|December 4 2011, 05:51 PM||#1|
Demand Compensation From Builders For Construction Defects & Delays
just came across a wonderful article.. hope this may hold some answers to the respite of those who are awaiting a long cherished home..
Very clearly delay is actually a DENIAL of SERVICE from a builder
First Published: 22:47 IST(3/12/2011)
Last Updated: 22:51 IST(3/12/2011)
Most agreements that you sign with builders stipulate a hefty rate of interest for delayed payments from your side. But search for a similar penalty clause for delays on the part of the builder in handing over possession, and you will find none. Fortunately, despite such one-sided
clauses in the agreement, consumers can get compensation from builders for construction delays. Under the Consumer Protection Act, a consumer is entitled to compensation for any service that turns out to be ‘deficient’. Since delays in the delivery of any service constitutes ‘deficiency’, one can demand compensation for such delays.
The Supreme Court (SC), in the landmark judgement in the case of Lucknow Development Authority vs MK Gupta, made it clear that “when possession of property is not delivered within the stipulated period, the delay so caused is denial of service” and a consumer who is a victim of such delay is entitled to compensation.
Another important point that the SC made in this case was that compensation awarded by the consumer courts in such cases should serve the dual purpose of recompensing the individual while simultaneously bringing about a qualitative change in the attitude of manufacturers and service providers towards consumers.
Rajiv Kumar Agarwal: I booked a plot in Faridabad with a private developer in 2006. They are yet to give me the possession. In mediation proceeding at the direction of Consumer Forum, they agreed to give possession by March next year. Can one get compensation for delayed possession in this case? The developer charged 18 % per anum interest for delayed payment.
Answer: You certainly can and you should demand it. But before doing that, I would suggest that you please go through the order of the National Consumer Disputes Redressal Commission in the case of Shri JL Sethi Vs Senior Citizen Home Complex Welfare Society decided on August 21, 2006). It would help you in your case. You can find the order on the Commission’s website-www.ncdrc.nic.in. Here, the National Consumer Disputes Redressal Commission has dealt in detail with the question of payment of interest to consumers in cases of delayed construction and the percentage of interest that can be paid.
In this case, the District Consumer Disputes Redressal Forum had awarded 18% interest on the ground that the builder was charging 18% for delayed payment from consumers.
While upholding this, the National Commission quoted two SC orders: In the case of Sovintorg India Ltd vs State Bank of India, (1999), the apex court had held that interest can be awarded in lieu of compensation or damages in appropriate cases. It can also be granted on equitable grounds.
Of course, you have to show that the builder delayed the possession process much beyond the stipulated time, on the basis of the time-frame given by the builder (or the promise made by the builder) towards completion of the project and handing over the property. You also need to show the loss suffered by you as a result of such delay in terms of the loss of interest on the amount deposited with the builder (beyond the stipulated time ) and also the amount being spent by you on a rented accommodation.
|December 4 2011, 06:00 PM||#2|
BlessU, great share . The fact of the matter is that u need to fight out for the compensation in courts . Most, if not all of the Builders would not pass u any kind of compensation on delays in construction .
|December 4 2011, 06:09 PM||#3|
I wish I had time to fight a legal battle.
|December 4 2011, 06:30 PM||#4|
ah! a really nice topic to disucss ... all the more because just like me, quite a lot of people are ignorant about our rights and process to enforce it.
Most of the builders cannot meet their committed timeline - it's common across real estate industry - so my first question : has any builder has ever paid to buyers according to delayed penalty clause ? (please qoute some real life example)
Also, i heard that builders play with words quite well - the exac word might say that "Possesion after 3 years of start of construction" and they might take the money around a year before in the name of pre-launch/ launch. So that gives them 4 years from the start of payment
Finally, common man want to avoid police/ court at any cost. The reason being ignore of procedures and also he/she is already struggling to juggle office, family, inflation, corrpution and what not. So, in usual circumstances no one would like to take on the mgihty builders.
So, my second question is - is there a easier way to get the builder pay for delay ?
|December 4 2011, 06:41 PM||#5|
Yes, builder do pay delay penalty, but it is not easy to get money from them , it is tough, but not impposible. The way is UNITY among buyer. The real example is Crossing republic Gajiyabaad. Buyer their got united and aftter several meeting with builder and some protest they got many of thier problem solved like Delay penalty, high maintaince charge etc. See site of CROMA for more detail. It is another story that they are rather unfortunate and still fighting a very tough fight of proposed dumping ground nearby......
|December 4 2011, 09:18 PM||#6|
It is pathetic situation and builders never give penalty so easily, even after several similar cases in consumer court, SC etc went against them.
Unit with buyers definitely work wonders, but it is just not possible in all the projects.
One new thing I heard about the delay penalty is that builders have one sided clause like " buyer is not eligible for delay penalty if they were ever late in making payments on time". Now, if you made all the payments on time, still builder could show it late by saying that "your check/draft was delayed by 2 days from getting cleared by his bank".
|October 19 2013, 10:02 AM||#7|
Delays can attract high penalty
Even before the real estate regulator is formed, consumer courts are taking the lead in establishing the best practices for the sector. On the most common issues — developers taking more than the time they promised in which to deliver a flat — consumer courts are coming down on the side of the buyers.
This time we examine a recent judgment by Maharashtra State Consumer Disputes Redressal Commission to figure out if it has a wider application for others in a similar situation. The recent judgement puts the onus of delay beyond reasonable limits on the developers and relieves the buyers the risk of being duped by developers when they renege on their promise.
The Maharashtra State Consumer Disputes Redressal Commission, in a judgement on September 13, gave a landmark decision in favour of the buyer Anant Ieetkar. Ieetkar had booked a flat in December 2008 in Kalyan, an extended suburb of Mumbai, and paid approximately Rs 19 lakh to the developer. The flat was supposed to be delivered by September 2010. The project was in limbo for years. Construction had not begun. Ieetkar waited until 2011. Eventually, he filed a complaint with the commission.
In his complaint, Ieetkar alleged negligence on the part of the developer in not handing over possession by the promised date. He asked for delivery of the unit, additional charges for the mental harassment he was put through, and the interest payment as per the agreement. In his complaint, Ieetkar also provided documentary proof of the current market value of the flat from a valuer.
The developer admitted to receiving full payment for the flat and that construction would begin "as soon as possible" after getting requisite permissions.
The commission called this case as the "best example how the developer exploits the prospective purchasers" and ordered the developer to pay the current market value of a flat with the same specification in the same locality, which would be around Rs 60 lakh, in case the unit was not delivered within three months. In addition, the commission also directed the developer to pay Ieetkar Rs 3 lakh as compensation for mental harassment and Rs 30,000 for legal charges.
In its judgement, the commission quoted a judgement from the Supreme Court, which held that "while quantifying the damages, consumer fora are required to make an attempt to serve ends of justice, so that compensation is awarded, in an established case, which not only serves the purpose of re-compensating the individual, but which also at the same time, aims to bring about a qualitative change in the attitude of the service provider".
According to Uday Wavikar, the lawyer representing Ieetkar, compensating the consumer at the current market value will increase consumer's trust in the system. "In earlier judgements, consumers were merely granted a certain amount of interest on the principal amount paid. In reality, no amount of interest is enough, considering the rising real estate rates. But with a compensation like this, a consumer can at least consider buying a house in the same area," says Wavikar.
Consumer forums across the country are lined up with similar complaints against developers. But as the Ieetkar judgement shows, such wilful default on the part of developers would now entail a heavy price.
Some developers agree. "Dedicated execution is of utmost importance to ensure timely delivery," says Ram Raheja, director S Raheja Realty, a Mumbai-based developer.
"The key factor for delays in majority of the cases is cash flow. The diversion of funds is an unethical practice but it may not be true for all developers. I believe that defaulters should be punished. However, the buyers also have to be very diligent and should ensure they get the documents, especially the approvals checked by professionals," adds Raheja.
Even as the judgement in this case could inspire more complaints, it is not yet a settled question of law as it can be potentially appealed with the National Consumer Disputes Redressal Commission and finally, the Supreme Court.
Let us take the example of a flat, say 1,000 sq ft in 2007 in Borivali, Mumbai. The going rate then was Rs 6,000 per sq ft. The agreement says the year of possession in March 2010. The developer, however, does not hand over the keys until March 2013 as the work is not complete. When the buyer asks reasons for the delay, he is presented with an option: take back the Rs 60 lakh paid from 2007 to 2010.
The buyer had two choices then. One, he may wait indefinitely for the project to complete, as he has already exhausted his funds. Two, he can take Rs 60 lakh back and look for other options.
This is also not possible as the rates in the area have doubled and he will get a far smaller unit for the same price at that locality. This buyer in this case has lost both the house and time. The developer will sell the same flat to another buyer at the current market value say Rs 12,000 per sq ft and would make Rs 1.2 crore, an extra profit of Rs 60 lakh.
"In some cases, where the buyers are able to exert some pressure, the developers have paid about 10 to 12 per cent interest on the amount refunded," says R Madan, an advocate who is fighting on behalf of buyers. "However, the interest was calculated from the date of possession mentioned in the agreement till the date of refund. The developers happily paid that interest as it was only for 2-3 years while they used the buyer's money for 6 years without interest. On the other hand this interest was not substantial for the buyer to match the current market value of another flat in the vicinity," adds Madan.
In India, sale agreements are usually prepared by the developers. The usual agreement for a standard under-construction project would usually indicate 3-4 years as the time-frame for completion. The buyer is bound to arrange the fund within this period while the developer is bound to keep his side of the deal and hand over the keys on the mentioned delivery date.
It is expected that the developer — being a businessman — must have considered all possible factors while finalising the cost and the time frame for delivery. "He has presumably paid for the land and cleared the legal title before accepting bookings. Otherwise it would amount to cheating," says Naresh Mehta, a property consultant.
"He must have anticipated the fluctuations in demand, the rate environment and cost of inputs before fixing the price. He is supposed to be aware of the time needed for approvals, procurement of men and material and the construction process before he lays down the delivery date in the agreement," adds Mehta.
"So, after the agreed date of delivery, the developer cannot justify delay on any of these factors as they are supposed to be factored beforehand. Now, in the absence of any natural calamity, if delay occurs beyond five years, it can easily be called 'developer made' calamity," says Paresh Parekh (name changed), an aggrieved buyer who is preparing to take a legal action against a developer in Panvel.
There are several examples of buyers caught in similar circumstances. If the pecuniary value of one's complaint is up to Rs 20 lakh, the complaint can be filed with a district consumer forum.
For value between Rs 20 lakh and Rs 1 crore, the complaint can be filed with the state commission and for value above Rs 1 crore, the complaint can be filed with the NCDRC.
Buyers in similar circumstances should consult a professional to build their case and get their due.
Delays can attract high penalty - Indian Express
|October 21 2013, 01:47 PM||#8|
Housing project delays: Roadmap to help you out of the logjam
|April 14 2014, 10:43 AM||#9|
Demand compensation from builders for construction defects and delays
I am creating this thread in IREF to compile the Various options available with Buyers for delay in delivery of possession and defective construction.
This thread is not project specific but IREFians are most welcome to share the live examples where builders are compelled to compensate by relevant law in different situations, is most welcome.
Regarding delay in delivery of possession I read some examples to quote later in this thread but for defective construction it's hard to find much example, which is not true by going through the way our builders knowledge about quality of construction.
Hope we'll get some useful contribution by BlessU in this thread with documentary proofs.
It is better to be blind than to see things from only one point of view
|April 14 2014, 10:47 AM||#10|
Delay in delivery of possession and defective construction in the flat makes builder liable to pay compensation #Compensation
In the judgment as passed by the Supreme Court in Lucknow Development Authority vs. M.K. Gupta [Dated 05.11.1993, reported as AIR 1994 SC 787 = 1994 SCC (1) 243] the Court dealt with the issues engulfing consumers who puts in their hard earned money to make their dream of having own house a reality, but suffers in some way or the other at the hands builders – private or government. The holding arrived at in this matter can certainly be considered as timeless ratio and worth including in this category.
The question posed before the Hon’ble Apex Court was to determine as to whether the statutory authorities such as Lucknow Development Authority or Delhi Development Authority or Bangalore Development Authority etc. constituted under State Acts to carry out planned development of the cities in the State are amenable to Consumer Protection Act, 1986 in the event of they being questioned for any act or omission relating to housing activity like delay in delivery of possession of the houses to the allottees, non-completion of the flat within the stipulated time, or defective and faulty construction etc.
The above issue was contested on the ground that the above named local authorities or government bodies develop land and construct houses in discharge of their statutory function, therefore, they could not be brought under the ambit of the provisions of Consumer Protection Act, 1986 (Act) otherwise it would vitally affect their functioning as official bodies.
The Apex Court while rejecting the above argument held that Act requires service provider to be more objective and caretaking more so when it renders public services.
When private undertakings are taken over by the Government or corporations are created to discharge functions which otherwise are to be discharged by State, the inherent objective is to provide better, efficient and cheaper services to the people. Thus, any attempt to exclude services offered by statutory or official bodies to the common man would go against the letter and spirit of the Act and hence the government or semi-government body or a local authority is as much within the purview of the Act as any other private body rendering similar services.
The second issue raised in the present matter was to determine if housing construction or building activity carried on by a private or statutory body was service within the meaning of clause (o) of Section 2 of the Act as it stood prior to inclusion of the expression ‘housing construction’ in the definition of "service" by Ordinance No. 24 of 1993.
It was held that the entire purpose of widening the definition was to include:
• Day to day buying and selling activity undertaken by a common man;
• All such activities which are otherwise not commercial in nature yet they assumes a character in which some benefit is conferred on the consumer.
Construction of a house or flat is for the benefit of person for whom it is constructed. He may do it himself or hire services of a builder or contractor. The latter being for consideration is service as defined in the Act.
Similarly when a statutory authority develops land or allots a site or constructs a house for the benefit of common man it amounts to service in the same way as is rendered by a builder or contractor. The one is contractual service and other statutory service.
If the service turns out to be defective or contrary to what was represented, the same would amount to unfair trade practice as defined in the Act. Any defect in construction activity would mean or amounts to denial of comfort and service to a consumer.
Further, when there is a delay in delivering the possession of a property i.e. beyond the stipulated period, the delay so caused also amounts to denial of service. Such disputes or claims fall under the category of deficiency in rendering of service of particular standard, quality or grade, as defined in Section 2(r) (ii) as unfair trade practice.
If a builder of a house uses substandard material in construction of a building or makes false or misleading representation about the condition of the house there again it amounts to denial of the facility or benefit against which a consumer is entitled to claim compensation/ value under the Act.
In an instance where the contractor or builder undertakes to erect a house or flat and there is a leaking roof in the flat, or a cracking wall or substandard floor, the consumer can accuse the contractor of denial of service.
On the other side, when a statutory authority, like those named above, undertakes to develop land and comes out with a housing scheme, it in discharge of statutory duty is actually rendering service to the society in general and individual in particular or in other words it is a service to the citizens amounting to rendering of service covered in the expression ‘service made available to potential users’.
A person who applies for allotment of a building site or for a flat constructed by the development authority or enters into an agreement with a builder or a contractor is a potential user and nature of transaction is covered in the expression ’service of any description’. Accordingly, any service unless it is free of charge or under a constraint of personal service is included in it.
Since housing activity is a service it was covered in the clause as it stood before the year 1993.
The consumer is entitled to claim and empowers the Commission to redress any injustice done to him and accordingly to award not only value of the goods or services but also to compensate a consumer for injustice suffered by him.
Delay in delivery of possession and defective construction in the flat makes builder liable to pay compensation #Compensation | TCL :: The Chambers of Law, New Delhi
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