Exemption of Projects Listed as “Structurally Completed” Cannot be Contemplated as Non-Applicability of Powers or Jurisdiction under RERA Act – TNRERA
Find this article on Mondaq by clicking this link here.
The Government of Tamil Nadu by way ofnotification on June 22, 2017 promulgated the Tamil Nadu Real Estate(Regulation and Development) Rules, 2017 (“Rules”)as part of the implementation of Real Estate (Regulation and Development) Act,2016 (“Act”). Under the said Rules, rule4 explanation III provides that if a planning authority gives approval for aproject which is planned to be developed in different phases, the said phasesmay be registered by the promoter/developer as an independent project for the purposeof registration with the Real Estate Regulatory Authority (“RERA”). Further it states that a twothird consent of the buyers is not required for the development of a land intodifferent phases but nevertheless requires such an agreement to divide aproject to be in written and executed by the parties. It is also notable thatregistration requirements under RERA shall not become mandatory if the subject landis less than 500 square meters or the total number of apartments developed isless than 8.
In light of the above provisions it is clear that
the new legislation under RERA has been standardised so as to give rights to
the buyers against any act which was conducted or completed unilaterally by the
developer/promoter. It is also notable to mention that although the new legislation
allows for the bifurcation of a single real estate project into different
phases and registering the same as independent projects, the Act itself does
not however provide clarity in instances wherein the said phases can be further
divided into sub-phases thereby avoiding registration as per the requirements
and provisions of RERA Act.
The ambiguity with respect to the powers and jurisdiction
under the Act, was clarified by Tamil Nadu Real Estate Regulatory Authority (“TNRERA”) in a judgement dated September
24, 2018 in the case of Secretary, Serene Kshetra Owners v. M/s. Adinath
Srinivasa Foundation LLP[1],
Complaint number 35/ 2018 discussed below[2].
FACTUAL BACKGROUND:
The present case was instituted by Serene Kshetra
Owners (“Allottees”) of ‘Serene
Kshetra project’[3] in the
Kancheepuram district wherein the allottees/complainants had stated that the
said project which had commenced prior to the introduction of RERA was listed
as “structurally completed” as per the list maintained and published in the
website of Director of Town and Country Planning (“DTCP”), Chengalpattu. This act of the developer curtailed the Allottees
from reaping the benefits under the RERA Act even though only certain
structures were completed or in the process of completion and handed over to
the respective allottees.
The facts of the said case were such that the Developer
had taken two different project approvals with respect to the initial project being
a single integrated project falling under the revenue jurisdiction of DTCP
Chengalpattu and Local Planning Authority, Kanchipuram. The said project was divided
into a Residential Layout scheme as Phase I and a Group Development scheme as
Phase II under which major plots were structurally completed with the exception
of 7 villas, 6 twin houses and 48 row houses. The Developer registered Phase I
and II of the development schemes as two separate projects without obtaining
two thirds majorities of the buyers which he claimed was a matter of right as
per section 3(2) of the Act.
It was contended by the Allottees that though the
project was initially a single integrated project and later recognised to be
developed in two separate phases the same cannot be further subdivided to
indicate sub-phases in the said project indicating registered and un-registered
plots with RERA. The Allottees further argued that in such cases there would be
differential treatment towards the present allottees within the same project
with that of future allottees who would benefit from certain advantages and
rights mentioned under the Act.
In reply to the contentions of the Allottees, the
Developer made arguments stating that the said project would not warrant the
jurisdiction of RERA as per the exemption provided under 2 (h) (iii) of the
Rules as it exempts the purview of RERA for execution of projects outside the
Chennai Metropolitan Area for completed structures and plots which were pending
completion certificate. The Developer further rebutted that only upon such
verification by the concerned relevant authorities that the said plots were
included in the list prepared by DTCP. It was further argued by the Developer
that the Act and the Rules lacked jurisdiction to confirm the legality of the
present complaint due to the statutory rights guaranteed under explanation of section
3(2) of the Act.[4]
ISSUES:
The issues framed before TNRERA were:
1) Whether a said project can be excluded from
the ambit of RERA even to the extent of examining its legality as per rule 2
(h) (iii) of the Rules?
2) Whether the developer has an unfettered right
to further bifurcate a project as per his wishes under section 3(2) of the Act
and Explanations II and III of rule 4 of the Rules and whether the same would
bar the jurisdiction of RERA to examine the said issues?
OBSERVATIONS AND FINDINGS:
It was observed that if a project is exempted
under rule 2 (h) (iii) of the Rules, sections 34 to 37 of the Act relating to
powers and jurisdiction can be invoked and be made applicable to test the
legality of the said exemption. TNRERA stated that as per sections 34 to 37 of
RERA Act, 2016 there was ample power and jurisdiction to regulate, call forth
records, conduct enquiry with respect to registration and regulation of the
real estate projects and agents. Therefore, keeping in mind the above
provisions TNRERA asserted its authority that no exclusion under the Act itself
could bar the applicability of the Act to determine the legality of the matter
in hand. Further with respect to issue 2 it was observed that since the project
had commenced before TNRERA was initially notified, the bifurcation was made by
the Developer keeping in mind the requirements for registration under RERA and
thereby taking steps to avoid any possibility of registration.
It was therefore observed from the submissions
that the Developer had utilised the provisions under rule 4 Explanation III of
the Rules, which allows for the registration of phases of a project separately
and then thereafter declaring to his advantage from further application of RERA
as provided under rule 2 (h) (iii) of the Rules. It was ascertained that since
only certain portions in the said project were completed it did not warrant the
project as a whole to be accorded the status of “structurally completed” as per
section 3 of the Act which would, if accepted prevent the jurisdiction of RERA.
In light of the facts and circumstances the Developer was therefore ordered to
register the whole project in its entirety under the provisions of RERA.
COMMENTS:
The order passed by TNRERA in the above case is awelcome judgement to showcase the fact that the real estate regulatoryauthority does not merely de facto pass judgement based on recordsmaintained by the relevant authority and that it imposes itself as theadjudicating authority in matters concerning the wilful omission of the partiesto register with RERA. That the present case is clearly a case regarding non –registration with RERA and for the purpose of avoiding registration fee payableby real estate agents to RERA. Further it clarifies the stance that anexemption for non-registration would per se be applicable only if all the plotsin a said project are structurally completed and does not include any partly ormajorly completed plots in a given real estate project. Thus it can be observedthat RERA does not hesitate to resolve any ambiguity which would have occurredprior to its commencement and that moving forward it aims to standardise thereal estate sector towards protecting the rights of the buyers.
By – Vaidya Gopikrishnan, Associate
[1] M/s. Adinath Srinivasa Foundation LLP hereinafter referred to as
the ‘Developer’
[2]Order dated 24 September
2018 – Serene Kshetra Owners v. M/s. Adinath
Srinivasa Foundation http://www.tnrera.in/tnrera_judgements/2018/35-2018.pdf
[3] Joint venture between Serene Senior Living Private Limited and
Adinath Srinivasa Foundations LLP – Registered under RERA
[4] Explanation to rule 3 (2) of Act – “For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered a stand alone real estate project, and the promoter shall obtain registration under this Act for each phase separately”.
King Stubb & Kasiva,
Advocates & Attorneys
New Delhi | Mumbai | Bangalore | Chennai | Hyderabad | Kochi
Tel: +91 11 41032969 | Email: info@ksandk.com
By entering the email address you agree to our Privacy Policy.