In Significant Victory for Home Buyers, SC Rejects Developer’s Appeal on Excess Sale Area

In a significant victory for home-buyers the Supreme Court dismissed a builder’s appeal on January 12 and upheld the National Consumer Disputes Redressal Commission’s (NCDRC) ruling in favour of a home-buyer. It had held that the builder’s demand for more money over the contractual sale, on account of excess sale area, was illegal.

The matter reached the apex court following an appeal by the developer after the NCDRC had ruled on the case in August last year.

In its judgment on August 26, 2020, the NCDRC had said that “this is a common practice adopted by majority of builders/developers which is basically an unfair trade practice. This has become a meansto extract extra money from the allottees at the time when allottee cannot leave the project as his substantial amount is locked in the project and he is about to take possession (sic).”

The case in question was filed by one Pawan Gupta against Experion Developers Pvt. Ltd. The builder had referred to a clause in their contract which stated that Experion could ask for more money if the sale area of the property increased up to ten per cent. The NCDRC held the demand as illegal and the apex court also dismissed an appeal by the developer on Tuesday.

The complainant had filed the complaint since the developer asked for more money for the excess area after the contract between them had been signed. He had also objected to the delay in handing over the property to the former.

Gupta had said that the developer sent across the demand for excess area “without any basis” and that he had received the certificate by the architect on a later date. An internal report by the architect – which supposedly showed the excess area – was the basis for the excess demand.

In its judgment in August last year, the NCDRC said that once the original plan had been approved by the competent authority, “the areas of residential unit as well as of the common spaces and common buildings are specified and super area cannot change until there is change in either the area of the flat or in the area of any of the common buildings or the total area of the project (plot area) is changed. The real test for excess area would be that the opposite party should provide a comparison of the areas of the original approved common spaces and the flats with finally approved common spaces/ buildings and the flats. This has not been done.”

It added that such a practice was “common” and adopted by the majority of developers and builders “which is basically an unfair trade practice. This has become a means to extract extra money from the allottees at the time when allottee cannot leave the project as his substantial amount is locked in the project and he is about to take possession. There is no prevailing system when the competent authority which approves the plan issues some kind of certificate in respect of the extra super area at the final stage.”

The commission said that there was no “harm” in communicating and charging for the extra area in the final stages but that the developer must provide the real reason for an increase in the super area on the basis of a comparison made between the buildings that were originally approved with the final approval.

“Basically the idea is that the allottee must know the change in the finally approved lay-out and areas of common spaces and the originally approved lay-out and areas,” it said.

The body also suggested reforms, saying that while the Real Estate Regulation Act (RERA), 2016, did make it mandatory for builders to mention the carpet area of the flat, “however the problem of super area is not yet fully solved and further reforms are required.”