Builders not liable to pay for delays

Builders not liable to pay for delays
04/12/2017 , by , in News/Views

The Maharashtra Real Estate Regulatory Authority has for the first time expanded the scope of reasons beyond a builder’s control.

The authority upheld a city builder’s claim that a 2009 project was delayed due to change of law, administrative conflicts and “incorrect classification of the plot as CRZ II’’ —reasons beyond his control. Hence, the builder is not liable to pay compensation to a flat buyer for a “justified’’ delay of seven years in handing over possession, it held.

This is the first time the scope of reasons beyond a builder’s control has been expanded.

The order for the first time expands the scope of reasons beyond a builder’s control to include administrative conflict, and judicial pendency, as under RERA, unless delay is due to force majeure—which includes only natural calamities—a developer would have to pay compensation.

The builder had said that incorrect classification under CRZ was rectified by an HC order last year, and the work is now nearing completion. The builder promised he would give possession of a 3BHK flat booked for over Rs 1 crore at 44-storeyed Imperial Heights, Goregaon west, by March 2018. The authority directed that if it is not handed over by that date, the builder would have to pay interest as provided under the Act, till possession is given.

RERA member Vijay Satbir Singh’s order came on a complaint made by flats buyers Sharan Lund and Vandana Lund. Their lawyer Mustafa Kanchwala argued that the builder must expedite giving possession after getting occupancy certificate and also pay a compensation with 12% interest per annum for the delay. The Lunds had booked the flat in 2009 and the sale agreement promised possession before March 2011. The Act allows a buyer to seek compensation for delay beyond date in agreement.

The builder, Epitome Residency Pvt Ltd, through its lawyer Vibhav Krishna said the delay was not due to any wilful violation of any provision of the RERA Act, but due to “external reasons, administrative uncertainties, policy paralysis and force majeure’’. The project was earlier being constructed by the Wadhwa group, which in 2017 underwent a reorganisation.

The plot is held by the BEST and was to be developed with private participation for the first time, leading to “procedural delays’’. The development agreement was executed in 2007, allowing the builder to use a huge transfer of development rights (TDR) potential of 60,000 sq m. But the BMC initially refused to approve the plan till 2014, but later a government notification permitted TDR use. Krishna added that the approval granted by then CM Ashok Chavan in 2010 was stayed by his successor Prithviraj Chavan for 16 months before approving it again. The project papers were destroyed in the Mantralaya fire and it took a year to reconstruct the file.

The plot was ‘wrongly classified as CRZ-II in 2006. A decade later, the builder moved the HC to challenge the ‘error’. The classification meant TDR restrictions. It was given non-CRZ status in October 2016. His case was also that the development control regulations were amended in 2012 which made additional floor space available and plans were amended till 2015.

The order noted that the builder had in 2012, “unable to resolve the insurmountable obstacles…informed purchasers about the delay and gave them the option to cancel the bookings and take refunds.’’ In October 2016, the builder offered buyers the refund option.

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