SAM
(LEGAL)
10 December 2012
Before You Pay Any Money to a Builder, Get Copies of the Following Documents
I. BLANK FORMAT FOR YOUR AGREEMENT WITH THE BUILDER. THIS IS NORMALLY BASED ON MODEL AGREEMENT PROVIDED UNDER THE MAHARASHTRA OWNERSHIP OF FLATS ACT (MOFA). It is important to have your agreement scrutinized by a lawyer or a knowledgeable person, so that the builder does not include clauses that are to his advantage and your disadvantage. If it contains any such unacceptable clauses, please have them struck out or suitably modified before you sign the agreement. Do not make any payments unless this is done. Things to watch out for:
a) THE AGREEMENT MUST NOT CONTAIN ANY ILLEGAL CLAUSES e.g. sale of parking, terrace, staircase, landing and other common amenities that belongs to the cooperative society collectively, and not to the builder.
b) IT SHOULD MENTION ALL COSTS AND CHARGES UP FRONT I.E. NO HIDDEN COSTS. For example, many builders illegally charge exorbitant amounts as “transfer fee” if a flat owner sells his flat before the cooperative housing society (CHS) is formed. The builder is not authorized to charge transfer fees, and only the CHS can charge Rs 25,000 maximum. But there are many cases of flat owners being forced to pay the builder as much as Rs 30 lakhs on a flat costing Rs 1.2 crore i.e. 25% of the value of the flat.
c) IT MUST NOT CURTAIL YOUR LEGAL RIGHTS AS A CONSUMER WITH ILLEGAL CLAUSES e.g. “After taking possession of your flat, you have no right to seek redressal against any perceived shortcomings in common amenities provided.” Another example is builders who illegally impose a two-year lock-in period on flat owners, forbidding them from selling their flats during this period.
d) IT SHOULD MENTION THE ACTUAL MEASURABLE DIMENSIONS OF THE FLAT i.e. Carpet Area, excluding non-FSI elements such as flower beds and dry-balcony.
e) THE DIMENSIONS AND SPECIFICATIONS OF THE ENTIRE BUILDING, ITS COMPOUND AND ALL COMMON AMENITIES MUST BE MENTIONED, because that is what you are paying for (and not just your flat). The agreement must mention specific details of each and every amenity promised. It cannot just say, “Clubhouse admeasuring 4,000 sq ft.” Insist that specifications of each facility such as central air-conditioning, gymnasium, pool table, swimming pool, children’s playground, parking lot, etc. should be mentioned, with as many details as possible. For example, don’t be content with “airconditioned clubhouse”. Insist that the agreement should mention minute details such as the brand of air-conditioner, how many tons capacity etc.
II. COPIES OF THE BUILDER’S PROPOSALS AND PLANS, AND ALL PERMISSIONS AND CERTIFICATES from the licensing authority (Municipal Corporation or MMRDA). Depending on the stage of construction, you should get the below outlined documents.
a) PROPOSAL / LETTER OF INTENT (LOI) submitted by builder to licensing authority e.g. MCGM’s Building Proposal Department, or MMRDA
b) INTIMATION OF DISAPPROVAL / INTIMATION OF APPROVAL (IOD/IOA) given to builder by the Licensing Authority. Legal conditions that the builder must fulfill are mentioned in this document. [Note: Builders start booking flats at this stage itself, without getting any further approvals. They fence off the plot of land, put up banners and advertise in newspapers, and collect tokens and advance payments from investors. In case the project fails to materialize, this money is unlikely to be returned. This is illegal.]
c) NO-OBJECTION-CERTIFICATES (NOCS). NOCs specified in IOD/IOA must be collected by the builder from several authorities such as police and fire brigade, and submitted to the licensing authority.
d) COMMENCEMENT CERTIFICATE (CC) is received by builder from licensing authority after the IOD/IOA conditions are fulfilled. CC authorizes the builder to commence excavation and foundation work. He can build upto plinth level i.e. ground level, even before getting approval of the plan layouts. [Sometimes, builders continue to put up slabs for 1st floor, 2nd floor etc. even without getting their plan layouts approved. They are confident that it will be regularized afterwards. This is illegal.]
e) APPROVED PLAN LAYOUTS. The plan layouts submitted by the builder and architect are studied by the licensing authority. After required changes are made, these layouts are approved. [Quite often, builders deviate from the approved plan layouts and build extra floors. This is illegal.]
f) AMENDMENTS TO APPROVED PLAN LAYOUTS. The builders commonly submit amendments after getting plans approved, and thus they add extra floors to the already submitted layouts. [Much mischief is played at this point. In the initial plans submitted, the builders adhere to Development Control Regulations concerning Floor-Space-Index and the ratio of open-spaces in the compound, which should be one-third the height of the building. Through the amendments, they break the DC Regulations with the connivance of licensing authorities. Builders also use amendments to alter the common amenities promised to buyers at the time of booking; spaces initially shown as clubhouses or playgrounds may be used for putting up another residential wing in your compound, and flat owners come to know only after they have been built and sold.]
g) COMPLETION CERTIFICATE FROM PROJECT CONSULTANT. Quite often, an “independent” project consultant is appointed by the licensing authority to oversee the architectural, financial and legal aspects of the project. This agency is however paid for by the builder himself. [Often, the project consultant colludes with the builder and issues false certificates.]
h) BUILDING COMPLETION CERTIFICATE (BCC) FROM THE LICENSING AUTHORITY. This is issued after receiving the Project Consultant’s completion certificate. [Often, buyers on the lower floors are allowed to move into the building even while construction is in progress. Not only illegal, but also dangerous!]
i) OCCUPATION CERTIFICATE (OC). This is the final certificate from the licensing authority. This certificate is crucial for you. Without this certificate, the Municipal Corporation normally will not give a water connection to your new flat. Also, it is necessary for sale or transfer of the flat. [Builders commonly allow buyers to move into the flats before getting OC. This enables the builder to continue doing residual work on the terrace, in the compound, refuge floors etc. Under their very noses, the terrace is often sold as a penthouse!]
j) CONVEYANCE. This signifies transfer of the plot of land to the cooperative housing society after it is registered. The ownership of the land is transferred in the Revenue records. [Until convenance is given, the builder retains a hold over the land for years or decades after giving possession of flats. This enables him to use residual FSI or additional TDR to build more floors or add new wings to the building, using the open spaces. According to a new amendment to Maharashtra Ownership Flats Act in 2005, builder can be jailed if they fail to promptly give conveyance. Read this: https://tinyurl.com/MOFA2005-Conveyance-Builders ]
PLEASE NOTE: If you book the flat really early, when the excavation work or foundation work are in progress, only Commencement Certificate may have been issued. This means that the builder is booking flats without approved plans – probably an offense under Consumer Protection Act, and other laws too. But if you book at progressively later stages, you should get the other documents also. Quite often, builders give possession of the flat without getting Occupation Certificate (OC), or even Building Completion Certificate – a patent illegality. Conveyance documents may only be available many months or even years after the builder has completed the project.
III. COMPLETE PAPERS FOR THE LAND TITLE OF THE BUILDER OR PRESENT LAND-OWNER:
a) Full chain of land transfers and owners, with all papers including registered agreements, stamp-duty payments, inheritance etc., advertisements and gazette announcements etc.
b) Complete revenue records of land, i.e. 7/12 extracts (saat-bara utara) etc.
c) Conversion from agricultural to non-agricultural, de-notification of Adivasi land etc.
d) City Survey Plan indicating the boundaries of the plot or plots of land
e) If any land-owner inherited the land, then Will/Testament & Probate in favour of the inheritor
f) If there was any dispute about ownership at any point (i.e. present owner or previous owners, then copies of the final court judgment.
g) If land was mortgaged to any bank or financial institution, then all papers of the bank etc. relinquishing the lien in favour of owner
h) If land was leased by the government, then lease agreement and receipts of lease rent payments
i) Registered agreement between the builder / promoter and the land-owner. For more information, also read: https://www.accommodationtimes.com/property-rates/documents-clearances-required-for-urban-property-transactions-sale-purchase/
REASON FOR THIS: If the land title is not totally clear, even of the previous owners, then legal problems can arise for your property also. No one can indemnify you against faulty title.
IV. COMPLETE PAPERS OF THE BUILDER’S FIRM OR COMPANY i.e. Memorandum of Partnership, Memorandum of Association, Audited Annual Reports of all previous years etc.
REASON FOR THIS: Depending on the form of ownership and the relationships involved, you – the flat-buyer – will have to bear various invisible risks. Examples:
a) If the builder is not an individual i.e. but part of a partnership firm, then in case of a dispute between partners, your project may get stuck.
b) If the builder (the individual you are dealing with) is director or employee of a private limited company of builders, then you need to know the legal powers of that individual. For example, you are at risk if he is signing papers that he is not legally authorized to sign; if so, all documents signed by him are of doubtful legal value for enforcing your rights in a court.
V. DETAILS OF YOUR BUILDER’S DEBT-EQUITY RATIO, EXPOSURE TO OTHER RISK-FACTORS i.e. other construction projects, speculative investments in stocks and commodities, etc. (These may come from indirect sources such as newspapers, internet research and word-of-mouth.)
REASON FOR THIS: If your builder is taking heavy financial risks on other fronts, then failure on those fronts may leave him unable to complete your building project. If your project gets stuck halfway due to his financial failure, it becomes your problem. Examples of such risks:
a) Is your builder low on working capital, and therefore dependent on large borrowings from private lenders? If so, then project delays (your project or some other projects) can raise the interest burden to crushing levels, and he may lose all interest in your project.
b) How much of your builder’s money is tied up in speculative investments such as derivatives? In that case, extraneous factors like fluctuating foreign exchange rates or oil prices can threaten his viability and your building project.
c) Is your builder diverting funds from other illegal activities into the construction industry? Is he a matka king, or a money-launderer? Is he handing underworld funds? Is he handling “hot money” from abroad? Beware, your project can be halted by numerous external factors such as a crackdown by arrests, Income Tax authorities, Economic Offence Wing (EOW).
d) Is your builder already in trouble with the law? Has he been charge-sheeted for fraudulent dealings with government agencies like MHADA, for instance? If so, then he may fail to get various permissions and certificates.
e) Is your builder a film producer? If so, find out more about the film that he is currently shooting. One flop may be enough to put your building project into cold-storage.
f) Is your builder a first-timer or small-timer? Is he a small-town building contractor trying to become a big-city builder with the help of friendly investors? Watch out: one small dispute with his lenders can rock his tiny boat and put a question-mark on your investment.
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Contact Krish 9821588114 Building.RTI.Union@gmail.com
