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'Builder Must Pay Compensation For Delay In Delivering Flat'

By Dr arvind, Section Real Estate
Posted on Mon May 12, 2008 at 11:45:18 PM EST

A Builder cannot refuse compensation to a buyer if he fails to keep his promise of handing over possession of a flat within a stipulated time, the national consumer court ruled on Monday.

The court said the builder also cannot pay less than the agreed amount of compensation, on the plea that the price of the property has gone up and, therefore, the buyer stands to gain anyway.

What It Means

There is no way the builder can avoid paying the fixed compensation in case of delay in flat possession
Make sure not to forget the compensation clause in the agreement paper.

"Such a contention of any builder is unjustified and unreasonable because after sale of the property all the benefits accrue to the purchaser and not to the vendor," the National Consumer Disputes Redressal Commission said.

"In any case, if such contention is accepted, the builders/contractors would earn crores of rupees by delaying the delivery of pos- session of the flat/property for months together for one reason or the other," the commission headed by Justice M.B. Shah said.

The compensation clause is usually decided between the buyer and the builder and put on the agreement papers at the time of the deal. The ruling came on a complaint by two buyers who demanded 24 per cent annual interest from a builder for delaying possession.

Builder made to pay for 10-year delay

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Builder made to pay for 10-year delay

THE NATIONAL Consumer Disputes Redressal Commission on Monday ruled that builders have to pay the compensation fixed in the agreement with buyers if they fail to hand over possession of flats within a stipulated time.
The ruling came on a complaint filed by two buyers, Kunj Behari Mehta and another person, who sought a direction to Ansal Properties and Industries Ltd to deliver possession of an apartment in Celebrity Homes, Palam Vihar. They had demanded 24 per cent per annum interest on Rs 26,26,790 - the amount they had deposited with the builders from October 10, 1998 till the delivery of possession. They demanded interest at least at the rate of 17 per cent per annum as agreed by the Ansals in August 1996.

The complainants had prayed that if the Ansals were unable to deliver the possession of the apartment, the builders should be directed to refund the amount of Rs 26,26,790 with an interest of 24 per cent per annum from the date of payment of the installment till the date of actual realization from the Ansals.

Allowing Mehta's complaint, the commission directed the Ansals to pay interest at the rate of 12 per cent per annum from November 1, 1998 till December 1, 2007 on the actual amount deposited with the builder i.e. Rs 25,29,770. Interestingly, the commission said in its ruling that the compensation rate cannot be lowered.

It also ordered the builder to pay a compensation of Rs 50,000 for rough behaviour.

The complainants and the Ansals had executed an agreement on March 2, 1995 regarding a flat. The complainants made the payment in advance before October 1997 and the Ansals were supposed to deliver possession of the flat to the complainants on or before October 10, 1998.

But actual delivery of the apartment was made only on December 20, 2007, and that too only after the commission issued a direction.

The Ansals opposed the complainants' plea on the ground that they had already delivered the flat's possession and the value of the said flat had increased.

But the commission said the builder's contention was "totally misconceived".

Source: Hindustan Times, May-13-2008

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