• Authored by Mr. Hitendra V.Hiremath, presently works as Legal Consultant with RERA Consultants LLP and has earlier worked as In-House Counsel at M/s. Shriram Properties Private Limited and thereafter with an investment banking firm Capaegis at Bengaluru, Karnataka, India

What is an Agreement for Sale?

As per Section. 2 (c) of The Real Estate (Regulation and Development) Act, 2016 (“Act”) defines an agreement for sale as an agreement entered into between the promoter and the allottee.

The definition doesn’t actually define an Agreement for Sale, however, the definition can be deduced keeping in mind the objective of the Act, an Agreement for Sale is a binding legal contract entered between the Promoter and Allottee to sell an apartment, building or plot as the case may be. The Agreement for Sale is also required to be notified under the respective state rules and all Agreement for Sale are necessarily required to follow the notified drafts.

An Agreement for Sale constitutes the terms and conditions to sell an apartment, building or plot as the case may be which includes the consideration to be paid for purchase along with the such necessary terms dealing with construction/development, timeline to make payments, obligations in case of default in payments, timeline of delivery, obligations in case of failure to deliver the possession of apartment, building and plot as the case may be along with such other necessary clauses.

Further as per Section. 54 of Transfer of Property Act, 1882 an Agreement for Sale is a promise to transfer/convey a property in future on satisfying certain terms and conditions and such agreement shall not in any manner does not create any absolute rights or interest in the property unless meeting such stipulated terms and conditions.

After the provisions of the Act coming into force, it is now essential that Promoter must include all necessary obligations as per the Act.

Is it necessary to enter into an Agreement for Sale?

Yes, an Agreement for Sale gives a right to the allottee to own an apartment, building or plot as the case may be on satisfaction of the conditions agreed under the Agreement for Sale. Likewise, the Promoter shall also get a right to receive consideration under Agreement for Sale on fulfilling certain terms and conditions.

When an Agreement for Sale is entered and Is it necessary to be registered?

As per Section. 13(1) of the Act, an Agreement for Sale needs to be executed with allottee, if the Promoter intends to accept a sum more than 10% (ten percent) of the cost of the an apartment, building or plot as the case may be and such Agreement for Sale has to be registered.

What are the necessary provisions an Agreement for Sale should constitute as per Act?

As per Section. 13(2) of Act, an Agreement for Sale should include the following:

  • Particulars of development of project including the construction of building and apartments.
  • Necessary specifications and details of internal and external development works.
  • Dates and manner by which the payment towards the cost of the apartment, building or plot as the case may be are to be made by the allottees
  • Date of handing over of possession of the apartment, building or plot as the case may be
  • Applicable rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default; and
  • Such other particulars, as may be prescribed or agreed between the allottee and promoter not being in contravention to the object of the Act.

What are the rights and obligations of Promoter under Act in furtherance of entering into an Agreement for Sale?

As per Section. 11(4)(a) of the Act, the Promoter shall be responsible for all obligations, as agreed with allottee under the Agreement for Sale.

The promoter as per Section. 11(4)(h) of the Act, after executing an Agreement for Sale with respect to an apartment, building or plot as the case may be, shall not mortgage or create charge. If in case a mortgage or charge is created by Promoter then it shall not affect the right and interest of the allottee.

Further as per Section. 11(5) of Act, the Promoter can only cancel the allotment of an apartment, building or plot as the case may be, as per the terms of the Agreement for Sale.

What are the rights and obligations of Allottee under Act in furtherance of entering into an Agreement for Sale?

As per Section. 19(1) and (2) of the Act, the allottee is entitled to know all information with respect to project or with respect to his apartment, building or plot as the case may be, as agreed under the Agreement for Sale.

As per Section. 19(4) and Section. 18(1) of the Act, the allottee is entitled to claim refund of entire amount paid along with interest and compensation, if the Promoter fails to comply or give possession of apartment, building or plot as the case may be in accordance with the terms of the Agreement for Sale or as per proviso of Section. 18(1) of the Act, if the allottee does not intend to withdraw from the project then allottee is entitled to the interest for every month, till the handing over of possession at such rate as may be prescribed.

As per Section. 19(6) of the Act, the allottee is responsible to make necessary payments in the manner and time specified as per the Agreement for Sale, further as per Section. 19(7) of the Act, the allottee shall be liable to pay interest for delay in payment as agreed, however the liability towards payment of interest by allottee can be reduced by the Promoter as per Section. 19(8). In case of cancellation by allottee, the promoter can withhold the booking amount i.e., upto 10% (ten percent) of the cost of the apartment, building and plot as the case may be.

As per proviso to Section. 11(5) of Act, the allottee is entitled to approach the Authority if promoter cancels the allotment of apartment, building or plot as the case may be, and such cancellation is not in accordance with the terms of the agreement for sale, unilateral and without any sufficient cause.

Who can hear the matters for violation of rights and duties of Promoter and Allottee?

Adjudicating Officer appointed as per sub-section (1) of Section 71 of the Act is empowered to hear the matters. A complaint under Section.31 of the Act can be filed by an allottee for violation of his rights under Section.18 and 19 and the promoter can file a complaint as against allottee for violation of duties as mentioned under Section.19.

Judicial Pronouncements

In Prakash Chand Arohi v. M/s. Pivotal Infrastructure Pvt Ltd, Complaint No. RERA-PKL-COMP.49/2018 decided by Haryana Real Estate Regulatory Authority, Panchkula. In the instant complaint, Mr. Rajan Gupta, Chairman observed the following:

  1. Para 2, Page No.31: Courts and authorities must exercise their powers with restrain and keep balance between both the parties, authorities have to tone down the oppressive provision under the agreement, however authorities should not impose their own value system over the substantive provisions which are lawful.

In the instant complaint, it was held:

  1. All agreements executed prior to the Act coming into force are valid except which are held as invalid by higher courts and which are universally acknowledged as such, as unfair trade practices.

 

  1. Agreement for Sale with respect to apartment, building or plot as the case may of an ongoing or new project shall be executed in accordance with the model agreement annexed with the rules.

 

  1. All agreements made preceding the date of the Act coming into force shall be enforced by RERA in accordance with RERA and in accordance with the terms and conditions settled between the parties. If promoters of an ongoing project have revised the schedule of completion of a project while getting the project registered with the RERA, the revised schedule will not be automatically applicable on the existing buyers. Existing buyers will be entitled to delay compensation.

 

DISCLAIMERS

  • This post underlines the information as per the applicable provisions of the Real Estate (Regulation and Development) Act, 2016; and 
  • We recommend the Promoters / Allottees to seek the assistance of the Professionals involved in the real estate practice in case of any queries, clarifications with respect to advertisement of the real estate project.

 

CONTACT

For any other details, clarifications, assistance, advise and other services, please visit www.reraconsultants.in; or can get in touch with us at 080 – 2223 3003 or email to consult@reraconsultants.in

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