CCI issues supplementary order u/s 27 of the Competition Act in the DLF case; modifies Apartment Buyers Agreement

[ajaynarula]

CCI issues supplementary order u/s 27 of the Competition Act in the DLF case; modifies Apartment Buyers Agreement as directed by COMPAT

The Competition Commission of India passed a supplementary order under Section 27 of the Competition Act, 2002 today, modifying the Apartment Buyers Agreement entered into between DLF and the apartment allottees. This order relates to the order of the Hon’ble Competition Appellate Tribunal of March 29, 2012, by which the Commission was directed to pass an order under Section 27(d) of the Competition Act specifying the extent and manner in which the terms and conditions of the Apartment Buyer’s Agreement need to be modified.

The Commission in its order today, after considering the modified terms of the Apartment Buyers Agreement submitted by both parties, has modified the terms of the Apartment Buyers Agreement in a manner which it considers fair and reasonable and takes into account the interest of both parties.

The Commission in its earlier order dated August 12, 2011 had held that DLF Ltd. was a dominant enterprise which had violated the provisions of Section 4 of the Competition Act 2002 by entering into an agreement with apartment allottees that was one sided, abusive and unfair to the allottees. Accordingly the Apartment Buyers Agreement has been amended such that the abusive and unfair conditions present in the original one sided agreement have been removed. The Commission in its order has also considered the relevant provisions of the laws applicable to the development of group housing projects in Haryana, particularly the mandatory requirements which must be followed by every developer/builder, but which were not followed by DLF Ltd. in this case.

The order of the Commission has been passed in Case No. 19 of 2010 and a copy of the order has been uploaded on the website of the CCI at http://www.cci.gov.in.

[dheerajjain]

This is a landmark order. Please find attached order

[lalitec]

Thanks Dheeraj. This is really good for end customers.

Regards,
Lalit

[dheerajjain]

CCI chairman Ashok Chawla said the modified agreement could work as a benchmark for commercial agreements between real estate developers and property buyers.

This order can be quoted in all our communications witth builders and Court cases. Don't let Customer Care of builder cheat us by quoting clause from agreement.

A brief summary of the key changes follows:

The Competition Commission of India, in it’s supplementary order dated 03 Jan 2012 related to case No 19/2010 in the matter of Belaire Owners Association Vs DLF Ltd & Othrs, has identified that the Apartment Buyer Agreement (ABA) for apartments is often one sided and many clauses in the ABA are dominant in favour of builders. The have offered detailed modifications to the clauses in the ABA to make the contract balanced, the list of modifications are in page 25 onwards.

Significant points that are highlighted in the order that are also applicable to most other group housing colony apartments are summarised below:

Besides detailed clauses, the modifications suggested in the clauses of the ABA primarily highlight the following:

1. The ABA needs to be balanced and fair to both parties.

2. Draft of ABA must be proved at time of booking the apartment and ABA must be signed after booking and before next payment can be taken.

3. Projects land area, approved layout plan details etc must be part of the ABA.

4. Once an ABA is entered into, no changes can be made in the layout plan, height / floors of buildings, size of apartments etc

5. The titles for the club/community centre and all common area and land will be with the apartment owners.

6. Parking – It is clearly highlighted that parking spaces can only be sold to Apartment owners along with the apartment. The cost of parking must be included in the basic price of the apartment. Stilt parking can't be converted into apartments and sold independently.

7. The applicable rate of interest for any compensation or penalty must be same for both parties.

8. Builder must maintain the complex or 5 years after completion.

9. Residential type electricity connection for the project must be arranged from DHBVN by the builder. If the builder uses commercial connection, the cost difference between commercial and residential rates must be borne by the builder.

10. Many of the clauses which were one sides in favour of the builder are to be deleted from ABA’s.



In addition, some of the specific clauses are further highlighted.



a. Clause 31 that a copy of the ABA should be made available to applicants at the time of booking of apartment and after booking is made, next instalment can only be taken AFTER signing of the ABA.



b. Clause 29 states that in the event of default of the ABA – such as delay in instalment payment by buyer or delay in construction by builder, the applicable penalty shall be SAME on both sides. If the builder charges 18% interest on delay in instalment payment, they are liable to pay the same rate of interest for delays in construction.



c. Clause 27 states that once a builder takes booking of apartments, they cannot make any changes in the approved layout plans without approval of the allottees. Further, they can only construct the project as per applicable FAR at the time of sanction of the approved plan, any subsequent changes in FAR rules will not be applicable on the project and the builder cannot increase the construction area.



d. Clause 23 states that a buyer must have options to exit the contract if there is default by the company – such as delay in construction. On page 71 of the order, it states that in the event of construction being delay by more than 2 construction linked milestones, buyer has the right to stop making further payments and also right to cancel the contract getting a full refund along with interest within 30 days of cancellation



e. Clause 18 clearly defines Super Area and stated that builder will have no right on any common area or land of the housing society after completion of project.



f. Clause 17 states that builder cannot increase the number of floors of any building after bookings are taken.





g. Clause 16 states that super area of the apartment can’t increase or decrease by more than 2% of the contracted super area when construction is complete. If the area changes by more than 2%, builder has to give detailed explanation of the same.



h. Clause 14 states that open parking and stilt parking are part of common areas and not sellable separately or along with flat.



i. Clause 13 states that apartment owners will have complete ownership rights of all the land area of the project once it is completed and builder will have no rights in the project after completion



j. Clause 12 makes it mandatory for builders to highlight their title of land and necessary licenses along with approved layout plan details as part of the ABA

[ashutoshkoul]

Can we not use clause 20 of this judgement which is related in EDC for our benefit. As per this Builder has to inform buyer with a copy of letter and calculations for any increase in EDC. Which i am sure none of Faridabad builder has done.
Can we not use this judgement as whole to make our case before CCI for all our agreements.

Regards,
Ashutosh Koul