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Advantage homebuyers

realestate Updated: Mar 01, 2014 19:41 IST

It’s ‘advantage homebuyers’ in Uttar Pradesh where their rights over common areas in housing societies are concerned. The Supreme Court (SC) has refused to stay the Allahabad High Court (HC) judgment in a case involving eHomes, a Ghaziabad project by the developer Designarch and its resident welfare association. The HC judgment had not only ironed out the creases in the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act 2010 but also interpreted it significantly to protect homebuyers’ interests, saying the apartment owners would share the benefits of any floor area ratio (FAR) bought by the developer after completion of the project.

What is important is that the dispute over rights to common property, festering for years between developers and homebuyers, has finally reached the apex court for a solution.

Real estate developers have always maintained that the apartments sold do not give the homebuyers any rights over the rest of the assets or land in their housing societies. Various disputes have arisen with homebuyers disagreeing with the developers. The most significant issues relate to ownership over common area and additional floor area ratio or FAR (What’s it? See box on page 06).

During the hearing, when the SC Bench enquired if the apartment owners could claim a share in the common property of eHomes by Designarch, senior counsel Mukul Rohatgi, appearing for the developer, insisted that they (apartment owners) could claim rights over the land beneath the buildings but not over the remaining land. Owners also did not have any say in the allotment of FAR to the developer for the housing society, he said.

The SC has refused to stay the HC order and directed the respondent Ghaziabad Development Authority and RWA to file counter affidavits along with other documents to enable RWA members to claim rights over the apartments as well as the land, shops and other properties in question.

So the good news is that the homebuyers will continue to get the benefits of the Allahabad High Court verdict.

In the 2010 case between Designarch Infrastructure Pvt Ltd versus the residents of eHomes, the residents had demanded control and rights over the common areas and facilities. The GDA had, on June 12, 2012, asked Designarch to hand over the common area and facilities to the RWA, failing which these would be transferred.

Designarch had claimed that the act was not applicable to the eHomes project as it had been completed before the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act had come into force on March 19, 2010.

Aggrieved by the GDA’s order, the developer had then appealed to the Allahabad HC to set it aside. The HC then clubbed this petition with those of other group housing projects in Indirapuram that were embroiled in violation issues and, on November 14, 2013, gave a landmark verdict which interpreted the UP Apartment Act in favour of the homebuyers.

RWAs were the gainers

The HC upheld the provision of the UP Apartment Act which said that once a group housing project was complete, the developer would obtain completion certificate, give possession of the apartments to the homebuyers, help form the RWA and then hand over common areas and facilities to the association.
“As far as FAR is concerned, Section 4 (4) of the UP Apartment Act states that once the developer discloses plans and specifications to homebuyers and signs a written agreement with them, he can’t make any changes in the building plans without the consent of the homebuyers. The high court upholds the provision too,” says Harshvardhan, an RWA office-bearer of eHomes.
The HC also interpreted a provision of the act which says that once the project is complete, a developer can purchase additional FAR with the consent of the majority of residents in a group housing project and that the apartment owners will share the benefits from this additional FAR. “FAR utilisation will also be subject to the consent of the apartment owners,” the Allahabad HC held while interpreting the UP Apartment Act 2010.

Builders approached SC

Unsatisfied with the HC ruling, Designarch then approached the SC, arguing that “the HC ventured to adjudicate on the issues not raised/involved in the suit before it, the most significant (such issue) being with regard to the rights over the additional FAR retained by the developer for further development or purchased by the developer from the municipal authority subsequent to development/conveyance of apartments to individual buyers.” The builder also argued that the HC had erroneously held that “The FAR or any additional FAR is a property, appended to rights in the property on which the building is constructed, and is thus a property in which the apartment owners have interest by virtue of the provisions of the UP Apartment Act, 2010. The purchase of additional FAR is not permissible to be appropriated by the promoter without any common benefits to the apartment owners. The consent of the apartment owners obtained by resolution in the meeting of the apartment owners by majority will be necessary for purchasing additional FAR. Its utilisation will also be subject to the consent of the apartment owners.”

Silver Oaks versus e-Homes

Encouraged by the SC judgment in the matter of Silver Oaks Society in Gurgaon, which gives builders rights over community and commercial facilities, Mukul Rohatgi had attempted to convince the court that the same was applicable in UP too.

However, senior counsel Rajeev Dhawan and SK Pal, on behalf of e-Homes RWA, said that the UP Apartment Act and Haryana Apartment Act were markedly different because the latter defined ‘common area and facilities’ very differently.