Status as on- 28/01/2020
Real Estate Sector is the major sector that is facing economic slowdown within the previous couple of years with job losses, unfinished projects, and impending litigation. Due to slump in the Real estate sector, mergers & acquisitions have increased over the last few years for revival of the stuck projects. Due to ongoing economic slowdown in the real estate industry, it had been predicted that due to the unavailability of funds from banks and developers getting bankrupt, small developers will get into joint ventures, mergers, and acquisitions for their survival within the market. Therefore, keeping in mind the situation of the Indian economy, it had been a well-thought move of the legislature to include Section 15 under RERA.
There could be innumerable situations where you as a promoter voluntarily or involuntarily will need to change the control of the project or transfer or assign your rights to the third party for any reason. If you are a promoter facing issues in transferring the rights to a third party or a new promoter.
We seek to elucidate the procedure to be followed by the promoter when third party rights are created by promoter
Section 15 and MahaRERA Circular No. 24/2019 provides the procedure for transferring or assigning the promoter’s rights and liabilities to a third party the procedure. The intention of the legislature in formulating Section 15 was to guard the interest of homebuyers when third party rights are created by the promoter and provide for obligations of a new promoter. It specifically deals with the consolidation and collaboration issues and provides for the procedure to be followed when there is a change in a promoter of a project due to merger or amalgamation.
“The promoter shall not transfer or assign his majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent from two-third allottees, except the promoter, and without the prior written approval of the Authority”.
The procedure to be followed by a promoter for obtaining aforesaid approvals of MahaRERA and two-thirds of the allottees, and also certain sorts of transfers that are exempted from the need to get the aforesaid approvals.
PROCEDURE TO BE FOLLOWED FOR APPROVAL
The procedure for transfer of rights to a third party where the transfer is initiated by the promoter is as follows:
- The promoter will have to apply to MahaRERA with the consent of two-third allottees, to seek permission to transfer its rights and liabilities to a third party. The promoter shall need to write to the Secretary, MahaRERA, on firstname.lastname@example.org prescribed format.
- Then on receiving the request, Secretary shall initiate action through the legal wing who would take necessary steps to obtain approval of MahaRERA, which may include scheduling a hearing. MahaRERA has to pass an order within one month of filing of such application, it can either approve or reject the application of transfer with or without any conditions.
- Pursuant to receipt of the approval for the transfer from MahaRERA, the new promoter shall within 7 days apply for necessary corrections in the existing registration details. He is also required to upload required supporting documents in its name like land title, building plan approval etc., upon obtaining the same from time to time. The new promoter shall upload on the web site of RERA, a registered undertaking stating that they will comply with all the obligations under agreement of sale executed by the erstwhile promoter with respect to the Allottee(s) of the project and has assumed all the obligations of the erstwhile promoter under the Act.
EXEMPTIONS FROM APPROVAL
2/3rd Consent of allottees and consent of regulatory authority is not required in the following cases:
1. Change in internal shareholding or constituents of promoter’s organisation
In case of changes in internal shareholding or constituents of promoters organisation will not affect the rights and liabilities of allottees and promoter’s organisation, above-mentioned approvals are not required.
2. Conversion of promoter entity
In case of conversion of any promoter entity from(i) partnership firm to LLP or private limited company, (ii) private limited company or unlisted company to a LLP or otherwise, (iii) proprietorship change by succession to legal heirs.
3. Amalgamation or merger of companies
In case of mergers of companies wherein amalgamation is initiated by promoter and amalgamating company has one or more project registered under RERA and one of the projects is transferred, the promoter is required to obtain 2/3rd consent of allottees however such approval is not required when: i) all liabilities of the amalgamating company relating to the demerged undertaking, should be transferred to the amalgamated company /resulting companyii) 75% of the shareholders remain same in the resultant company, the same shall not require the aforesaid approvals of Allottee (s) under section 15 of the Act.
4. Transfer by financial institutions/creditors
In case of enforcement of security by lenders either by operation of law or by way of enforcing the security wherein charge or security is disclosed on the RERA website in the details of the project. In such cases approval of allottees is not required but intimation to regulatory authority is required which is as follows:
i) the promoter shall write to the Secretary, MahaRERA, on email@example.com manner prescribed within seven days of being aware of such transfer.
ii) The Promoter shall also inform each allottee of the Project of such transfer.
iii) Moreover, a Financial institution or creditor initiating such transfer is required to intimate within 7 days to each of the Allottee(s) and Secretary MahaRERA on firstname.lastname@example.org.Sov.in of enforcement of the security which has resulted in the transfer.
iv) The Financial Institution or creditors (acting as a new promoter) or new promoter (appointed by such financial institution or creditors) shall then apply for necessary corrections in the existing registration details and the procedure is the same.
Disclaimer– The above article is based on the personal interpretation of related laws, which may differ from person to person. The readers are expected to take expert opinion before relying on this article. For more clarification, the readers can be expected at email@example.com or firstname.lastname@example.org