Action against Builder for Delayed Possession

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September 26, 2022
By Advocate Chikirsha Mohanty

Table of Contents

1. Delay in delivery of possession by the builder

2. What are the actions that a buyer can take against the builder in
case of a delay in delivery?

3. Remedies that can be obtained in action(s) against the builder for

delay in possession:

4. What are the problems faced by the homebuyers?

5. What are the other instances in which a buyer can file a case
against a builder?

6. Should you hire a lawyer?

7. Frequently Asked Questions (FAQs)

Delay in delivery of possession by the builder is when the builder

fails/does not deliver the possession of the residential property
within the stipulated time, as decided in the agreement between
the buyer and the builder/developer.
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Delay in delivery of possession by the builder

Let us understand the process in detail. A Builder-Buyer Agreement is
signed between a builder and a buyer, whenever a person invests in an
immovable property. The stipulated time within which the
property/possession has to be handed over to the buyer is stated in this
Agreement. When the possession is not transferred or delivered by the
builder to the buyer within the stipulated time period (in some cases, even
after the extension period), it is a delay in delivery by the buyer.

It has been seen many a time that the builder does not abide by this
Agreement (by delaying the delivery of the residential property). Some
builders delay the possession from the decided time also because of some
malpractices such as shortage of funds. It has been seen that sometimes
alterations in designs and plans of the property are also made without the
knowledge of the buyer.

In case there are some genuine reasons for the delay in completion, the
builder can seek an extension in time. However, if the property is not
delivered even after the extension period, it is a delay in delivery and/or
possession of the property.

However, the liability of the builder arises only when the delay is due to
his own fault. If the delay is due to any calamity, or situation which is
beyond the control of humans, the buyer would not succeed in an action
against the builder.

The question that now arises is whether these buyers remain remediless.
Thankfully, the answer to this is a clear “NO”. The law has provided some
remedies to ensure that the aggrieved buyers get justice and do not easily
get duped by faulty builders.

Consult: Top Property Lawyers in India

What are the actions that a buyer can take

against the builder in case of a delay in
delivery?
It is important that the buyers are made aware of what remedies are
available against the builders if they have been wronged. No specific
statute providing for provisions and punishments against builders existed,
until the passing of the RERA (Real Estate Regulation Act) in the year
2017.

A buyer should be aware of his rights in case he is duped. For this,

understanding aspects of property law and contract law, along with RERA
and consumer laws is necessary. Read on to understand the most
important laws and the remedies available under them, for aggrieved
buyers:-

1.RERA (REAL ESTATE REGULATORY AUTHORITY

ACT)
Under RERA, each State is required to establish a “Regulatory Authority” -
a special body to deal with matters relating to the real estate sector.
Given below are the important provisions given under RERA that can help
ensure justice to the buyer-

 Compulsory Registration: Every builder/developer is required to

register their projects with the Regulatory Authority, except in cases
 where the project is smaller/less than 500 square meters, and if the
number of apartments is lesser than 8.

 Publishing details of the project: After the Regulatory Authority

grants registration, it is mandatory for the builder/developer to
publish details of the project on the Regulatory Authority website.
The registration is only valid for a period of time (as stated in the
project application) which is required by them to complete that
project. The Regulatory Authority has the right to revoke the
registration, once the time period is over.

 Buyer's right to withdraw from the project: If the

builder/developer has not handed over the possession of the
unit/property within the time period mentioned in the agreement, or
in case the registration for the project has been suspended/revoked,
the buyer has the right to completely withdraw from that particular
project.

 Buyer’s right to compensation after withdrawing: A buyer

has a right to get fully compensated (i.e. the entire amount one has
paid to date, along with interest). This right is available to the buyer
as soon as the date passes by. However, at this stage, there is no
requirement to file a complaint or case against the builder. You
should be compensated by him simply upon a request made by you.

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 Buyer’s right to compensation without withdrawing: If in case

the buyer does not wish to withdraw from the said delayed project,
he will have the right to get compensation with interest, for each
month of delay. This interest amount differs from state to state.
  Right to file a complaint against builder: If in case the
builder/developer refuses to compensate you, it is your right to file a
complaint against him. This complaint is to be filed before the
Regulatory Authority. An officer is required to be appointed by each
Regulatory Authority. This officer would perform all the functions of
a judge. He/She will conduct an inquiry and pass appropriate orders
once it has been proved that the buyer should actually get the
money spent and the interest.

Although you can appear yourself, it is advised that you appoint a

lawyer to represent you. The Regulatory Authority is required to
dispose of the complaint within 60 days, however, if the authority
requires more time, it will have to give its reasons for doing so.

If in case you are unsatisfied with the decision of the officer, you can
file an appeal before the appropriate appellate tribunal (to be set up
by each state) within 60 days.

RERA being a fairly new law, each State has not

implemented/carried out the functions as stated therein. Since the
States are still in the process of doing so, it may be possible that
Regulatory Authorities and Appellate Authorities may not have been
set up. The buyer would have to check if the State in which the
property is located, has set up these authorities or not. If such RERA
authorities are not yet set up, the buyer can seek other remedies as
stated below.

Consult: Top Property Lawyers in India

2. CONSUMER COMPLAINT IN CASE OF DELAY:

If the buyer has bought the property for the purpose of residence, or if the
source of livelihood for the person is the rent from that property (for ex. if
the builder is constructing the property on your/buyer’s land), the buyer
has an option to seek redressal through the Consumer Court by making a
consumer complaint, instead of going to the Real Estate Regulatory
Authority.

A buyer is able to make a complaint in the consumer forum as a consumer

as he/she has paid for a service from the builder and there is a deficiency
(delay) from his end (in this particular service). A complaint can be filed in
District, State, or National Consumer Courts, depending upon the value of
the property and the compensation that a buyer is claiming.

The complaint should be filed as early as possible from the date upon
which the buyer was supposed to get possession. Consumer Courts have
been seen in the past to be aiding in getting faster relief than other
authorities in case of builder delay. As has been evidenced, temporary
relief, settlement with the builder party, and compensation are easier to
get under this option.

It is advised to take the help of a lawyer to file a written complaint in the

appropriate Dispute Redressal Forum/Commission under the Consumer
Protection Act. A claim can be made for the losses even if the possession
is delayed by just one day. In addition to this, when there is delayed
possession, a buyer can even make a claim for interest upon the payment
that has already been made for the flat. The step of approaching the
Consumer Forum can also be preceded by a legal notice to the builder,
with the help of a lawyer. Follow the steps given below to file a consumer
complaint against a builder:

 Legal Notice: Send a well-drafted Legal Notice to the builder

stating your reasons of discontent (delay, etc.)

 Response: Await a response for the stipulated time from the other
party.
  Complaint: Depending upon the response (or no response) prepare
a petition/complaint, stating all the facts and evidence with the help
of expert legal advice.

 Filing of the Complaint: Approach the Consumer Court and file

the petition against the builder.

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3. CIVIL SUIT / WRIT PETITION IN HIGH COURT:

In States where Regulatory Authorities have been set up, no buyer can file
a case before a civil court or writ petition before High Courts. In recent
times it has been seen that some High Courts have redirected cases filed
before it, stating that the buyer must approach the appropriate
Regulatory Authority in that particular State. However, since RERA is a
new law, in case there is no such Authority, the buyer may still have an
option to file a civil suit.

A civil case, whenever appropriate, should be filed in the area where the
property is located, or where the defendant/respondent (builder) carries
on his business.

4. ARBITRATION:
If in the agreement, an arbitration clause exists, the buyer should refer
the case to the arbitrator instead of going to a civil court. Arbitration is a
process of resolving a dispute with the help of an arbitrator(s) - a third
party, which gives its decision via an award. Through this, the arbitrator(s)
would decide if the builder has deviated from the agreement or not.

The arbitrator, in his order, would declare whether there is default by the
builder, and the compensation he is liable to pay to the buyer if any.
However, this order may have to be brought into force by approaching a
civil court.

5. CRIMINAL CASE:
A criminal case can also be filed in some cases for example when the
builder/developer is purposely not handing over the property possession,
only to keep the money. He/she could be criminally sued for cheating
and/or criminal breach of trust, etc. under the Indian Penal Code. In
criminal cases, if the builder is found guilty, he could be sent to jail and
there is no assurance that the buyer would be getting monetary
compensation.

Consult: Top Property Lawyers in India

Remedies that can be obtained in action(s)

against the builder for delay in possession:
The buyer/complainant can seek the following reliefs through legal
resources. However, a buyer should always consult a lawyer to
understand what remedy should be sought in accordance with the facts
and circumstances of the buyer’s case.

1. Compensation: A buyer can claim compensation of up to 10% of the

property price if in case the delay has been caused by the builder without
any justification as given under RERA rules. Even under a consumer case,
a buyer can claim compensation.

2. Refund: In cases wherein the construction has not even begun or is

still in its initial stages, a complete refund of the amount paid can also be
sought. A refund would enable you to buy another property. If the court is
satisfied that the builder is at fault and that the buyer has had to go
through hardships due to this, it can order the builder to refund the entire
amount, along with a direction for the builder to pay the entire cost of the
litigation. Under RERA, builders are required to keep the money/funds
received from the buyers in a special account. These funds can not be
used for any purpose other than this.

3. Punishment: When there is delayed delivery, along with the builder

being at risk of losing the registration of the project, he/she is also liable
to be imprisoned.

4. Completion of Project: The builder can also be ordered to complete

the construction of the project as per the agreement between the buyer
and the builder. The court can also grant the builder some extra time in
order to complete the construction. This is generally a relief given by
courts in civil suits.

5. Damages: In case your agreement has a clause stating that a certain

fixed penalty must be paid in case the builder delays in delivering the
possession, the court may order the builder to pay this penalty to the
buyer. However, even if there is no such clause in the agreement, you can
seek damages/compensation for the mental agony that has been suffered
by you. Damages can also be sought for the rent that a buyer could have
received (and couldn’t due to the delay), till the possession of the
property is handed over.

6. Interest: A buyer can also claim interest on the payment that has
already been made to the builder to date. Several States also have
provisions to ensure protection of the buyers. An example of this could be
the Maharashtra Ownership Flat Act, 1963, which states that if the builder
cannot justify the delay caused by him in handing over the possession of
the property to the buyer, he/she shall be liable to refund the amount of
the buyer with an interest of 9%.
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What are the problems faced by the

homebuyers?
Buying a home is a dream for many. The entire journey from the idea of
buying a property to finally moving into the new address is a wholesome
experience. However, the most stressful part of putting your money into
an under-construction property is the uncertainty of possessing that
property.

Even though tall claims about the early transfer of property are made by
the builders, more often than not, the wait is stretched and tiring.

According to the statistics and estimates, more than 14 Lakh

flats/apartments/units have crossed the promised date of delivery of
possession and are not yet handed over to the homebuyers/consumers in
India. Many invest in homes but are soon disappointed due to the delay
and other tactics of the builders/developers to avoid delivery. The
challenges faced by a homebuyer are many. The errant builders often sell
defected projects to investors. The builders may also use several tactics to
delay the possession of the property.

Some of the major concerns of the aggrieved homebuyers are:-

 Delay in delivery of the unit for possession as discussed earlier.

 The demand for extra charges is based on excuses by the builder, at

the time of handing over of the unit to the buyer.

 The frustration of the purpose of purchase by the homebuyer, due

to major changes in the layout plan/building plan, by the builder.
What are the other instances in which a buyer
can file a case against a builder?
A buyer can take legal action against the builder in the following
situations/cases:-

 Non-Execution: In case the builder does not execute the relevant

sale agreement despite having received a substantial advance
amount.

 Non-Issuance of Docs: In case the builder fails to issue copies of

all relevant documents viz.; development agreement, power of
attorney, sanctioned plan (by concerned Regional Authorities),
specification of construction materials/design as per sanctioned
plan, and/or any other relevant documents.

 Charges: In case the buyer is charged higher than the amount

agreed between the parties.

 Receipt: In case the builder fails to issue a receipt(s) against the

paid amount.

 Poor quality construction: In case the builder has used

substandard or poor quality materials and/or products to
build/construct the project.

 Not complying with specifications: In case the builder delivers

the house, not complying with the agreed specifications.

 Parking space: In case the builder does not provide a free parking
space within the premises.
  Co-operative housing society: If in case no co-operative housing
society was formed and handed over to the members.

 Water storage tank: In case no storage tank for water has been
provided on the residential premises.

 Proper ventilation and light: In case no proper ventilation and

light are available on the residential property.

 Completion Certificate: In case the builder does not issue the

requisite Completion Certificate at the time of delivery of the
respective flats/house to its occupants.

 Non-declaration of expenses: In case the builder/developer does

not declare the expenses against which he collected money.

In case any project suffers from any defect as stated in the list above, the
builder can be sued/and action can be taken against him. In this article,
however, the issue of delay in delivery of possession has been discussed
in detail.

Consult: Top Property Lawyers in India

Should you hire a lawyer?

It is highly recommended that an aggrieved buyer hires a lawyer for any
action against the builder. This is because a property lawyer would be
able to assess what is the best remedy that you should seek, the best
legal recourse that should be taken, etc. A lawyer can better draft your
complaints/suits and would also be able to represent you better than you
would be able to represent yourself. This is because he is experienced and
has studied and has been taught how to draft and represent clients. In
addition to this, a property lawyer knows the requisite laws and can
interpret judgments and research more effectively. Hiring a lawyer is thus
a good practice that would only work in your favor.

Frequently Asked Questions (FAQs)

1. Why should a case be filed against the builder if he has delayed

in handing over the possession of the flat?

If a buyer fails to take an action against the faulty builder/developer, he is

putting his investment at risk. If a case is not filed by the buyer in such a
situation, and the builder files for bankruptcy, the buyer will be at risk of
not being named as one of the creditors to claim his/her amount. When
the court orders the sale of the builder’s assets, the aggrieved buyer
would not be eligible to attain reimbursement.

2. Can I claim the interest amount in case of delay or non/delivery

of possession?

Yes, you as a buyer can claim an interest in case of delay or non-delivery

of possession. Interest rates depend upon where the case is filed and the
rules pertaining to it.

3. Is it possible for homebuyers to file a case as a group against

delayed possession?

Yes, a class action can be taken against a particular builder delaying

possession.

4. Do I have to appear in person at every hearing date?

No, you do not have to appear in court on every date. The lawyer that has
been appointed by you would represent you in court. However, you have
to appear if you have been asked by the court to actually appear in
person.

5. Do I need a lawyer to represent me at RERA?

Under RERA, representation can be made either by a legal

practitioner/lawyer or by the complainant himself. However, it is highly
recommended that a lawyer be hired for this action as a proper complaint
needs to be drafted with proper annexures, etc. Moreover, a lawyer would
guide you best as to which court to appear at and what relief should be
sought, keeping in mind the facts and circumstances of your particular
case.

6. Can I claim a refund of the entire amount as paid by me to the

builder, in a case of delayed possession?

Yes, in cases wherein the construction has not even begun or is still in its
initial stages, a complete refund of the amount paid can also be sought. If
the court is satisfied that the builder is at fault and that the buyer has had
to go through hardships due to this, it can order the builder to refund the
entire amount, along with a direction for the builder to pay the entire cost
of the litigation. Under RERA, builders are required to keep the
money/funds received from the buyers in a special account. These funds
can not be used for any purpose other than this. This makes the process
all the more efficient.