Buying A Flat In Maharashtra? – Know Your Legal Rights!

In Maharashtra most of the flats are sold while they are under construction. This largely holds true for residential sales across the country. In the absence of a physical unit that can be transferred to the buyer immediately the builders used to enter into a letter of intent,  or memorandum of understanding etc., with the buyers as they could not enter into sale deeds when the property was not into existence. Unlike the sale deed (which is duly stamped and registered) which effectively leads to absolute transfer of property from the developer to the buyer, the aforesaid documents, which were a mere understanding to  transfer  property at some point in future, had no legal sanctity and were unenforceable before the court of law. Now this can be hurtful to buyers of property in Mumbai and Pune which are two very expensive markets in India.

Often the property buyers were found to be on a weak wicket in comparison to real estate firms in case of disputes and litigation. This led to the State of Maharashtra enacting the Maharashtra Ownership Flats (Regulation of the Promotion, Construction, Sale, Management and Transfer) Act, 1963 (MOFA). MOFA lays down the responsibilities of real estate developers in respect to flats sold by them and conversely the rights of buyers within the State of Maharashtra.

Under MOFA a developer who intends to construct a building of flats has to mandatorily enter into a written Agreement for Sale with each of the persons who are to take or have taken such flats. Basis MOFA, few rights which you should be aware of are as follows:

  1. Disclosures by the Developers : The developer is required to make full disclosure of (a) his title to the land along with a title certificate; (b) all encumbrances on the land; (c) all outgoings for the property (municipal taxes, cess, etc.); (d) the nature of fixtures, fittings, lifts, materials used in construction of the building, etc.; (e) date on which possession would be provided; (f) carpet area of the flat; (g) price of the flat including proportionate price of the common areas and facilities which should be shown separately and the intervals at which the instalments are to be paid; (h) percentage of undivided interest in common areas and facilities; (i) plans and specification of the building as approved by the local authority; essentially a buyer needs to be fully aware of what he is bound to pay for.
  1. Cap on the Deposit: While entering into the Agreement for Sale, the developer cannot accept any payment or deposit which is more than 20% of the unit sale price.
  1. Registration of Agreement for Sale: Though the agreement is required to be registered under Section 32 of the Registration Act, even if due to any reason the agreement is not registered, the document can still be received in court as an evidence for contract in a suit for specific performance. However, it is advisable to necessarily get the agreement registered to avail of other rights available under law.
  1. Change in Plan or Specification of the Building: After the building plan and specifications are disclosed, as approved by the local authority, to a buyer, any change in the plan can only be subject to such buyer? (Approving it?). Further, if any such unauthorised change comes to notice of the buyer within a period of 3 years from the date on which he gets the possession, the developer would be responsible for rectifying the change or compensate the buyer for the changes which could not be rectified.
  1. Developers failure to handover possession: If the developer fails to hand over possession of the flat in accordance with the terms of the agreement, the developer is legally liable to repay the amount taken from the buyer along with interest (as specified in MOFA) from the date on which the developer received the money.
  1. Formation of Society or Company: As soon as a minimum number of persons required for forming a cooperative housing society or company have taken possession of the flats, the developer is required to submit application before the Registrar for registration of the organisation. The moment such organisation is registered, the developer is required to transfer his right, title and interest in the land and building to it. However, this does not prohibit the developer from selling the flats which are unsold.
  1. Penalty for offences by Developers: MOFA provides for stringent penalty in cases where developer breaches the provisions of MOFA, which extends from payment of fine to imprisonment for a period of 3 years.

Many of us think that Agreement for Sale is a standard document just like insurance documents or banking documents. However, the fact is that it not a standard document. Accordingly, Agreement for Sale should be read carefully and if possible, advice of a property lawyer should be taken before executing the Agreement for Sale.

While MOFA is applicable for Maharashtra, the guidelines of MOFA are applicable to property transaction across India. One must thus be careful to take into account these issues before committing to property purchases.

 

The information has been curated from various sources and may not be verified as per RERA guidelines *
If you require more information, please write back to ashish.mahajan@propstory.com or call on : +91-9167510950
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6 COMMENTS

  1. It is really a nice and informative blog and the content is really precise. I liked your views on it. I will subscribe to it. I am looking forward for more such kind of blogs as they are really mesmerizing. Thanks for such an interesting and wonderful blog.

  2. the actual date of enforcement of THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 is 25th March 2016.
    Agreement to sale has executed earlier than the enforcement of the Act (4th February 2016) but Completion Certificate of a residential multi storied building had issued in March 2017.Sale deed is still in process. In this case are the builder and buyers are within in the jurisdiction of the RERA at Nagpur or Not ?

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