DUTIES OF A FLAT PROMOTER
In order to regularize the promotion, construction, sale, management and transfer of ownership of flats, the Karnataka Ownership flat (Regulation of the promotion of construction, Sale, management and Transfer) Act 1972, was enacted by the Government of Karnataka. The Act popularly known as Karnataka Act 16 of 1973 was first published in Gazette Extraordinary on 23.07.1973, received the assent of the president on 29.06.1974, and came into force on 01.04.1975, as per notification No.FD/KHB/75 dated 06.03.1975. The Act details the rights and responsibilities of promoter and purchaser of flats.
A flat is defined in the Act as “a separate and self contained set of premises used or intended to be used for residence, or office, or shop, or go-down, and includes a garage the premises forming a part of a building”.
Promoter is a person who constructs or causes to be constructed a block of building of flats or apartments for the purpose of selling some or all of them to other persons or to a company, co-operative society or others.
Thus a promoter need not construct a flat. He may get them constructed through another builder. Such construction is for selling some or all of the flats. Since he receives advance amounts from proposed purchasers and will be in possession of the land not owned by him, the Act prescribes certain obligation on promoter.
GENERAL LIABILITIES
Section 3 deals with the general liabilities of promoter. The promoter has to disclose the nature of his title to the land on which the flats are constructed. Such title has to be duly certified by an advocate who has standing practice of not less than seven years. He shall produce the original documents of his title to the property. Advocates certificate of his title, encumbrance certificates, documents relating to the title, the plan and specifications of building proposed, before the intending proposer. Some of the promoters refuse to give copies of the title documents to the proposed purchaser which is against the law and not ethical. He has to allow inspection of plans and specifications of the property of the building approved by local authority, disclose the nature of fixtures, fittings, amenities including provisions for lift. If the promoter himself is the builder shall disclose the prescribed particulars of design and materials used for building. If the promoter is not the builder, he shall make available for inspection all agreements entered by him with architects and contractors related to design and materials used for construction.
Promoter has to prepare and maintain a list of flats with their specific numbers and names and complete address of persons who have agreed to purchase flats with consideration amount charged and terms and conditions on which flats are sold and shall inform the proposed purchaser in writing the date by which the possession of the flat will be given.
He has the responsibility of informing in writing the nature and constitution of organization to which title being passed with terms and conditions.
He should not allow persons to enter and take possession of flats until completion certificate wherever required is obtained from the competent authority. He is duty bound to disclose the full outgoings including ground rent, municipal taxes, tax on income, water and power charges and any subsisting mortgage. If the purchaser demands, he has to furnish the true copies of all documents of title, advocates certificate, encumbrance certificates/documents, approved plan and specifications, list of furniture, fixtures, amenities, list of flats with numbers with the name and address of proposed purchasers, the price at which the flats are sold and also terms and conditions of such sale, provided the purchaser pays the charges for such copies.
AGREEMENT
The promoter may receive the advance amount not exceeding 20% of sale price, but before accepting such advance, he has to enter into an written agreement with the purchaser and such agreement shall be registered. The sale agreement should contain the complete details of the building to be constructed, and promoter obligation to comply with the approved plans and specifications, the date by which the possession will be handed over, the agreed consideration and mode of payment of the consideration, nature of owners’ organization proposed, details of common areas, facilities including limited common areas and amenities, and percentage of undivided interest. But most of the agreements are one sided in favor of promoters/builders. The copies of advocates certificate and plan and specification of the flat to be sold has to be enclosed to the agreement.
Promoter as trustee
The promoter receives various amounts from flat purchasers like advance, deposits, towards share capital to form the society, or company, ground rent, water and power charges, taxes. He shall maintain a separate account of such advances and deposits in any bank. He shall hold such money as a trustee and disburse the moneys towards the intended purposes.
The promoter who is in possession of flats shall pay all outgoings on flats until he transfers flats to persons who have purchased or to an organization of such persons.
Changes in plans and specifications
After the approved plans and specifications are disclosed / furnished to the proposed purchaser, any alterations in the structure of any particular flat shall be done only with the prior consent of the proposed purchaser.
If any alterations have to be made in the structure of the building the consent of all proposed purchasers is required. The building shall be constructed in strict conformity with the approved plans and specifications.
Any defect in the construction of the building, materials used in the construction or unauthorized change in construction has to be brought to the notice of the promoter within a year of taking possession, and the promoter shall wherever possible rectify such defects free of cost. If rectification is not possible the aggrieved person is entitled to receive reasonable compensation. State government will designate an officer not below the rank of Superintending engineer to settle the disputes in connection with defects, reasonable compensation and rectification. The aforesaid person may approach such designated person within two years of taking possession on payment of specified fee (Rs.100). The decision of such officer shall be final.
Delay in handing over possession
The promoter has to handover the possession of the flat on to the agreed date. Such date may be extended on agreement. The promoter may also not in a position to handover the possession of the flat for reasons beyond his control.
If the promoter fails to deliver the possession of flat on the agreed or extended date and by another three months thereafter of such agreed extended time the proposed purchaser may claim refund of the amounts paid.
Similarly in case of non delivery of flats on account of reasons beyond the control of the promoter, and if such reasons exists after three months from the agreed date of handing over possession, the proposed purchaser may claim refund of the amounts paid.
In both the cases the promoter shall refund the amounts received with simple interest at 9% p.a. from the date of receipt till the date of payment. Such amounts and interest shall continue to be a charge on land and flat but any earlier encumbrances have priority.
MORTGAGE
The promoter shall not create any mortgage or charge on the flat or land after the execution of the agreements without previous written consent of proposed purchaser. Any mortgage / charge created without previous written consent of proposed purchaser shall not affect the right and interest of proposed purchaser.
Formation of society or company
The promoter has to take steps to form society or company consisting of owners. The promoter shall submit an application to the registrar for registration of organization. Such application shall be submitted within four months from the date on which minimum number of persons required to form such society or company have taken flats. The promoter shall represent the flats which are unsold.
If the owners opt to submit to the provisions of Karnataka Apartment Ownership Act 1972, by submitting a deed of declaration, the promoter shall inform the registrar of co-operative society as soon as possible after the date of which at least five owners have filed the deed of declaration.
Conveyance of title etc.
The promoter shall take steps to complete his title and convey to the organization, which is registered either as co-operative society, or company or association of flat owners, his right, title and interest in the land and building as per the agreement. If the agreement provides no definite date for conveying the title to the organization/society, he shall convey his title within four months from the date of which the organization was registered and association of owners is duly constituted.
The promoter will be very co-operative and extend red carpet treatment to the prospective purchasers at the time of entering into an agreement and receiving advance money, thereafter it would be very difficult to meet any important person at promoters office and the purchasers will be at the mercy of receptionist.
In order to regularize the promotion, construction, sale, management and transfer of ownership of flats, the Karnataka Ownership flat (Regulation of the promotion of construction, Sale, management and Transfer) Act 1972, was enacted by the Government of Karnataka. The Act popularly known as Karnataka Act 16 of 1973 was first published in Gazette Extraordinary on 23.07.1973, received the assent of the president on 29.06.1974, and came into force on 01.04.1975, as per notification No.FD/KHB/75 dated 06.03.1975. The Act details the rights and responsibilities of promoter and purchaser of flats.
A flat is defined in the Act as “a separate and self contained set of premises used or intended to be used for residence, or office, or shop, or go-down, and includes a garage the premises forming a part of a building”.
Promoter is a person who constructs or causes to be constructed a block of building of flats or apartments for the purpose of selling some or all of them to other persons or to a company, co-operative society or others.
Thus a promoter need not construct a flat. He may get them constructed through another builder. Such construction is for selling some or all of the flats. Since he receives advance amounts from proposed purchasers and will be in possession of the land not owned by him, the Act prescribes certain obligation on promoter.
GENERAL LIABILITIES
Section 3 deals with the general liabilities of promoter. The promoter has to disclose the nature of his title to the land on which the flats are constructed. Such title has to be duly certified by an advocate who has standing practice of not less than seven years. He shall produce the original documents of his title to the property. Advocates certificate of his title, encumbrance certificates, documents relating to the title, the plan and specifications of building proposed, before the intending proposer. Some of the promoters refuse to give copies of the title documents to the proposed purchaser which is against the law and not ethical. He has to allow inspection of plans and specifications of the property of the building approved by local authority, disclose the nature of fixtures, fittings, amenities including provisions for lift. If the promoter himself is the builder shall disclose the prescribed particulars of design and materials used for building. If the promoter is not the builder, he shall make available for inspection all agreements entered by him with architects and contractors related to design and materials used for construction.
Promoter has to prepare and maintain a list of flats with their specific numbers and names and complete address of persons who have agreed to purchase flats with consideration amount charged and terms and conditions on which flats are sold and shall inform the proposed purchaser in writing the date by which the possession of the flat will be given.
He has the responsibility of informing in writing the nature and constitution of organization to which title being passed with terms and conditions.
He should not allow persons to enter and take possession of flats until completion certificate wherever required is obtained from the competent authority. He is duty bound to disclose the full outgoings including ground rent, municipal taxes, tax on income, water and power charges and any subsisting mortgage. If the purchaser demands, he has to furnish the true copies of all documents of title, advocates certificate, encumbrance certificates/documents, approved plan and specifications, list of furniture, fixtures, amenities, list of flats with numbers with the name and address of proposed purchasers, the price at which the flats are sold and also terms and conditions of such sale, provided the purchaser pays the charges for such copies.
AGREEMENT
The promoter may receive the advance amount not exceeding 20% of sale price, but before accepting such advance, he has to enter into an written agreement with the purchaser and such agreement shall be registered. The sale agreement should contain the complete details of the building to be constructed, and promoter obligation to comply with the approved plans and specifications, the date by which the possession will be handed over, the agreed consideration and mode of payment of the consideration, nature of owners’ organization proposed, details of common areas, facilities including limited common areas and amenities, and percentage of undivided interest. But most of the agreements are one sided in favor of promoters/builders. The copies of advocates certificate and plan and specification of the flat to be sold has to be enclosed to the agreement.
Promoter as trustee
The promoter receives various amounts from flat purchasers like advance, deposits, towards share capital to form the society, or company, ground rent, water and power charges, taxes. He shall maintain a separate account of such advances and deposits in any bank. He shall hold such money as a trustee and disburse the moneys towards the intended purposes.
The promoter who is in possession of flats shall pay all outgoings on flats until he transfers flats to persons who have purchased or to an organization of such persons.
Changes in plans and specifications
After the approved plans and specifications are disclosed / furnished to the proposed purchaser, any alterations in the structure of any particular flat shall be done only with the prior consent of the proposed purchaser.
If any alterations have to be made in the structure of the building the consent of all proposed purchasers is required. The building shall be constructed in strict conformity with the approved plans and specifications.
Any defect in the construction of the building, materials used in the construction or unauthorized change in construction has to be brought to the notice of the promoter within a year of taking possession, and the promoter shall wherever possible rectify such defects free of cost. If rectification is not possible the aggrieved person is entitled to receive reasonable compensation. State government will designate an officer not below the rank of Superintending engineer to settle the disputes in connection with defects, reasonable compensation and rectification. The aforesaid person may approach such designated person within two years of taking possession on payment of specified fee (Rs.100). The decision of such officer shall be final.
Delay in handing over possession
The promoter has to handover the possession of the flat on to the agreed date. Such date may be extended on agreement. The promoter may also not in a position to handover the possession of the flat for reasons beyond his control.
If the promoter fails to deliver the possession of flat on the agreed or extended date and by another three months thereafter of such agreed extended time the proposed purchaser may claim refund of the amounts paid.
Similarly in case of non delivery of flats on account of reasons beyond the control of the promoter, and if such reasons exists after three months from the agreed date of handing over possession, the proposed purchaser may claim refund of the amounts paid.
In both the cases the promoter shall refund the amounts received with simple interest at 9% p.a. from the date of receipt till the date of payment. Such amounts and interest shall continue to be a charge on land and flat but any earlier encumbrances have priority.
MORTGAGE
The promoter shall not create any mortgage or charge on the flat or land after the execution of the agreements without previous written consent of proposed purchaser. Any mortgage / charge created without previous written consent of proposed purchaser shall not affect the right and interest of proposed purchaser.
Formation of society or company
The promoter has to take steps to form society or company consisting of owners. The promoter shall submit an application to the registrar for registration of organization. Such application shall be submitted within four months from the date on which minimum number of persons required to form such society or company have taken flats. The promoter shall represent the flats which are unsold.
If the owners opt to submit to the provisions of Karnataka Apartment Ownership Act 1972, by submitting a deed of declaration, the promoter shall inform the registrar of co-operative society as soon as possible after the date of which at least five owners have filed the deed of declaration.
Conveyance of title etc.
The promoter shall take steps to complete his title and convey to the organization, which is registered either as co-operative society, or company or association of flat owners, his right, title and interest in the land and building as per the agreement. If the agreement provides no definite date for conveying the title to the organization/society, he shall convey his title within four months from the date of which the organization was registered and association of owners is duly constituted.
The promoter will be very co-operative and extend red carpet treatment to the prospective purchasers at the time of entering into an agreement and receiving advance money, thereafter it would be very difficult to meet any important person at promoters office and the purchasers will be at the mercy of receptionist.
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