MAHRERA UPDATE | NON-NEGOTIABLE CLAUSES IN THE AGREEMENT FOR SALE
Maharashtra Real Estate Regulatory Authority (MahaRERA) recently published an (Order) regarding amending of certain clauses in the Agreement for Sale by the developers. When registering for a Real Estate Project, the promoters are required to upload the proforma of the Agreement for Sale. The Agreement for Sale must be in accordance with Annexure-A Rule 10 of the Maharashtra Real Estate (Regulation and Development) (Registration of Real Estate Projects, Registration of Real Estate Agents, Rates of Interest and Disclosures on Website) Rules,2017 (Rules). Amendment to the Agreement for Sale is permitted with certain restrictions. Despite the restrictions, developers have been making changes in certain clauses which are barred by the Rules. Hence the Order makes an absolute restriction for amendment of certain clauses. Any amendment to these certain clauses will be liable for the application for registration to be rejected.
Section 4(2)(g) of the Real Estate (Regulation and Development) Act, 2016 (RERA) mandates every promoter/developer to upload the proforma of the Agreement for Sale while making an application for registration of a real estate project. The Explanatory Note in the model form of Agreement under Annexure-A permits deviation from the given format depending on the circumstances of a respective case without amending the event, matter and substance mentioned in those clauses which are in accordance with the statute and mandatory under the RERA. MahRERA also published an order dated 3 June 2022 (Order I) mentioning that any deviation made from the format provided in Annexure-A must be highlighted in a different colour for speedy verification and to ensure the deviations are in accordance with the statute. Although the Order I mentioned that any modification to the Agreement for Sale which is contrary to the Act will be rejected subject to compliances made under Section 5 of RERA, there have been increasing number of cases wherein the promoters/developers are making material changes in the clauses which are prejudicial towards the buyers. This has prompted MahRERA to issue a new Order barring certain clauses as non-amendable by immediate effect.
The following clauses cannot be amended and must be implemented in the Agreement for Sale as provided under the Act and the Rules. It is pertinent to note that the Order categorically states the list provided in the Order is not exhaustive.
- Force Majeure:As per Section 6 of RERA, the definition of Force Majeure must only include natural calamities such as earthquakes, floods, drought that affect the development of the project. Further under Rule 6(a) of the Rules, the period for registration shall exclude when actual work could not be implemented as per sanctioned plan due to a stay or an injunction order.
- Time period for formation of Association of Allottees: As per Section 11(4)(e) of RERA, in the absence of local laws, the association of allottees shall be formed within a period of 3 (three) months of the majority of allottees having booked their plot or apartment or building.
- Time period for execution of registered conveyance deed with the association of allotees: As per Section 17 of RERA read with Rule 9 (2) in the absence of any local laws, the conveyance deed in favour of the allottees shall be carried out by the promoters/ developers within 3 (three) months from the date of issue of the Occupancy Certificate.
- Defect Liability Period: As per Section 14(3) of RERA, in case of any structural defect or defect in quality or any other obligations of the promoter(s)/ developers as per the Agreement for Sale from within five years from the date of hand over possession it shall be the duty of the promoter/ developers to rectify the mistake.
- Changes in carpet area: As per Annexure-A if there is a reduction in the carpet area after the construction of the building, which is contrary to the Agreement for Sale, the Promoter will refund the excess money paid by the allottees within 45 (forty-five) days with annual interest from the date such excess amount was paid by the Allottee.
- Termination of Agreement by promoter/developer for default of instalments by allottee: As per Annexure-A, the Developer/ the Promoter has the right to terminate the Agreement for Sale if the allotee commits 3 (three) defaults in payments provided the promoter gives the allottee a notice in writing and sends an email providing his intention to terminate the Agreement for Sale. If the allottee does not rectify the breach within the period of notice, then the promoter is entitled to terminate the Agreement for Sale, provided the promoter refunds the allottee the money already paid after final adjustment within thirty days of the termination.
Penalty for Non-Compliance
Any application of registration where there is a violation of any of these mentioned clauses in the Agreement for Sale shall be rejected.
The new Order is a welcome change for the protection of the rights of buyers. It will also help relieve the burden of the Courts, who are facing increasing litigations pertaining to prejudicial Agreement for Sales by attacking the problem at the inception of the project.
Although it is sceptical if there will be any real enforcement of the Order, as despite Order I being issued almost 6 months prior, which dealt with the same matter, it did not deter the promoters/ developers from altering clauses and receiving registration of application for real estate projects.
Author: Bhushan Shah - Partner | Shreya Dalal – Senior Associate
This update was released on 12 Jan 2023.
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