Safe Obligations

RUCHIT S PARIKH and ARADHANA BHANSALI elaborate upon MOFA and other rules and regulations developers must follow when constructing a new building. It is commonly perceived that it is a cakewalk for developers to construct a new building. However, the truth differs. Right from the nascent stage of developing a project till all the flats in the newly constructed building are sold, they have to follow several rules and regulations, comply with several obligations and procure several permissions, approvals and sanctions, not only under any one particular statute but under different enactments depending upon the scheme and stage of development. The checklist During pre-construction, developers have to establish the zone in which the property falls along with the existing reservations, if any, with respect to the property under the provisions of the Maharashtra Regional and Town Planning Act, 1966. Thereafter, they have to procure various permissions and approvals at various stages of construction. Further, where the development scheme involves slum redevelopment and/or ceased properties and dealing with authorities for slum (ie the Slum Rehabilitation Authority) or other authorities, such as the Maharashtra Housing and Area Development Authority or any other such competent authority, the developers have to follow the rules, regulations and procedure laid down by such authority in addition to the rules, regulations and procedure laid down by the planning authority viz the Municipal Corporation. Moreover, while selling a flat, they have to follow and comply with several obligations and have to take on several liabilities under the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, or MOFA. Understanding MOFA MOFA was introduced on the recommendations contained in a report submitted in June 1961 by a committee appointed by the state government to ameliorate and curb malpractices and sundry abuses in the promotion of the construction of sale, management and transfer of flats on ownership basis in Maharashtra and regulate the same. Under the provisions of MOFA, developers are obliged to: Execute with each flat purchaser an agreement for sale and registration. Make full disclosure of the title of the entire property, including the flat, the nature of construction, particulars of amenities to be provided in the flats or building and the period within which the possession of the flat would be handed over to the flat purchaser. Make payment of outgoings of the flat till it is transferred to the flat purchaser. Maintain a separate bank account with respect to any and all sums taken by it from the prospective purchasers under any name and utilise such sums only for the purpose for which they were taken by the developers. Refund to the purchaser all the monies received from him with an interest at the rate of 9 per cent per annum from the date of receipt of such payments, in case the developers fail to deliver possession of the flat to the purchaser within the agreed period or mutually extended period. Take steps for the formation of a cooperative society or limited company or condominium (the Organisation), as soon as the minimum number of persons required for doing so have taken the flats. Complete the title with respect to the property and convey to the organisation all its rights, title and interest in the property within the agreed period, and where no such period is agreed upon then, within four months from the date of registration of such organisation. Not make any alteration in first the flat described in the plans disclosed to the purchaser, and second, the structure described in the plans disclosed to the purchasers, in each case, without procuring previous consent of all the purchasers. Developers take To avoid taking the consent of all flat purchasers to modify or amend the layout plan, during the initial stage, developers take a blanket consent from them in advance in the agreement for sale to carry out changes in the building plan with respect to the flat and/or the building concerned in the manner the developers think fit without disclosing the nature of the alterations or amendments the developers intend to make in the flat or building. Pursuant to the consent of the purchasers, the developers make alterations, additions and modifications in the building structure after obtaining all the approvals and, in certain cases, even after the receipt of the occupation certificate. However, such unauthorised construction may cause damage to the building and lead to accidents and calamities. In a recent mishap in which a fire broke out in the 22-storeyed Lotus Business Park in Andheri, Mumbai and claimed the life of a fire fighter, serious lapses emerged on the part of the builders. According to the fire officials, there were gross violations like blatant use of construction voids and blockage of pathways in the building. It also emerged that the entire top floor of the building was constructed illegally. Further, there was neither any fire fighting system, nor sprinklers or water in the tanks. Another perspective on the matter is that the increased compliances, obligations and liabilities imposed upon the developers under MOFA have resulted in a steep increase in the rate of corruption and unauthorised construction. While MOFA was enacted to protect flat purchasers and has a benevolent objective, it has most certainly increased the number of compliances, obligations and liabilities upon developers, thereby driving many to find new and innovative ways of breaking the shackles. And finally All considered, it is evident that either owing to a genuine paucity of space in metros or to make more profits, many developers tend to reduce the minimum areas required for open spaces, passageway and recreational areas. That said, not all developers can be tarred by the same brush - today, there are a host of respected developers who not just comply with the rules, regulations, obligations, responsibilities and liabilities imposed upon them under different statutes, but go a step further and provide additional comfort and protection to purchasers. Prospective buyers, choose carefully! Permission and approvals a developer must not miss! Site inspection from Building Proposal Office Building layout approval Intimation of disapproval Submission of structural plans approved by structural engineer Provisional and final no-objection certificate from Tree Authority, Storm Water and Drainage Department, Sewerage Department, MOEF (under environmental laws), Electric Department, Traffic and Coordination Department, Fire Department and Airport Authority of India (if required) Commencement certificate Inspection of plinth and site from time to time Building Completion Certificate and Complete Occupation Certificate. Judicial verdicts: Some recent judgements passed by the Supreme Court Campa Cola (Mumbai): In this matter, the Supreme Court came down heavily on the flat purchasers who had occupied the illegally constructed buildings knowing that the same were constructed in violation of the sanctioned plans and permissions and observed that "the MOFA obligates the promoter to obtain sanctions and approvals from the concerned authority and disclose the same to the flat purchasers, and provides for imposition of penalty on the promoters. However, the provisions contained in MOFA do not entitle the flat buyers to seek a mandamus for regularisation of the unauthorised or illegal construction." Essentially, the Court underlined the responsibility of the flat purchasers to be diligent while purchasing a flat and not assume blanket protection under the provisions of MOFA. DLF: The Competition Act, 2002, was enacted to prevent practices having adverse effect on competition, to prohibit use of dominance and to protect the interests of consumers. Under the Competition Act, 2002, an allottee can file a complaint against the unfair practices of a builder (who is a dominant entity in the market) before the Competition Commission of India (CCI). In a landmark order, CCI imposed a penalty of Rs 630 crore on DLF while holding that it had indulged in unfair practice and market dominance. It found DLF guilty of beginning work on a residential project without approvals, increasing the number of floors midway through the project, delaying completion, and forfeiting the booking amount of the allottee. In an appeal before the Competition Appellate Tribunal (COMPAT), the COMPAT while confirming the order passed by CCI held that although the clause in the agreement authorised DLF to construct additional floors, the construction of additional floors without any intimation and consent amounted to abuse of dominant position by DLF. About the Author: With experience of three years, Ruchit S Parikh (left) is an Associate and Aradhana Bhansali (right) with experience of 12 years, is a Partner with Rajani, Singhania & Partners, New Delhi. To share your legal perspective, write in at feedback@ASAPPmedia.com