The concept of people of different cultures, tastes and habits living in separate dwelling units situated within a compound, is not new in the country as was prevalent in the past under the name and style of Vatarah houses wherein small dwelling units were constructed within a compound in a horizontal or in L shape rows unlike the present day multiple storey vertical apartments/flats.

An individual or group of individuals may construct multi-storied buildings consisting of a number of self-contained flats either from own funds or from the money collected from the intending purchasers and sell them on ownership basis.

In order to protect the interest of these purchasers who advance money, it is necessary to regulate the promotion, construction, sale, management and transfer of ownership of flats, by the promoter of these multi-storied buildings.

In furtherance of this objective, the Karnataka Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1972, has been enacted by the Government of Karnataka. The Act elaborately deals with the rights and responsibilities of promoter and purchaser of flats. It may be noted that the flats or apartments in multi-storied buildings are heritable and transferable immovable property.

Owners of such flats enjoy exclusive ownership of the same, while retaining an undivided interest in the common area and facilities which are to be used and owned by all such owners jointly.

A promoter may get the apartment building constructed through his own work force or through an outside agency or an individual. The Act, in order to protect the interest of the purchasers and the land owners, prescribes certain obligation on the promoter since he receives a part of sale consideration in advance from the intending purchasers and will be in possession of the land not owned by him.

General liabilities
Under section 3 of the Act, 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 a standing at the bar of not less than seven years.

The promoter  shall produce to the intending purchaser, 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 and also permit the intending purchaser, inspection of approved plan with specifications thereon of the proposed building, disclose the nature of fixtures, fittings, amenities including provisions for lift.

If the promoter himself is the builder, he 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 into by him with architects and contractors regarding the design and materials to be used for construction.

He has to convey to the intending purchasers in writing, the nature and the formation of the organisation to which the common original title deeds will be  passed on.

The 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 details of sale consideration and the terms and conditions on which flats are sold and the date by which possession of the flat will be given. Normally, the promoter cannot hand over possession of flats until completion certificate is obtained from the competent authority.

He is duty bound to disclose complete outgoing including ground rent, municipal taxes, tax on income, water and power charges and the subsisting mortgage, if any.  If the purchaser demands, he has to furnish true copies of all documents of title, advocate’s certificate, encumbrance certificates, approved plan and specifications, list of furniture, fixtures, amenities, list of flats with numbers with name, and address of the proposed purchasers and the terms and conditions of sale, subject to the purchaser making payment for such copies.

Agreement
The sale agreement should invariably contain the complete details of the promoter’s obligation to construct the apartment building as per approved plan and specifications, date by which possession will be handed over, sale consideration, mode of payment of sale consideration, formation of owners’ organisation, details of common areas, facilities including limited common areas and amenities and percentage of undivided interest. 

Copies of advocate’s certificate and plan and specification of the flat to be sold, has to be enclosed to the agreement. The promoter who is in possession of flats, shall pay all outgoing on flats until he transfers flats to persons who have purchased or to an organisation of such persons.

Promoter as trustee
The promoter receives money from flat purchasers towards advance, deposits, share capital for  formation of the apartment owners’ society, ground rent, water and power charges, taxes. He shall have to maintain separate accounts for each types of such advances and deposits and shall hold such money as a trustee for utilisation of the same only for the intended purpose.

Changes in plans and specifications
The building is required to be constructed strictly in conformity with the approved plans and specifications. After supply of the approved plans and specifications to the intending  purchaser, all alterations in the structure of any particular flat shall be carried out only with the prior consent of the purchaser. If  alterations are to be carried out in the structure of the building, consent of all proposed purchasers is required. 

Delay in handing over possession
According to section 8 of the Act, if the promoter fails to give possession in accordance with the terms of agreement or within such extended date or the promoter, for reasons beyond his control, is unable to give possession of the flat by the specific date or further agreed date and a period of three months thereafter or a further period of three months if those reasons still exist, then the promoter shall be liable on demand to refund the amount already received with simple interest at nine percent per annum from the date he received the sums, till the date the amount and interest thereon is refunded and the amount and the interest thereon shall be a charge on the land and the construction subject to prior encumbrances.

Resolution of disputes
The state government will designate an officer not below the rank of Superintendent Engineer to resolve the disputes between the promoter and the purchaser concerning the defects in the structure, rectification and the compensation payable. The purchaser may approach the designated person within two years of taking possession on payment of prescribed fee and the decision of the designated authority is treated as final.

Defects if any, noticed in the building or the change in the quality of the materials used for the construction or the unauthorised modification in the structure, are to be brought to the notice of the promoter within one year of taking possession of the flat and the promoter wherever possible shall rectify the defects at his cost. If rectification is not practicable to be rectified, the aggrieved person would be compensated financially.

Formation of society or company
The promoter has totake steps to form society or company consisting of flat  owners. The promoter shall submit an application to the registrar for registration of organisation.

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 possession of 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
The promoter shall take steps to obtain clear and marketable title over the property and to convey to the organisation, which is registered either as co-operative society, or company or association of flat owners, all such rights, title and interest in the land and building.

If the agreement provides no definite date for conveying the title to the organisation/society, the promoter shall convey his title over the property within four months from the date on which the said organisation was registered and association of owners is duly constituted.

The author is an advocate who specialises in property matters.
He can be reached on e-mail : editor@realestatereporter.net
ph: 25526644/45.