Real estate projects: Apex court stresses on need for model builder-buyer agreement

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October 05, 2021 4:30 AM

A bench comprising Justices DY Chandrachud and BV Nagarathna issued a notice to the Centre on a batch of public interest litigations on the lack of a uniform form for agreements entered into between builders, agents and buyers.

Real EstateSenior counsel Vikas Singh and Menaka Guruswamy argued that there should be a model agreement for states to adopt

Stressing on the need to have a model builder-buyer and agent-buyer agreements in the real estate sector, the Supreme Court on Monday said it will examine the “important issue”. It also sought response from the Centre as to why such uniformity should not be there across the country so as to avoid deliberate delays and exploitation of home buyers by developers.

A bench comprising Justices DY Chandrachud and BV Nagarathna issued notice to the Centre on a batch of PILs led by BJP leader and advocate Ashwini Kumar Upadhyay on lack of a uniform form for agreements entered into between builders, agents and buyers. It also said that in the absence of model agreement, flat purchasers are left at the mercy of developers who delay transfer of possession and often re-draft delivery schedules on their whims and fancies.

“West Bengal had enacted an identical law like RERA, but we struck it down as it failed the test of repugnancy,” Justice Chandrachud said.

However, the apex court refused to entertain some petitions filed by homebuyers who wanted a direction to the developers to compensate for the delay in giving possession of their flats. The Bench said that these homebuyers can approach alternate fora like consumer courts for relief.

The apex court said, “Uniform builder-buyer agreement is required to be framed by the Centre to protect interests of lakhs of home buyers. This is an important issue on protection of buyers, often put on back foot by clauses in agreements made by builders… It is very important for consumer protection because builders try to put any number of clauses in the agreement which common people may not be aware of. It is important that this (model builder buyer agreement) is achieved in the country.”

Senior counsel Vikas Singh and Menaka Guruswamy argued that the Real Estate and Regulatory Authority Act, 2016, there should be a model agreement for States to adopt and the Centre was enjoined to frame a model agreement to ensure transparency, and fairness and to restrain builders and agents from indulging into unfair and restrictive trade practices.

The absence of “model builder-buyer and agent-buyer” agreements across the country have been the main cause behind the fraud, lack of transparency, criminal conspiracies and unfair and arbitrary trade practices in the real estate sector, they submitted.

Singh argued that not a single state had framed agreements to maintain transparency and there were many cases of deliberate delay in handing over possession. The police did not register First Information Reports on the complaints lodged by buyers, he said.

“Builders issue revised delivery schedule again and again, adopted unfair practices… All this amounts to cheating, conspiracy, criminal breach of trust, dishonestly inducing delivery of property, violation of corporate laws,” Upadhyay said in his petition.

The lawyers told the SC that Section 41 of the RERA mandated the establishment of a Central Advisory Council and Section 42 says that the Council would ensure the implementation of the Act. However, the court prima facie said the RERA did provide sufficient enabling powers to the Council to make Rules to prevent buyers from being exploited.

Frame a model builder-buyer agreement and model agent-buyer agreement to infuse transparency, ensure fair play, reduce frauds and deliberate delays, restrain builders/promoters/agents from indulging into arbitrary, unfair and restrictive trade practices and to protect the rights and interests of customers in the spirit of the RERA Act of 2016, the petitions said.

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