To : The LAW COMMISSION GOVERNMENT OF GOA, B/ S I, 3rd FLOOR, PARAISO DE GOA , PORVORIM-GOA 403 521
Subject: Law Commission of Goa calls for suggestions on new law on Ownership of Apartments & Flats. Dear Sir, Given hereunder my suggestions w.r.t. subject matter: In the suggestions, the word “flat” be read as flat, apartment, tenament, house, bunglow or condomium and the word “society” be read as society, association or any other entity formed to manage the affairs, maintenance and common facilities of the group housing scheme. 1) The new law should go to the bottom of the problem. Making law for ownership (as the name suggests) may not help to protect interests of buyer. If the new law becomes applicable after ownership of flat is established ie after occupancy certificate is issued and possession passed on to the buyer of flats / apartments, the builder will be free to default and cheat the buyer during the period between first payment and possession, which is 2 to 3 years. The ownership law will not be applicable in such cases since the ownership is not transferred to the buyer. 2) It would be better if the new provisions of law forms a part of existing law for development of flats so that the law becomes applicable the day the first payment is made or agreement to buy/sell is entered in with the builder. This will enable the buyer who has made part payment/ entered into agreement to enforce the performance and get his grievances addressed through legal/ regulatory recource. 3) The Act could provide for a autonomous regulator to look after the interests of the buyers, who are often less resourceful than the builder. The regulator must have the resources to verify the land titles, the approvals from various bodies, the conformance to laws of land, the clearances for water,electricity, severage and garbage and the credibility and deliverability of the builder 4) The builder should prepare an “offer for sale document” before he starts marketing flats and get it approved by the regulator (just like red-herring prospectus of IPOs). This document forms the basis of sale of the underlying flats. It should include all the specifications of the flat, facilities, fittings therein and time based performance guarantees (PG) for leakage, defects and non-conformities to specifications. 5) The Act should specify that the society must be formed and the land must be conveyed to the society before the flats are marketed and the details of which are mentioned in the “offer for sale document”. At this stage, the builder will hold all the shares of the flats to be built. 6) When the first payment is made by the buyer or an agreement is made between the buyer and the builder, it must be deemed that an agreement is automatically entered into between the two to transfer the flat and proportionate shares in the society to the buyer (subject to defaults if any). The “offer for sale document” approved by the regulator forms the basis of the deemed agreement. On full payment, the right of the flat and shares automatically devolves on to the buyer and simultaneously the right of the builder is automatically extinguised. 7) The Regulator should be empowered to specify certain standard clauses to be included in the agreement between the buyer and the builder in the interest of the buyer, who is often less resourceful than the builder. 8) The Regulator should be empowered to specify the payment schedule, which should not be front loaded and must be based on the expenditure. 9) The Act should specify a portion of total payments (equivalent to profits of the builder) to be retained in an escrow account under the regulator to take care in case the builder defaults. A major part of this amount could be released to the builder after possession and remaining after expiry of PG or in stages during the tenure of PG. This escrow account condition can be relaxed in cases where the builder furnishes unconditional bank guarantee of an equal amount in favour of the regulator covering the tenor of PG. 10) The Act must provide that Price escalation/ reduction clauses if unavoidable, should be based on formulas with costs of major inputs as variables and subject to certain maximum ceiling. I am prepared to help the commission, the regulator, the government or the legislature in deliberating and finalizing the issue. Kindly take my suggestions on record and issue me a receipt for the same. Thanking you Rajendra Kakodkar Shiv-kunj, Marutigad, Curchorem, Goa 403706 Phone: 9822101450
