Builder Cannot Forfeit Amount In Absence Of Agreement With Forfeiture Clause, Telangana RERA Orders Full Refund To Homebuyer

While directing the builder to refund the full amount paid by the homebuyer for the purchase the flat, Telangana Real Estate Regulatory Authority (Authority) bench, comprising Dr. N. Satyanarayana (Chairperson), K. Srinivasa Rao (Member), and Laxmi Narayana Jannu (Member), held that forfeiture is only applicable when a formal agreement with a forfeiture clause has been executed between the homebuyer and builder. Background Facts The homebuyer (Complainant) booked a flat in the builder (Respondent) project named "Anya" located at Bowrampet, Hyderabad and paid ₹12,10,000/- to builder. On 11.04.2023, builder confirmed booking in the homebuyer's favour with a letter. Due to some personal reasons homebuyer requested builder to cancel the booking on 18.07.2023 and asked for a full refund. In response builder refunded ₹5,00,000/- on 28.07.2023 and withheld the remaining balance. Therefore, being aggrieved by the forfeiture of amount, Homebuyer filed complaint before authority seeking refund of the paid up amount. Contentions of builder The builder contended that the remaining amount was deducted due to the homebuyer's default, which occurred 167 days after the booking. They claimed to have incurred expenses of ₹3,88,459/- for the resale of the flat. The builder referred clauses 10 and 13 of the confirmation letter which gave builder right to charge interest at 1.5% per month for the first 30 days and 2.0% per month afterward on delayed payments. Observation and Direction by Authority The Authority observed that Section 13 of RERA, 2016, bar builders from accepting any deposit or advance without first entering into an agreement for sale. In this case, the builder collected 20% of the total sale consideration and issued only a confirmation letter. Therefore, the builder violated Section 13. Further, the Authority observed that the confirmation letter contained terms heavily skewed in favor of the builder, constituting an unfair trade practice. The Authority held that forfeiture implies the imposition of a penalty, which is only applicable when a formal agreement with a forfeiture clause has been executed between the parties. Since no such agreement was executed in this case, the builder's attempt to forfeit the booking amount was baseless and unjustifiable under the law. Therefore, the Authority directed the builder to refund the remaining balance amount of ₹7,10,000/- to the homebuyer within 15 days. Authority also imposed penalty of ₹2,69,874/- on the builder against the violation of Section 13 of RERA, 2016. Case – Sri Bhavani Velivala Versus M/s Pagadala Constructions Citation – COMPLAINT NO.1184 OF 2023 Date of Order – 15.10.2024Click Here To Read/Download The Order

Builder Cannot Forfeit Amount In Absence Of Agreement With Forfeiture Clause, Telangana RERA Orders Full Refund To Homebuyer

Aryan Raj

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