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SC: Contracts skewed against homebuyers are not binding ‘Lenient Clauses For Builder, Harsh For Buyer’

April 04, 2019 07:05 AM


SC: Contracts skewed against homebuyers are not binding
‘Lenient Clauses For Builder, Harsh For Buyer’

New Delhi:

In what should level the playing field for homebuyers put at a disadvantage while signing voluminous agreements with stringent clauses for investors and lenient provisions for builders, the Supreme Court has said such one-sided and unfair contracts will not be binding.

A bench of Justices U U Lalit and Indu Malhotra on Tuesday said a real estate company could not be allowed to bind homebuyers with one-sided contractual terms that protect the company at the cost of buyers.

The court’s pronouncement came while directing a builder to refund Rs 4.83 crore with 10.7% interest to a homebuyer. In this case, the buyer had invested Rs 4.83 crore in 2012 to buy a flat in Sector 62, Golf Course Extension Road, Gurgaon, and was assured possession in 2015. But the company failed to fulfil its promise and the buyer filed a case for refund in 2017.

The court took note of the common dilemma of homebuyers who are confronted with thick contractual documents while purchasing a house. The procedures for bank loans are also similar where homebuyers have little choice but to sign up to the terms offered.

A scrutiny of litigation piling up in courts shows that a homebuyer is invariably at a disadvantage in a flat purchase agreement.

The agreement usually entails the buyers pay a higher rate of interest in case of delayed payment with the builders having the option of cancelling allotment in case of a default. But punitive clauses for builders are lenient in case of delay in possession and low interest rates by way of penalties

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