Your real estate developer may assure you of a completion date that’s earlier than the one mentioned in the written agreement. Or he may have promised you an additional parking slot or terrace space. How do you handle such assurances?
Can the mere presence of a homebuyer at a meeting called by a real estate developer imply the purchaser has accepted an extension to the completion date of a delayed project the latter spoke about?
An order passed by the Bombay High Court on May 2 has held that a written agreement entered into by a developer and homebuyer cannot be substituted by a subsequent oral understanding. The ruling has protected the rights and interests of homebuyers.
The court also dismissed the developer’s claim that flat purchasers had implicitly approved an extension of the deadline for completion of the project and handover of their homes later than the dates mentioned in the written agreement.
According to the Indian Evidence Act’s Section 91, it is “only when the written contract itself does not contain the whole of the agreement or if there is any ambiguity, then oral evidence can be permitted to be adduced to prove the other conditions, provided it is not inconsistent with the written contract,” the order said.
The High Court upheld a Real Estate Regulatory Authority (RERA) Appellate Tribunal Order, which did not agree with the builder’s submissions that the date of handover of possession had been extended after meetings held with homebuyers.
Case history
A builder-buyer agreement was executed between the developer and allottees of Sai Sapphire, a project being developed in Kurla, Vikhroli, Mumbai, wherein it had been agreed that the developer would deliver flats to the buyers by July 2015.
After the developer missed the deadline, the developer and the buyers held several meetings and the timeline for delivery of possession was mutually extended up to 2018.
Subsequently, some buyers complained against the delay in delivery of their flats to the Maharashtra RERA, which ruled in their favour.
This was followed by the promoter/developer of the project appealing against the order of Maharashtra RERA in the Bombay High Court.
The court held that the “agreement entered into between the parties, which has been reduced into writing, cannot be substituted or stand novated by a subsequent oral understanding between the parties.”
The Appellate Authority had stated: “Mere presence of Allottees (at meetings with the developer) will not amount to consent for extension of date of possession. Similarly, minutes of meetings are not signed by Allottees and therefore are not binding on the Allottees. Payment made by Allottees even after the date of possession was over cannot be accepted as a piece of evidence to show that Allottees had given consent for extension of date of possession.”
“There is no substantial evidence to show that date of possession is extended mutually by Promoter and Allottees. Minutes of the meetings cannot override the terms and conditions of the agreement for sale,” the Appellate Authority ruled.
Oral promises versus written agreement
Legal experts told Moneycontrol of a growing trend whereby, to avoid regulatory complications, developers were mentioning conservative project completion dates on the RERA website and on contracts, but were orally promising homebuyers possession of their flats well in advance.
Some builders also promise to provide certain amenities not declared in submissions to RERA and/or in the registered agreement for sale. Others promise to allot certain restricted common areas for exclusive use of the flat purchaser such as the terrace or to provide an extra car parking slot.
All these oral agreements are not binding and could lead to litigation. Legal experts advise homebuyers to execute a written unregistered document to record an agreement that’s different from what has been previously agreed to in writing.
Lawyer Kumar Mihir said the Bombay High Court ruling was “a very appropriate decision.”
“Allowing oral understandings to supersede written agreements will give a carte blanche to the builders to violate the terms agreed between them. We are hopeful that this decision will force all builders to strictly comply with the provisions of the agreement and not take the buyers for a ride,” he said.
A homebuyer needs to be aware that if he/she relies on an oral contract, especially to amend the terms of a written and registered contract, such an oral understanding may not be enforceable, said Avikshit Moral, a partner at legal firm IndusLaw.
“We also see a growing trend that to avoid regulatory complications, developers are mentioning conservative project completion dates on RERA website and on contracts, but at the time of sale, homebuyers are orally promised possession well in advance. It is imperative to note that in both instances, what will eventually hold water is the written agreement that has been entered into by the parties,” he said.
Manmeet Kaur, Principal Associate, Karanjawala & Co, points out that Section 13(1) of the RERA Act mandates a registered “written Agreement for Sale”.
The promoter, under Section 13(2), has to compulsorily disclose information such as particulars of constructions, external development and infrastructure development charges, date of possession and so on, she said.
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New agreement must be executed to record changes
Homebuyers should be careful and evaluate the risk of non-enforceability of an oral agreement versus what is captured in the written agreement or when the builder, after executing and registering a written agreement for sale, convinces the buyer to execute a written unregistered document to record an agreement that is different, said Heena Chheda, a partner at Economic Laws Practice.
It is fairly common for builders’ teams to make oral commitments and assurances to homebuyers on important aspects, terms and obligations not expressly put in writing and are different from what is part of the registered sale agreement.
For example, a builder may verbally assure buyers that he would complete a project before the date declared on the RERA portal and provide certain extra amenities in the project not mentioned in the registered agreement. Such agreements are not binding and could lead to litigation, Chheda cautioned.
The Bombay High Court order has made it clear that the timeline for delivery of flats cannot be deemed to have been extended merely through an oral agreement/understanding between the developer and the allottees in their meetings without a written document/agreement to that effect being registered, said Kshitij Bishnoi, a partner at Khaitan & Co.
Some developers in the Delhi National Capital Region also tend to enter into oral agreements and understanding with allottees of the project subsequent to execution of the builder- buyer agreement, Bishnoi said.
They negotiate with buyers some terms in the developers’ favour by citing ostensible challenges and issues being faced by them, including changes in applicable laws or market sentiment, a shortage of raw materials and labour.The developers also tend to negotiate with allottees by entering into oral agreements to revise/modify building plans and drawings approved by the authorities, after the execution of the builder-buyer agreement, Bishnoi said.
