Action against Builder for Delayed Possession

Delay in delivery of possession by the builder is when the builder fails/does not deliver the possession of the residential property within the stipulated time, as decided in the agreement between the buyer and the builder/developer.

Delay in delivery of possession by the builder

Let us understand the process in detail. A Builder-Buyer Agreement is signed between a builder and a buyer, whenever a person invests in an immovable property. The stipulated time within which the property/possession has to be handed over to the buyer is stated in this Agreement. When the possession is not transferred or delivered by the builder to the buyer within the stipulated time period (in some cases, even after the extension period), it is a delay in delivery by the buyer.

It has been seen many a time that the builder does not abide by this Agreement (by delaying the delivery of the residential property). Some builders delay the possession from the decided time also because of some malpractices such as shortage of funds. It has been seen that sometimes alterations in designs and plans of the property are also made without the knowledge of the buyer.

In case there are some genuine reasons for the delay in completion, the builder can seek an extension in time. However, if the property is not delivered even after the extension period, it is a delay in delivery and/or possession of the property.

However, the liability of the builder arises only when the delay is due to his own fault. If the delay is due to any calamity, or situation which is beyond the control of humans, the buyer would not succeed in an action against the builder.

The question that now arises is whether these buyers remain remediless. Thankfully, the answer to this is a clear “ NO” . The law has provided some remedies to ensure that the aggrieved buyers get justice and do not easily get duped by faulty builders.
 

What are the actions that a buyer can take against the builder in case of a delay in delivery?

It is important that the buyers are made aware of what remedies are available against the builders if they have been wronged. No specific statute providing for provisions and punishments against builders existed, until the passing of the RERA (Real Estate Regulation Act) in the year 2017.

A buyer should be aware of his rights in case he is duped. For this, understanding aspects of property law and contract law, along with RERA and consumer laws is necessary. Read on to understand the most important laws and the remedies available under them, for aggrieved buyers:-

1. RERA (REAL ESTATE REGULATORY AUTHORITY ACT)

Under RERA, each State is required to establish a “ Regulatory Authority” - a special body to deal with matters relating to the real estate sector. Given below are the important provisions given under RERA that can help ensure justice to the buyer-

• Compulsory Registration: Every builder/developer is required to register their projects with the Regulatory Authority, except in cases where the project is smaller/less than 500 square meters, and if the number of apartments is lesser than 8.

• Publishing details of the project: After the Regulatory Authority grants registration, it is mandatory for the builder/developer to publish details of the project on the Regulatory Authority website. The registration is only valid for a period of time (as stated in the project application) which is required by them to complete that project. The Regulatory Authority has the right to revoke the registration, once the time period is over.

• Buyer's right to withdraw from the project: If the builder/developer has not handed over the possession of the unit/property within the time period mentioned in the agreement, or in case the registration for the project has been suspended/revoked, the buyer has the right to completely withdraw from that particular project.

• Buyer's right to compensation after withdrawing: A buyer has a right to get fully compensated (i.e. the entire amount one has paid to date, along with interest). This right is available to the buyer as soon as the date passes by. However, at this stage, there is no requirement to file a complaint or case against the builder. You should be compensated by him simply upon a request made by you.

• Buyer's right to compensation without withdrawing: If in case the buyer does not wish to withdraw from the said delayed project, he will have the right to get compensation with interest, for each month of delay. This interest amount differs from state to state.

• Right to file a complaint against builder: If in case the builder/developer refuses to compensate you, it is your right to file a complaint against him. This complaint is to be filed before the Regulatory Authority. An officer is required to be appointed by each Regulatory Authority. This officer would perform all the functions of a judge. He/She will conduct an inquiry and pass appropriate orders once it has been proved that the buyer should actually get the money spent and the interest. Although you can appear yourself, it is advised that you appoint a lawyer to represent you. The Regulatory Authority is required to dispose of the complaint within 60 days, however, if the authority requires more time, it will have to give its reasons for doing so. If in case you are unsatisfied with the decision of the officer, you can file an appeal before the appropriate appellate tribunal (to be set up by each state) within 60 days. RERA being a fairly new law, each State has not implemented/carried out the functions as stated therein. Since the States are still in the process of doing so, it may be possible that Regulatory Authorities and Appellate Authorities may not have been set up. The buyer would have to check if the State in which the property is located, has set up these authorities or not. If such RERA authorities are not yet set up, the buyer can seek other remedies as stated below.

2. CONSUMER COMPLAINT IN CASE OF DELAY:

If the buyer has bought the property for the purpose of residence, or if the source of livelihood for the person is the rent from that property (for ex. if the builder is constructing the property on your/buyer's land), the buyer has an option to seek redressal through the Consumer Court by making a consumer complaint, instead of going to the Real Estate Regulatory Authority.

A buyer is able to make a complaint in the consumer forum as a consumer as he/she has paid for a service from the builder and there is a deficiency (delay) from his end (in this particular service). A complaint can be filed in District, State, or National Consumer Courts, depending upon the value of the property and the compensation that a buyer is claiming.

The complaint should be filed as early as possible from the date upon which the buyer was supposed to get possession. Consumer Courts have been seen in the past to be aiding in getting faster relief than other authorities in case of builder delay. As has been evidenced, temporary relief, settlement with the builder party, and compensation are easier to get under this option.

It is advised to take the help of a lawyer to file a written complaint in the appropriate Dispute Redressal Forum/Commission under the Consumer Protection Act. A claim can be made for the losses even if the possession is delayed by just one day. In addition to this, when there is delayed possession, a buyer can even make a claim for interest upon the payment that has already been made for the flat. The step of approaching the Consumer Forum can also be preceded by a legal notice to the builder, with the help of a lawyer. Follow the steps given below to file a consumer complaint against a builder:

• Legal Notice: Send a well-drafted Legal Notice to the builder stating your reasons of discontent (delay, etc.)

• Response: Await a response for the stipulated time from the other party.

• Complaint: Depending upon the response (or no response) prepare a petition/complaint, stating all the facts and evidence with the help of expert legal advice.

• Filing of the Complaint: Approach the Consumer Court and file the petition against the builder.

3. CIVIL SUIT / WRIT PETITION IN HIGH COURT:

In States where Regulatory Authorities have been set up, no buyer can file a case before a civil court or writ petition before High Courts. In recent times it has been seen that some High Courts have redirected cases filed before it, stating that the buyer must approach the appropriate Regulatory Authority in that particular State. However, since RERA is a new law, in case there is no such Authority, the buyer may still have an option to file a civil suit.

A civil case, whenever appropriate, should be filed in the area where the property is located, or where the defendant/respondent (builder) carries on his business.

4. ARBITRATION:

If in the agreement, an arbitration clause exists, the buyer should refer the case to the arbitrator instead of going to a civil court. Arbitration is a process of resolving a dispute with the help of an arbitrator(s) - a third party, which gives its decision via an award. Through this, the arbitrator(s) would decide if the builder has deviated from the agreement or not.

The arbitrator, in his order, would declare whether there is default by the builder, and the compensation he is liable to pay to the buyer if any. However, this order may have to be brought into force by approaching a civil court.

5. CRIMINAL CASE:

In some cases, a criminal case may be filed if the developer/builder deliberately refuses to hand over possession of the property in order to keep the money. You can also sue him/her for criminal fraud, criminal deceit or criminal breach of trust under the Indian Penal Code. If the builder is convicted in criminal cases, the sentence could include jail time, however, the compensation to the buyer is not guaranteed.

6. National Company Law Tribunal (NCLT):

If the builder is incapable of completing a real estate project, the buyer has the option to initiate insolvency proceedings as per the Insolvency and Bankruptcy Code of 2016. This legal framework includes the National Company Law Appellate Tribunal (NCLAT), which specializes in resolving cases involving registered companies facing financial distress with disputed amounts exceeding Rs. 1 lakh. The NCLAT facilitates the dissolution of the company, allowing the company owner to lay claim to their share during the liquidation process. The average case resolution time is 9 to 12 months as per the act, with a court fee of Rs. 25,000. Legal costs range from Rs. 60,000 to Rs. 1,50,000 for individuals and Rs. 30,000 to Rs. 50,000 for NCLT Group (10+).

Consumer Court vs RERA vs CREDAI: Which body is applicable?

Consumer Court

Consumer courts, staffed with experienced judges nationwide, have decades of experience handling thousands of cases. They are the go-to choose for legal recourse against builders. But they operate at a slower pace and can only provide compensation or refunds, which are more limited compared to RERA.

Filing a Consumer Complaint

It is advisable to hire a property lawyer when dealing with consumer court matters. Here's the simplified process:

1. Send a legal notice to the builder with a specified response time.

2. Await the builder's response if they compensate willingly, the dispute resolves. Otherwise, proceed to the next step.

3. File a petition with the Consumer Court, including details of the builder, yourself, the agreement, payment proof, grievance, property, and compensation sought.

4. Court fees vary from Rs 100 to Rs 5000 based on the claim's value.

You should go to the appropriate consumer court based on your claim's value.

1. If your claim is for an amount less than Rs. 20 lakh, please visit the District Consumer Dispute Redressal Forum.

2. You can seek assistance from the State Consumer Commission if your claim falls within the range of Rs. 20 lakhs to Rs. 1 crore.

3. If the amount exceeds Rs 1 crore, you should contact the National Consumer Dispute Redressal Commission.

RERA

In most Indian states, RERA appellate authorities have been established. If your state has a functioning RERA authority, it is advisable to consider approaching it before resorting to the consumer court. The primary rationale for this is the requirement to resolve cases within 120 days. Furthermore, RERA considers factors such as consumer interests and project completion dates when awarding compensation.

How to Fine an Online Complaint Against a Builder with RERA

1. Navigate to the State Portal of RERA.

2. Locate the Complaint Registration section and provide the necessary information about your grievance.

3. Include your details and attach any evidence or documents to substantiate your claim.

4. Note that fees typically begin at Rs 1000, but they may go up to Rs 5000 for cases handled by an Adjudicating Officer.

CREDAI

The final choice is CREDAI, the Confederation of Real Estate Developers Association of India, but the specified builder must be a registered member of this organization.

Ways a builder may defraud or cheat you:

1. Misrepresentation during booking: Builders may provide inaccurate information regarding flat size, material quality, or floor plan.

2. Booking/project cancellation: They may cancel your booking or the entire project with flimsy explanations.

3. Third-party interests: Builders can place your flat under mortgage, lease, or license without your consent.

You can file a criminal complaint against the builder for cheating and fraud. Bombay High Court views cheating by developers as a criminal offense, not a civil dispute. If needed, hire a lawyer for assistance. The criminal justice process may be lengthy and intricate, so stay patient and persistent. A successful complaint could lead to compensation or penalties for the builder.

Criminal Suit Against a Builder in India

1. Builder Fraud: If your builder deceives you or breaks promises, you can file a criminal suit against them.

2. Criminal Case: Fraud or cheating is a criminal offense under the Indian Penal Code, 1860. To pursue this, you must file an FIR with the police.

3. Consumer Complaint: Alternatively, you can file a consumer complaint for service deficiencies, such as possession delays or non-delivery of flats.

4. Consumer Courts: Consumer Courts treat these issues seriously, often imposing hefty penalties and ensuring prompt possession or full refunds.

Procedure to file a criminal complaint against a builder in India:

1. Start with a formal legal notice to the builder, specifying the grievance, evidence, and desired resolution.

2. If the builder does not respond, file a police complaint, providing builder details, grievance nature, and evidence.

3. If the police do not act, file a criminal complaint with the metropolitan magistrate, backed by evidence.

4. Present proof, like builder-buyer agreement, payments, photos, and expert opinions.

5. Attend all court hearings to avoid potential warrants for non-appearance.

Remedies that can be obtained in action(s) against the builder for delay in possession:

The buyer/complainant can seek the following reliefs through legal resources. However, a buyer should always consult a lawyer to understand what remedy should be sought in accordance with the facts and circumstances of the buyer's case.
 

1. Compensation: According to RERA, a buyer may claim up to 10% compensation if the delay was caused by the builder without justification. A buyer can also claim compensation under consumer cases.
 

2. Refund: If the construction is not yet underway or in its early stages, you can request a full refund. You can use the refund to purchase another property. The court can, if it is satisfied that a builder has been at fault, and that the buyer was forced to suffer hardships as a result, order that the builder refund the full amount. It may also direct the builder that they pay for all litigation costs. Builders are required by RERA to hold the funds/money received from buyers in a separate account. These funds cannot be used for anything else.
 

3. Punishment: If the builder is late in delivering the project, they are at risk of losing their registration. They may also be jailed.
 

4. Completion of project: The court can order the builder to finish the project in accordance with the agreement made between the buyer, the builder and the court. The court may also give the builder extra time to finish the construction. In civil cases, courts will often grant this relief.
 

5. If your contract stipulates that the builder must pay a fixed penalty if he delays the delivery of possession, a court can order him to do so. Even if the contract does not contain such a clause, you may still seek compensation for your mental agony. You can also seek damages for the rent a buyer would have been entitled to (but was not due to the delay) until the possession of the house is handed over.
 

6. Interest: A buyer may also claim interest for payments made to the builder till date. Many states have laws that protect buyers. The Maharashtra Ownership Flat Act of 1963 is an example. It states that the builder must refund the money to the buyer with 9 % interest. if he/she cannot justify his/her delay in transferring the property.
 

What are the problems faced by the homebuyers?

Buying a home is a dream for many. The entire journey from the idea of buying a property to finally moving into the new address is a wholesome experience. However, the most stressful part of putting your money into an under-construction property is the uncertainty of possessing that property.

Even though tall claims about the early transfer of property are made by the builders, more often than not, the wait is stretched and tiring.

According to the statistics and estimates, more than 14 Lakh flats/apartments/units have crossed the promised date of delivery of possession and are not yet handed over to the homebuyers/consumers in India. Many invest in homes but are soon disappointed due to the delay and other tactics of the builders/developers to avoid delivery. The challenges faced by a homebuyer are many. The errant builders often sell defected projects to investors. The builders may also use several tactics to delay the possession of the property.

Some of the major concerns of the aggrieved homebuyers are:-

• Delay in delivery of the unit for possession as discussed earlier.

• The demand for extra charges is based on excuses by the builder, at the time of handing over of the unit to the buyer.

• The frustration of the purpose of purchase by the homebuyer, due to major changes in the layout plan/building plan, by the builder.

What are the other instances in which a buyer can file a case against a builder?

A buyer can take legal action against the builder in the following situations/cases:-

• Non-Execution: In case the builder does not execute the relevant sale agreement despite having received a substantial advance amount.

• Non-Issuance of Docs: In case the builder fails to issue copies of all relevant documents viz. development agreement, power of attorney, sanctioned plan (by concerned Regional Authorities), specification of construction materials/design as per sanctioned plan, and/or any other relevant documents.

• Charges: In case the buyer is charged higher than the amount agreed between the parties.

• Receipt: In case the builder fails to issue a receipt(s) against the paid amount.

• Poor quality construction: In case the builder has used substandard or poor quality materials and/or products to build/construct the project.

• Not complying with specifications: In case the builder delivers the house, not complying with the agreed specifications.

• Parking space: In case the builder does not provide a free parking space within the premises.

• Co-operative housing society: If in case no co-operative housing society was formed and handed over to the members.

• Water storage tank: In case no storage tank for water has been provided on the residential premises.

• Proper ventilation and light: In case no proper ventilation and light are available on the residential property.

• Completion Certificate: In case the builder does not issue the requisite Completion Certificate at the time of delivery of the respective flats/house to its occupants.

• Non-declaration of expenses: In case the builder/developer does not declare the expenses against which he collected money.

In case any project suffers from any defect as stated in the list above, the builder can be sued/and action can be taken against him. In this article, however, the issue of delay in delivery of possession has been discussed in detail.

Should you hire a lawyer?

It is highly recommended that an aggrieved buyer hires a lawyer for any action against the builder. This is because a property lawyer would be able to assess what is the best remedy that you should seek, the best legal recourse that should be taken, etc. A lawyer can better draft your complaints/suits and would also be able to represent you better than you would be able to represent yourself. This is because he is experienced and has studied and has been taught how to draft and represent clients. In addition to this, a property lawyer knows the requisite laws and can interpret judgments and research more effectively. Hiring a lawyer is thus a good practice that would only work in your favor.

Frequently Asked Questions (FAQs)

1. Why should a case be filed against the builder if he has delayed in handing over the possession of the flat?

If a buyer fails to take an action against the faulty builder/developer, he is putting his investment at risk. If a case is not filed by the buyer in such a situation, and the builder files for bankruptcy, the buyer will be at risk of not being named as one of the creditors to claim his/her amount. When the court orders the sale of the builder's assets, the aggrieved buyer would not be eligible to attain reimbursement.

2. Can I claim the interest amount in case of delay or non/delivery of possession?

Yes, you as a buyer can claim an interest in case of delay or non-delivery of possession. Interest rates depend upon where the case is filed and the rules pertaining to it.

3. Is it possible for homebuyers to file a case as a group against delayed possession?

Yes, a class action can be taken against a particular builder delaying possession.

4. Do I have to appear in person at every hearing date?

No, you do not have to appear in court on every date. The lawyer that has been appointed by you would represent you in court. However, you have to appear if you have been asked by the court to actually appear in person.

5. Do I need a lawyer to represent me at RERA?

Under RERA, representation can be made either by a legal practitioner/lawyer or by the complainant himself. However, it is highly recommended that a lawyer be hired for this action as a proper complaint needs to be drafted with proper annexures, etc. Moreover, a lawyer would guide you best as to which court to appear at and what relief should be sought, keeping in mind the facts and circumstances of your particular case.

6. Can I claim a refund of the entire amount as paid by me to the builder, in a case of delayed possession?

Yes, in cases wherein the construction has not even begun or is still in its initial stages, a complete refund of the amount paid can also be sought. If the court is satisfied that the builder is at fault and that the buyer has had to go through hardships due to this, it can order the builder to refund the entire amount, along with a direction for the builder to pay the entire cost of the litigation. Under RERA, builders are required to keep the money/funds received from the buyers in a special account. These funds can not be used for any purpose other than this. This makes the process all the more efficient.

7. Why should I file in NCLT as an Individual rather than a group as the cost of litigation is very high in filing individually?

Filing insolvency against a builder in NCLT can dissolve the builder's company. If an individual files, the builder may settle out of court. But when a group of home-buyers files, settling out of court may not be possible.

8. How and where can I appeal against an unfavorable SCDRC judgment?

You can appeal a state consumer forum's judgment within 30 days at the National Consumer Disputes Redressal Commission (NCDRC). Include the original order, appeal petition, and annexures. If you are told to pay compensation by the State Commission, deposit 50% or Rs. 35,000, whichever is less, with the NCDRC. No extra fee is needed for the appeal at the national commission.

Advocate Chikirsha Mohanty

4.0 | 2+ user ratings Greater Kailash - 1, Delhi
5 years

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