Precautions before giving token to book your home
By Dr Sanjay Chaturvedi, LLB, PhD
Home buyers who were having only allotment letters and payment receipts are at a loss as they count not convince the law execution process as to their bonafied contentions to purchase homes. Often buyer of real estate give a token, Ernest money, advance, booking amount, subvention token of ratio (20:80) etc by whatever name called.
Hundreds of Order under RERA in the country have seen these allotment letters and advance receipt in suspicious transaction and never gave the due justice as they should have got.
In my opinion, an advance given by whatever named called is first step to enter into contractual obligations. By accepting it builder is at the other end must adhere to what was promised at the time of taking the money/ advance. Under section 12 of RERA, it is provided that if at the time of taking token, whatever builder has promised must he should deliver.
In the matter of PCIT v Vembu Vaidyanathan, Hon’ble Bombay High Court observed that : Section 45 Capital Gain , The allottee gets title to property on issue of allotment letter. The payment of installements is only a follow-up action. Taking delivery of possession is only a formality. Accordingly, the date of allotment is the date on which the purchaser of a residential unit can be stated to have acquired the property ( CBDT Circular applied).
Will allotment letter treated as contract/ agreement? In my opinion, any advance given and accepted will lead to concluded contracts and must looked at Agreement. In many cases, MAHA RERA have treated a 28 pages long so called allotment as “Agreement for Sale” hence qualified for Section 18 remedies.
What you should see before giving advance? Builder usually put a cancellation clause in the allotment letter. The cancellation charges / forfeiture charges are 10% of the purchase consideration or value of the apartment and not token amount. One must insist that no such charges be imposed. Besides this, if home buyer paying more than 10% of the purchase consideration then you must enter into agreement for sale.