Flat Sale Agreement Not Mandatory for Relief Under Real Estate Law: Rules MREAT

MUMBAI: In a significant ruling, the Maharashtra Real Estate Appellate Tribunal (MREAT) has overturned a 2020 MahaRERA decision that had denied compensation to a homebuyer due to the absence of a registered sale agreement.

The tribunal found the denial unjustified and directed the developer to refund the sum paid by the buyer, along with applicable interest.

The case pertains to allottee Stanley Saldanha, represented by advocate Anil D’Souza, who had booked a flat in an Indiabulls project located in Panvel in August 2013.

He paid over ₹26 lakh towards the purchase. However, following prolonged construction delays and failure to hand over possession, Saldanha decided to withdraw from the project in 2019.

When the allottee sought an exit, the developer attempted to impose cancellation charges and withhold a portion of the amount already paid.

The developer’s position was initially upheld by MahaRERA, led by chairman Gautam Chatterjee, which ruled that Section 18 of the Real Estate (Regulation and Development) Act (RERA) could not be invoked without a formally registered agreement for sale.

MREAT, however, held this interpretation to be erroneous. It emphasized that a registered agreement is not a prerequisite for relief under Section 18.

The tribunal pointed to a comprehensive booking application form, spanning nearly 26 pages, which clearly outlined the mutually agreed-upon terms between the buyer and the developer. These terms, the tribunal said, were functionally equivalent to those found in a formal sale agreement.

The tribunal clarified that an agreement does not necessarily have to be in a specific written format. Any document that adequately captures the core elements and intentions of both parties may be treated as a valid agreement for the purpose of seeking relief.

The MREAT reiterated its earlier stance that even a Memorandum of Understanding (MoU) could qualify as a legally binding document under Section 18 if it contains the essential elements of an agreement for sale.

Additionally, MREAT rejected the argument that the timeline for delivery of possession should be linked to the date of occupation. It ruled that this approach lacks a legal foundation.

It further observed that the promoter failed to comply with Section 11(3) of the Act by neglecting to provide a specific date for possession or to disclose the phased construction schedule at the time of booking.

Importantly, the tribunal also noted that the Real Estate Act does not grant developers an automatic right to forfeit earnest money or any specific portion of the amount paid in the event of cancellation.

There is no provision in the Act that explicitly authorizes such forfeiture, especially when the buyer seeks a legitimate exit due to delays or non-performance on the part of the developer.

This judgment reinforces the principle that the substance of agreements and the conduct of parties can hold as much weight as formal documentation under real estate law. The ruling is likely to serve as a crucial precedent in cases where buyers seek redress despite lacking a registered sale deed.