that the name of the applicant not being considered at the time of the draw notwithstanding that the applicant had fulfilled all the requirements of the advertisement was held to be a ”deficiency in service” as such, an applicant had a right for consideration of his application along with similarly situated persons and if at the appropriate time his name had been considered and allotted a plot, he would have been able to raise construction thereon with the resources at his disposal.
  • It was held that by unduly and unlawfully denying him the opportunity of allotment, a reasonable and just compensation was required to be fixed and paid.
  • It was also held that a period of 9 months to a year is justifiable period to return the application fee without any interest, but if it can be demonstrated that the delay on the part of the Authorities in refunding the application fee was unreasonable, the courts have awarded interest notwithstanding that the brochure inviting the applications clearly provided that no interest would be paid by the Development Authorities.
5. Change of land use, layout plan and structures without the approval of the allottee:
  • If the builder wants to undertake additional construction, which is not part of the layout plan shown to flat allottees at the time of executing the purchase agreement he must obtain the consent of the allottee. In cases of the builder/developer makes changes in the use of land or in the layout plan and the structures with respect to the one given in the agreement, the allottee must send a legal notice to the builder and if he does not respond to the same the allottee can file a complaint against the builder in the consumer forum or file a civil suit in a civil court.
  • The allottee can also file a complaint before the Competition Commission of India if he is able to show that the builder is a dominant entity in the market and is misusing his position to the detriment of the allottee by unilaterally altering the layout plan or structures of the building.
6. Hidden charges:
  • If the allottee is overburdened by the excessive hidden charges in the allottee builder agreement, the allottee can file a civil suit in a civil court.
  • The allottee can also file a complaint before the Competition Commission of India if he is able to show that the builder is a dominant entity in the market and is misusing his position to the detriment of the allottee by unilaterally imposing exorbitant hidden charges.
7. Enhanced external development charges:
  • If the builder demands enhanced development charges from the allottees, the allottee can file a civil suit in a civil court.
8. Cancellation of booking/project:
  • If after receiving the booking amount the builder cancels the booking, the allottee can send him a legal notice regarding the same and in case the no solution comes out of the same or the builder does not respond to the notice, the allottee can file a consumer complaint against him fro refund for his booking amount.
  • The allottee can also file a civil case against the builder. The allottee can also file a criminal case against the builder.
9. Forfeiture of amount:
  • The terms and conditions of the agreement entered into between the builder and the allottee determines the refund of the booking amount. If the agreement contains an expert clause that the builder has right to forfeit certain percent of the booking amount, then there is no legal recourse. But if the agreement does not contain any such clause then the allottee can issue a legal notice to the builder.
  • The allottee can also approach a consumer forum in case the cancellation is on account of the delay caused by the builder in the completion of the project. The National Commission has held that if the request for refund is made by the allottee on the ground that there has been a considerable long delay in development or handing over of the possession of the plots, then the allottee can approach the consumer along with 18 per cent interest.
10. Delay in delivering possession:
  • In case of delay in delivery of possession by the builder, the legal options that are available to the allottee are to file a consumer complaint or file a civil suit against the builder for the refund of amount paid to the builder and the interest thereon.
  • In case of undue delay the buyer can also file a complaint before the Competition commission of India if the builder is a dominant entity in the market and using his dominant position to the detriment of the buyer.
  • The Supreme Court has held that when possession of the property is not given within the stipulated period, the delay is denial of service. Such disputes or claims are not with respect to immovable property but 'deficiency in rendering of service' of a particular standard, quality or grade.
  • A person who applies for allotment of a building site, or flat constructed by the development authority, or entered into an agreement with a builder or contractor is a potential user and the nature of construction is covered in the expression service of any description.
  • The Court also held that the compensation awarded by the consumer courts in such cases should serve the dual purpose of recompensing the individual while simultaneously bringing about a qualitative change in the attitude of manufacturers and service providers towards consumers.
  • In another case the Supreme Court has held that in a specific case, where it is found that the delay was culpable and there is no contributory negligence by the allottee resulting in harassment/injury, both mental and physical, the forum/commission would not be precluded from making an award in excess of 12% per annum.
  • National Consumer Commission has also held that the buyer is entitled to a refund of the entire money with reasonable interest, and any deduction by the builder is unjustified.
11. Creation of third party interests:
  • Where a builder creates a third party interest in the flat allotted to a person, the allottee can serve a legal notice to the builder and in case no response is given by the builder the allottee can file a consumer complaint against the builder or can file a civil case. The allottee can also file a criminal complaint against the builder for cheating and fraud.
12. Not providing completion certificate:
  • In case the builder has not received the completion certificate from the concerned authority, the allottee can file a RTI application with the SPIO of the local Municipality demanding the copies of all the documents submitted for seeking approval of the concerned authorities and can file the required NOCs with the concerned authority and can obtain the completion certificate himself.
  • If the builder has obtained the completion certificate and willing to give it to the allottee, then he can file a consumer complaint or file a civil suit against the builder.

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Introduction
Precautions to be taken by a prospective buyer
Remedies
Civil Court
Consumer Forum
Competition Commission of India
Regulatory Forums & Criminal Case
Various Defaults Committed by Builders and Developers and their Remedies
Conclusion
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