Collecting Advance without Agreement is Violation Under RERA

Developers collecting a deposit from homebuyers without entering into a construction or sale agreement is a violation under the RERA Act, the state’s real estate regulator has ruled. In a recent order, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) also obse

BY Realty Plus
Published - Monday, 30 Aug, 2021

Collecting Advance without Agreement is Violation Under RERA

Developers collecting a deposit from homebuyers without entering into a construction or sale agreement is a violation under the RERA Act, the state’s real estate regulator has ruled. In a recent order, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) also observed that partial payments under the guise of payment towards ‘expression of interest’ with a promise of refund are deceptive and designed to bypass legal procedure. The complaint pertains to ‘The Goodwood Residence’ in Chennai’s Cenotaph Road area, developed by Cenotaph Developers LLP and Olympia Tech Park Chennai Pvt. Ltd., The complainant’s submission said 3.63 crore had been paid to the developers under a ‘non-binding expression of interest’ to purchase a flat in the housing project in 2016. A year later, the complainant preferred to withdraw from the project and sought a refund. The developer returned 3.5 crore after deducting nearly 12.8 lakh as service taxes, the complainant submitted to the TNRERA and demanded a return of the deducted amount. Of the sum received from the complainant, the developers said, "They paid 12.8 lakh for among others service tax, Swachh Bharat cess and Krishi Kalyan Cess and returned the balance." TNRERA, after hearing both sides, said the developers collected around 80% of the cost without entering into a sale or construction agreement, a clear violation of Section 13 of the RERA Act. Noting that the developers in 2016 received two cheques for ?95 lakh from the complainant towards ‘expression of interest’, TNRERA adjudicating officer G Saravanan said receipt of such payment with a promise to refund the amount was meant to bypass legal procedure. Further, the developers failed to prove they provided a taxable service to the complainants, which were registered with the service tax authorities for making such payment with respect to the project. Hence, the complainant was entitled to the deducted amount along with 10.2% interest, the real estate regulator’s order said.