Consumer is King » Law

Government preparing to force builders to provide more information

ashish — Sun, 27 Sep 2009 20:09:49 +0000

Over a period of time, dealings in the property sector have been the woe of many investors. Except for the richer investors, or the very well informed buyer, other purchasers of property have always been at the receiving end of problems. Some of the problems that are typically found in property transactions are:
- The builder did not have adequate permissions to proceed, but did not state this in the offers or in the agreement, or has not yet wrapped up the civic permissions
- The builder does not clearly specify the rates for different definitions such as carpet area, super area (where you end up paying for lift areas, and other common areas), plinth area (where the area covered by the walls is included), and buyers get confused by these different definitions. I remember one case where the builder had included long corridors leading from the main corridor, and the area of these corridors was included in the super area
- There have been cases where the builder would have changed the number of apartments being constructed after selling apartments; so a person who bought an apartment at a certain floor found that in the new plan, his view would be blocked since the builder added more floors in front
- Builders, when the going is good, have asked for higher rates even when the deed is already in place. And buyers had been given the option of either paying up, or getting their sale terminated. This happened when the sales deed were typically informal arrangements between the builder and the buyer.
A lot of these problems could go away if a landmark law is passed by the Government that will reduce the ability to builders to hoodwink buyers (link to article):

The aam aadmi looking to own a piece of real estate might be able to breathe easier. The possibility of being hoodwinked by a smooth-talking builder or salesman might be reduced sharply as developers will soon be required to post project details, including civic clearances, on the website of the real estate regulator. This should also reduce the chances of honest property buyers being duped by developers hiding behind terms like “super area” and fine print about various “charges” to conceal actual floor area and the final costs.
The law to regulate real estate developers will call on builders to provide details of the number and size of plots, layout plan, carpet area and plinth area of flats, apartments or any other housing complexes. Importantly, it will prevent builders from changing the plans or inserting charges as the sale agreement will be considered binding. The proposed bill mooted by housing ministry, a draft of which has been circulated to all stakeholders, has asked promoters to submit the details of approval and sanctions from civic agencies and bank guarantee furnished.

Lawyer fined more than Rs. 1.18 by consumer court

ashish — Sat, 16 May 2009 06:16:06 +0000

Typically, one really does not hear of lawyers being fined for any sort of consumer malpractices. So it was surprising to read this case where a lawyer in Chandigarh was fined for deficient services, something that caused losses to his client – when the client complained to a consumer forum, the consumer court agreed with the client and awarded damages to the extent of loss as well as a penalty. Typically, in India, penalties are not to the extent that they are in western countries, but we are slowly advancing towards greater protection of consumer rights and penalizing whenever consumer services are deficient (link to article):

For deficiency in rendering satisfactory services to a litigant, UT consumer forum directed a local lawyer to pay Rs 1.18 lakh, the loss caused, along with Rs 50,000 as compensation and Rs 13, 500 as fee besides expenses to complainant Sunil Kumar, a Hoshiarpur resident. The forum also asked the lawyer to shell out Rs 5,000 as litigation cost.

This was a simple case where the lawyer provided advice that was misleading, and then did not provide correct information. As a result, the client suffered financial loss and accordingly filed for deficiency in service.

SC warns home property buyers

ashish — Thu, 17 Jul 2008 16:59:19 +0000

Here is a warning right from the Supreme Court for home owners. People get attracted to the flats and houses offered by real estate builders, more so when they are offered by reputed and large builders. At the same time, the terms and conditions of the deals offered by these builders can be complex, and not easily understood by normal buyers. For example, the builder may offer a deal whereby there is a penalty clause if the handover of the property is delayed, but most consumers that I have talked to are hesitant to call up the builder on this, In many cases, they are worried that either the builder will rush through things, or maybe handover the property when everything around the property including facilities are incomplete. Hence the warning by the Supreme Court:

The Supreme Court has cautioned prospective flat buyers to look for the devil in the fine-print of documents before signing a contract with builders, who generally promise speedy construction, timely delivery and little or no escalation in price.
It said after a person signs an agreement with a builder for getting a flat in an under construction residential complex, there is little the courts can do to rescue him as he is bound by the clauses of the contract. Though it reduced the amount forfeited by a person for dropping out of the instalment payment scheme for acquiring a flat in a housing complex built by DLF, it frowned upon the practice of builders to put a clause that barred the buyer from challenging the escalation costs.

It is typically a world of buyer beware. Once you enter a contract that is not totally lopsided, then it is difficult for the courts to step in and void the terms of the contract.

Citicorp fined for using force in loan recovery

ashish — Sat, 07 Jun 2008 06:44:55 +0000

It seems to be a story that keeps on repeating itself over and over; you hear of people being harassed by loan recovery agents for repayment of loans, or of somebody’s vehicle being taken away from them anywhere where the vehicle can be found, and so on. In extreme cases, the pressure or violence of the recovery agents can lead to injury or death of the person having taken the loan. The financing company or bank having advanced the loan would take recourse to goons or musclemen and they would use or threaten force in this regard.
For the last 2-3 years, this practise has been challenged in court, and there have been a number of decisions in this regard. Here’s another substantiating the same point that a loan recovery company cannot use force for loan recovery. Since a loan agreement is a civil contract, recovery of loan amount or the assets bought against the loan also can happen only when there is a court order:

Unless a bank or a financial institution is equipped with a court order to repossess a vehicle which it has given on loan, it has no authority to go to the residence of the borrower to take away the vehicle by force. This was observed by the state consumer commission in a recent order.
Taking strong exception to the method adopted by a finance firm to recover dues in the form of a few unpaid instalments from a consumer who took the money to purchase a vehicle, the commission headed by Justice J D Kapoor directed Citicorp Finance (I) Limited to pay Rs 50,000 to one Jan Mohammad, a resident of Mehrauli, for the mental agony, harassment and public humiliation he faced. It was observed by the commission that no financier or bank had the authority to forcibly take possession of the vehicle as the loan agreement or hire purchase agreement were civil contracts and therefore had to be enforced through civil remedy. In other words, through intervention of the court.

It may be argued that the judicial system in India is slow and cases take a long time to settle; however that cannot be an argument for using force or illegal means. A company needs to act in the constraint of the law, so they need to use greater discretion when deciding loans, or they need to go in for more out-of-court settlements in such cases.