Status on- 18/09/2021
Real Estate projects are not always developed on the lands owned by the builders only, it has become a normal practice among builders to execute a Memorandum of Understanding with the real owners of the land to share profits with them and promote the project as their own. This is also a tactic to avoid payment of stamp duty and other ancillary charges payable on transfer of land.
In extreme hurry to enjoy huge profits out of these projects, the builders sometimes do not follow the proper procedure of due diligence over the title of the land which have draconic results. Any defect in the title of the land causes severe setback to the real estate project and finally it is the allottee that have to suffer. The defect in title or encumbrances over the property restricts the builder’s liability to transfer title of the property.
Defective title or defect in title could be due to various reasons. Some of them are-
There may be a dispute or defect in title of the owner of the land from whom the builder has received the land. Such owner cannot transfer absolute or clear title upon the builder.
Dispute between builder and seller over payment
There are various incidents where the builder has promoted the projects and received advances from the buyers without absolute transfer of title of the land upon them and during the payment period dispute arises between them and ultimately the deal gets cancelled. The buyers are left with no option than to receive the payments back.
Fraud with builder
It is a possibility that the builder becomes a victim of the fraud due to lack of proper due diligence.
Will or inherited
In case of inherited property, there are more chances of disputed title as these properties are subject to will, probate, letter of administration or a succession certificate.
Proper lease/disputed lease
Taking land on lease to develop the project is also a very common method. Execution of the proper lease deed, its registration, payment of other ancillary charges is required.
Remedies with relevant provisions-
After introduction of RERA, it has become compulsory for the builders to register the project with the RERA Authority before its promotion. RERA Authority registers any project after proper enquiry and due diligence about the project, plans, approvals, etc., which decreases the possibility of any defect in title of the land.
But even if after the registration of the project, any defect comes into light which creates any problem in completion of the project, RERA Act provides remedy for the same.
Section 18(2) of the RERA Act states that:
“Return of amount and compensation:
….. (2) The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.…”
It specifically provides the relief of refund to the buyer allottees, if any such dispute or defect arises later.
To avail this remedy, the buyer has to file a complaint before the RERA Authority under section 31 of the Act. The RERA Authority passes the order to pay interest, penalty or compensation considering the circumstances of the case and factors mentioned in Section 72.
Section 40 of the Act provides that if the promoter fails to pay any interest or penalty or compensation imposed on him, by the Authority, it shall be recoverable from the promoter as an arrear of land revenue.
Section 11(4)(c) of the Act is also relevant when the project land is taken on lease. It is the responsibility of the builder to obtain the lease certificate specifying the period of lease and also certifying that all dues and charges in regard to the leasehold land has been paid. Builder is also responsible to make the certificate available to the association of allottees.
Further, the petition can be filed before NCLT under the provisions of the IBC Laws to revise the project.
It is the duty of the buyer to be cautious and do proper due diligence to satisfy himself about the title of the land before making any bookings into the project. But no law is absolute and if any issue arises after the booking, the buyer allottees must not delay in reaching the RERA Authority, after proper legal consultation, for adjudication of the dispute and availing the remedies provide under the Act.
Disclaimer– The above article is based on the personal interpretation of related laws and judicial pronouncements, which may differ person to person. The readers are expected to take expert advice while placing reliance. For more information, please contact at firstname.lastname@example.org