Booking and Agreement to Sell of Real Estate Properties under RERA Law

Prior to enactment of RERA Act, 2016 there were no clear regulations and there was no transparency in the real estate transactions. Buyers were forced to sign documents drafted on the terms of the promoter. Some amoral promoters used to harass the builders by charging large amount of money in lieu of advance payment and later forfeiting the same when the allotment of the unit was cancelled either on the request of buyers or by the promoter itself. To put a curb on such unfair practices done by some promoters, RERA Act contains the provision of Section 13 which mentions about Agreement to Sell. The section has been further divided into two (2) subsections.

Limit on Advance payments

Sub-section (1) of Section 13 of RERA Act, 2016 puts a cap on the token money that can be charged by the builder at the of booking. It states that promoter can only accept 10% of total cost of the property as advance payment from the buyer without first entering into a written agreement to sale. The section also states that such agreement to sale must be registered under the law being in force i.e. under The Registration Act, 1908. Thus it is quite clear from reading the section that without a registered agreement to sale promoter can charge only 10% of the total value of the property as advance payment from the buyer and it is only after entering in such agreement promoter can charge more. The requirement under Section 13 (1) is a mandatory requirement and cannot be compromised with. The same was also established by Rajasthan Real Estate Regulatory Authority, Jaipur.

In Vinod Kumar Agarwal v. Jaipur Development Authority, Complaint No. RAJ-RERA-C-2020-3622, decided on 22-09-2020 by Rajasthan Real Estate Regulatory Authority, Jaipur, the buyer stated that the promoter has charged 15% of total amount of property without executing an agreement for sale and has issued a further demand note of 35% amount with warning in its demand note and thus has acted in contradiction with provisions laid down in Section 13(1) of RERA Act, 2016. On this the Authority directed the promoter to execute an agreement for sale with the buyer and get it registered before demanding or accepting any further amount beyond 15% amount which was already deposited by the buyer and the promoter could charge any other amount as per the payment schedule given in the agreement for sale to be executed.

What is format of Agreement to Sale?

An Agreement to Sale is an important document that contains in it the rights and obligations of the parties to the contract. Prior to advent of RERA Act, 2016 this document was drafted on the wishes of promoters mostly and therefore this document was available in different formats and conditions and there was no fixed standard. To bring standardization in the process RERA Act has an inbuilt provision in the form of Section 13 (2).

This provision makes it mandatory, for promoters to adopt the agreement to sale in a format that is prescribed and should contain all the necessary information like the particulars about development, payment plan, date of possession of the property, rate of interest payable by promoter and buyer in case of default etc. To meet this objective real estate regulatory authorities of various states have adopted standard Agreement to sell, containing all the details mentioned above and it is made mandatory for all the promoters to follow this agreement to sell. It is pertinent to note that the promoter can make modifications to this notified Agreement to sale, but no such provision should contradict the provisions of RERA Act, Rules, Notifications or clauses given in the agreement.

Model Agreement to Sell by Various States

To meet the objectives enshrined in sub-section 2 of Section 13, real estate regulatory authorities of various states have made it compulsory for the builder to execute an agreement to sell with the buyers in a form as is provided by the authority of that state. This model Agreement for sale provided by the states can be found on the official website of the RERA Authority of that state. Some model Agreements for Sale provided by various states are given here for ready reference.

Can Promoter make Changes to the Model Agreement to Sell?

It is obligatory on the part of the builder to execute the agreement to sell as is provided by the authority and comply with the terms and conditions specified therein. Promoter can add additional terms in the model agreement provided by the RERA authority but the same shall not be in contravention to the original terms and conditions provided therein. This Model Agreement of Sale provided by RERA will prevail over any other agreement signed between the buyer and the promoter.

In Rajendra Singh Rawat Vs. Sridhara Pvt. Ltd., Complaint No. NCR144/10/83508/2021 decided on 16.06.2022 by Uttar Pradesh Real Estate Regulatory Authority, Gautam Buddha Nagar, the buyer stated that the buyer has requested for cancellation of his booked unit but contrary to Clause 1.13 and Clause 7.5 the promoter has confiscated more than 10% of the total value of the unit. On this the Authority directed the promoter to refund the remaining amount after forfeiting 10% of total value of property, as is mentioned in the Agreement to Sale.

Conclusion

Both the provisions provided under section 13 are in public interest and are provided in the act to safeguard the interest of the buyers. Recently there is a demand for a single model Agreement to Sell aka Builder Buyer Agreement by the Centre Government. The Hon’ble Supreme Court has also noted that it wants that instead of leaving it to the States, the Centre makes the model builder-buyer agreement which shall be applicable for the whole of the country So that there is some uniformity in the basic terms and conditions and the flat buyers are not exploited. Such an action of court is synchronous with provisions laid down in this section and will help in bringing transparency in the realty sector in line with the Real Estate Regulatory Authority (RERA) Act, 2016.