2022- A Year of Active RERA Jurisprudence- Dec 22 Rera Circulars

The year 2022 is now almost behind us. Yes, it made RERA more complicated. Who would have imagined a mandatory allotment letter and cancellation provision – Order 35 - resonating across the Real Estate Sector and a devoted Registration Regime for New Registration, which we are yet to accept smilingly.

The RERA litigation has been in the limelight. While the RERA community was busy grappling with the mind-numbing Registration Process Changes, the RERA Tribunal had commenced cracking down on errant developers and Maharera publishing list of lapsed projects. The year 2022 has left an indelible mark on the RERA jurisprudence by its verdicts for Real Estate entities engaged in non-aligned real estate activities. The future years will be a testimony to the all-pervasive impact of these judgments and detailed circulars that were passed in the year 2022.

We can rest assured that the year 2023 will give us more challenging and intriguing times given the overwhelming legacy of 2022 and prior years. RERA compliance is becoming a detailed complicated labyrinth of circulars, notifications, on ground clarification, and Allottee empowerment drive by the Regulatory Authority. It will be in the interest of all Real Estate promoters to set up a mechanism to ensure they change quickly with changing times in 2023.

NON NEGOTIABLE CLAUSES IN AGREEMENT TO SALE- Order 38 dated 13-12-22

This order is a natural consequence of Order 35 where in Promoter have to now upload the agreement to sale highlighting the deviations from the standard format given in Annexure A- Model Agreement. Maharera has now restricted the deviations that can be made/proposed by the Promoter. This circular has altered how we look at the Indian Contract Act and Transfer of Property Act. The Authority has put in place a mechanism to restrict the mischief done in the Agreement to Sale by coming up with strict rules on modification of contents that are mandated by Annexure A of Rule 10 of  Maharera Rules pertaining to ATS. The restrictions placed are as follows:

1. Promoters cannot expand the definition of Force Majeure (Acts beyond their control/ acts of God). This has to be in line with Section 6 of the RERA Act.
2. Time period for the formation of Association of Allottees to now mandatorily be 3 months from achieving 51% allotment in RERA project. This is in line with section 11(4)(e) of RERA Act.
3. Time period for execution of Conveyance Deed to now mandatorily be 3 months from Completion Certificate/ Occupation Certificate. This is in line with section 17 of RERA act
4. The Promoters are restricted from changing scope or duration of Defect liability period of 5 years in line with section 14(3) of RERA Act.
5. MAHARERA has gone above and beyond in restricting ANY MODIFICATION to two clause is Agreement to Sale. One clause making confirmation of Carpet area and refund if change in area by Promoter Mandatory and second clause being the Right of Promoter to cancel the agreement if there are three defaults in payments by Allottee.
6. The Circular is unique in multiple aspects. It has gone beyond the Indian Contract Act and Transfer of Property act, where in the instrument entered between the parties and the agreement between promoter and Allottee shall be nullified to the extent the above Non Negotiable clauses are altered by any party for any reason whatsoever. The circular terms these changes as “Void-ab-initio” meaning not valid since inception and not binding on Allottees.
7. Further the Maharera has warned the promoters that if the ATS is not in compliance with the circular the registration application may be summarily rejected meaning the application of the Circular is very critical for all Real estate Promoters.         

DISCLOSURE OF INTEREST OF PROMOTERS- Order 39 dated 27-12-22

Maharera continues to surprise the Promoters. This Order comes with a justification that this disclosure is made mandatory in order to ensure Allottees make an informed decision. Only time will tell if this disclosure is used to make decision or to further put pressure on Promoters. The Order mandates:

1. At the time of applying for registration Promoter has to disclose in a Self Declaration list of Real Estate Projects that he is interested in as a Promoter/ Partner/ Director/ Proprietor/ Designated Partner
2. This Declaration applies to all projects across India and not just Projects in Maharashtra
3.  The Words used is “Any Interest” and may widely cover any form of interest including being silent partners, JV partners, Landowner Co promoter etc.
4. Disclosure of All Pending RERA complaints in such projects with Complaint Number is to be made
5. Any Warrants issued by RERA against the Promoter is to be Disclosed
6. List of the projects which have been “Revoked” by RERA where such Promoter is interested needs to be disclosed.
7.  Commentary on the Order
1. The Order fails to clarify if the same declaration is to be updated every quarter.
2. It fails to take under consideration that in some cases the Promoter may be a dormant partner and there may be other Partners responsible for a lapse under the act.
3. It fails to take into consideration that such data is regularly used by Media and activists to negatively publicize about the Promoter creating unnecessary impact on Promoters Business.
4. This Declaration adds no value in decision making of Allottee unless the data declared is true, accurate and correct in all aspects. Unscrupulous developers may still not declare the defaults which Maharera presently has no mechanism to verify the authenticity of the Self Declaration. However an Honest Promoter may bear the burden of misuse of this Declaration.

 

EXTENSION AFTER CONSENT OF ASSOCIATION OF ALLOTTEES- Order 40 dated 27-12-22

This order brings in radical changes in extension of Completion Date Process within Maharera. Presently the first extension of maximum 1 year  (Under section 6) was granted on application and second extension beyond it required consent of Allottees. Multiple RERA projects were on standstill as Allottees may not always give consent to Promoters stuck with multiple delays for a plethora of reasons like compensation may be denied, filed case may be rejected, no confidence on promoter etc. Non extension led to a deadly cycle for promoter as he could not register new agreements, banks refuse disbursement and allottees refuse payments to invalid RERA registration projects. Maharera has come up with a merit based application system that can take care of such contingency. The new process is as follows:-

1. The Authority has clarified that Order 7 of 2019 continues to be applicable and valid
2. If Promoter is unable to acquire 51% consent required for extension under Section 7 of RERA act then the Promoter may take shelter of Order 40 of 2022.
3. The Promoters need to submit whichever consents they have received irrespective of not achieving 51% approval. They need to give reasons in writing why they are unable to get consent as per Order 7 of 51%
4. An explanatory note setting out grounds and reasons of delay to be submitted by Promoter. Further why should he be granted extension with reasons need to be explained to the Authority.
5. Authority may impose further terms and conditions in the interest of Allottees while granting such extensions.
6. The Authority has clarified that Grant of extension shall not effect/ jeopardise the rights accrued in favour of allottees.
7. Commentary on Order
1. An exceptional initiative by the Authority
2. The authority has taken into consideration the practical challenges faced by the Promoter and has simultaneously also addressed the concerns of Allottee
3. This order is a great example of how Regulation can lead to a balancing act between two stakeholders.

 

Ban the Touts/ Agents- Eradicate even a whiff of Doubt- Order 41 of 2022 dated 13-12-2022

 

Maharera intends to make registration of New Projects a seamless process. If all formats and disclosures are rightly followed it usually issues registration in record time. However, many application are submitted not in consonance of such order, circulars, Act and formats necessitating need to return the application with scrutiny remarks. The New appended process is as follows:

1. The SRO i.e Credai, Naredco, MBVA etc shall nominate 2 persons who shall be the in-between between the Promoter and the Authority.
2. The SRO representative shall be given access to the scrutiny remarks and they shall be allowed to communicate to the Promoters and get the same resolved.
3.  Only SRO representatives to interact with Maharera officers
4. Liasoning agents are banned from entering Maharera office.
5. Only in exceptional cases Promoter or his representative only shall be allowed to visit Maharera office for extension, application or registration cases.
6. All queries are to be resolved via Open House discussions held every Friday at 3 Pm online
7.  If the Promoter does not agree with the stand of the officer he may approach the legal division of Maharera.
8. Commentary on Order
1. Another exceptional order by the Authority
2. Lately Touts have been creating an impression that certain works can happen through means not approved by law and authority
3. This puts a closure to all such discussions as no amount of influence can get a case through on mandatory application of this circular.
4. Now if the promoters still believe that liasoning works, they may do it at their own peril.

Commentary on Changes, Personal view

MAHARERA is slowly becoming a draconian website that only mandates and does not facilitate. From a consumer centric lawmaker it is becoming another government department that wants only compliance and is only making lives of the Promoter difficult. A few of the recents circulars have shown that a Balanced approach can be taken by the Authority. This Author urges the Hon’ble Authority to also take into account the compliance burden that the new changes are putting on the Promoter and would request it to take a more lenient and progressive approach on changes.

The Recent changes, though made with good intentions, only complicate the process.

Hoping MAHARERA does not become a MAHA-PROBLEM for Promoters.

Happy New Year to all readers. If you have any feedback on the blog please comment on the article.

Download the circulars from below link: 

Download Circulars- 2022

A blog written by:

CA Saransh Dey