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RERA Applicable To Long Term ‘Lease Agreements’ In Which Substantial Investment Is Made By Lessee As Consideration: Bombay HC [Read Judgment]

The object of the RERA cannot be to exclude such persons, who have invested huge amount in the Real Estate Project, may be under the ‘Agreement of Lease’ and taken such apartment on the lease of ‘999 years’, which transaction is, in reality, the transaction of sale.’

The Bombay High Court has held that provisions of the Real Estate (Regulation and Development) Act, would apply in case of agreements styled as ‘Agreement to Lease’ when the lease period is long (say 999 years) and when the ‘lessee’ has paid a substantial amount as consideration.

Justice Shalini Phansalkar Joshi dismissed second appeals filed against orders passed by the Maharashtra Real Estate Appellate Tribunal that held that though the ‘Agreements’ between the parties are titled as ‘Lease Agreements’, in effect, they are the agreements of “absolute sale” and, therefore, the provisions of the RERA will be applicable.

Perusing the agreement executed between the parties (Lavasa Corporation Limited and the individual allottees), the high court observed: “In an ‘Agreement of Lease’, the ‘Lessee’ does not pay more than 80% of the consideration amount towards the price of the said apartment. In an ‘Agreement of Lease’, the rent cannot be Rs.1/- per annum only, for such an apartment, market rate of which is more than Rs.40 lakhs. In an ‘Agreement of Lease’, parties do not pay the registration charges and stamp duty on the market value of the said apartment. The ‘Agreement of Lease’ also cannot be for such a long term for ‘999 years’. This long period of lease in itself is sufficient to hold that, it is not an ‘Agreement of Lease’, but, in reality, an ‘Agreement of Sale’.”

The court observed that very object of the RERA is to protect the consumers, the persons, who have invested their hard-earned money by entering into an ‘Agreement’, which is in the nature of purchase of the apartment itself, mere nomenclature of the document as ‘Agreement of Lease’ will not in any way take away the rights given to them by the statute.

Upholding the appellate authority order, the court observed: “If the entire ‘Agreement’ is perused as such, then it becomes apparent on the face of it also, that it cannot be termed or treated as an ‘Agreement of Lease’, but, in its real purport, it is an ‘Agreement of Sale’. The very fact that more than 80% of the entire consideration amount is already paid by the Respondents to the Appellant and the lease premium agreed is only of Rs.1/- per annum, including the clause relating to the period of lease of 999 years, are self-speaking to prove that, in reality, the transaction entered into by the parties is an ‘Agreement of Sale’ and not an ‘Agreement of Lease’; though it is titled as such. The law is well settled that the nomenclature of the document cannot be a true test of its real intent and the document has to be read as a whole to ascertain the intention of the parties. if the entire ‘Agreement’ is perused as such, then it becomes apparent on the face of it also, that it cannot be termed or treated as an ‘Agreement of Lease’, but, in its real purport, it is an ‘Agreement of Sale’. The very fact that more than 80% of the entire consideration amount is already paid by the Respondents to the Appellant and the lease premium agreed is only of Rs.1/- per annum, including the clause relating to the period of lease of 999 years, are self-speaking to prove that, in reality, the transaction entered into by the parties is an ‘Agreement of Sale’ and not an ‘Agreement of Lease’; though it is titled as such. The law is well settled that the nomenclature of the document cannot be a true test of its real intent and the document has to be read as a whole to ascertain the intention of the parties.”

Read the Judgment Here

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  • vswami says:

    OFFHAND
    May be, the view the HC has taken is not to be faulted , on grounds of equity. Nonetheless, should one go by simply what the LAW (the Central RERA Act and the state RERA Rules, rtw the MAOA/MOFA) says, – which covers within its ambit only a transaction of ‘SALE’ ( not of lease- short term or long term) , it is worth keeping a watch in case the dispute is, as expected, pursued any further !

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