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A battle lost for apartment owners?

real-estate Updated: Dec 16, 2013 17:17 IST
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B K Dhawan, a 75-year-old resident of Silver Oaks, Gurgaon, is a disappointed man today. He has lost a 20-year-old legal battle against real estate developer DLF for residents’ rights over community and commercial facilities within the Silver Oaks complex – a campaign which has all but consumed his finances and energies.

The Supreme Court, in a much-awaited judgment, which may have far-reaching consequences for the real estate sector in Haryana, has held that apartment owners can’t claim undivided interest in community and commercial facilities as these belong to the developer.

The judgment impacts lakhs of families living in housing projects in Haryana where ownership over common areas and facilities has remained a bone of contention between developers and apartment owners. The latter also argue that by virtue of being in a dominant position, the developers are likely to misuse and twist the judgment to suit their own needs.

“A developer can lease or sell community and commercial facilities such as club, nursery schools, convenience shops and community centre in a group housing project to any third party who will run these facilities for making money and who will have no concern for the needs and requirements of the apartment owners. There is also no clarity on what the community and commercial facilities include,” says Dhawan, who bought his Silver Oaks apartment in 1991 and got the possession in 1995 after a two-year delay.

“In 1996, when we came to know that the developer planned to sell the community and commercial facilities, we decided to go to court because we believe these facilities are a part of the common area and meant for the apartment owners. It’s the right of the apartment owners to lease out community and commercial facilities and maintain them by earning money by leasing out the facilities. The Punjab and Haryana High Court had given its verdict in our favour but the apex court has overruled that. It’s a big setback for the flat buyers of Haryana, especially in Gurgaon ,” says Dhawan.

The Silver Oaks Condominium Association (SOCA) and other residents who contested the builders’ ownership claim over community and commercial facilities argued that the real estate regulation acts in Haryana – The Haryana Development and Regulation of Urban Areas Act, 1975, and The Haryana Apartment Ownership Act, 1983 – give apartment owners rights over common areas and facilities, which include everything from corridors, lobbies, staircases, lifts etc to community facilities such as nursery schools, shops, community centres etc.

According to the SOCA members, once the project is complete the developer is legally bound to file a declaration before the director, town and country planning, with details of land, buildings, apartment numbers and everything that exists within the housing complex.

Except for the dwelling units over which apartment owners have exclusive rights, anything which exists in the complex is part of the common area and facilities in which flat buyers have undivided interest. They also argue that according to the Apartment Act, the developer should hand over the ownership, administration and management of these facilities to the association of homebuyers.

“In our plea we cited legal provisions as well as practical problems we would face if the developers were given rights over community facilities. We told the Hon’ble court that the developer got the license to sell only residential units and, therefore, could not sell shops and schools as that would be interpreted as sale of commercial entities. Secondly, the Haryana Apartment Ownership Act talks about common profits – the balance of all income, rents, profits and revenues from the common areas and facilities remaining after the deduction of the common expenses. So what will be the source of the RWA’s income if the schools, clubs, shops and other facilities are owned by the developer? We tried to convince the court that these provisions suggest that the intent of the legislature is to give apartment owners rights over community and commercial facilities,” says Amit Jain, director general, Federation of Apartment Owners Association in Gurgaon.

Examining Section 3(3) (a)(iv) of the Haryana Development and Regulation of Urban Areas Act, 1975, the SC says that the ownership of the colonizer cannot be transferred or divested, unless the colonizer volunteers to transfer the same free of cost to the government.

The apex court further examines Section 3(f)(7) of the Haryana Apartment Ownership Act, 1983 and says, “No duty is cast on the colonizer to give an undivided interest over those community and commercial
facilities exclusively to the apartment owners of a particular colony, since the same have to be enjoyed by other apartment owners of DLF City, Phase I, II and III as well.” Silver Oaks is part of a large colony of 130 acres.

Besides these provisions, the Supreme Court has also taken into consideration the builder-buyer agreement, the license format etc and holds, “In a given case if the developer does not provide common areas or facilities like corridors, lobbies, staircases, lifts and fire escape etc. the competent authority can look into the objections of the apartment owners but when statute has given a discretion to the colonizer to provide or not to provide as per Section 3(f)(7) of the Apartment Act the facilities referred to in Section 3(3) (a)(iv) of Development Act, in our view no objection could be raised by the apartment owners and they cannot claim any undivided interest over those facilities except the right of user.”