Last Updated on January 20, 2021 by Satish Mishra
In this post we will discuss about Agreement to Sell under The RERA Act, 2016 and various compliances related to this agreement.
Whether Agreement to Sell is to be registered as under RERA?
Any contract for sale of an immovable property that provides that the sale takes place on terms that is settled between both the parties which is basically the Agreement for Sale, does not on itself create any kind of right or interest on the property. As per Section 54 of the Transfer of Property Act, 1882; sale is defined as transfer of ownership (which includes the right to possession as well as the enjoyment of the property) for a price that is the consideration and provides that the sale of an immovable property that exceeds the value of Rs. 100, should be made via a registered instrument. It is important to note that Section 54 provides that an immovable property whose value exceeds Rs. 100 must be registered, however, this provision does not mandate registration of Agreement for Sale.
Also, the Agreement for Sale does not require any form of mandatory registration as per Section 17 of the Registration Act, 1908. This is concluded from the fact that the list of instruments and documents that require mandatory registration as provided under Section 17 of the Registration Act, 1908 does not include Agreement for Sale. Furthermore, Section17 (2) of the Act excludes certain documents, including the Agreement for Sale, from the application of Section 17 (1) (a) and Section 17 (1) (b) of the Registration Act. The Agreement for Sale document is excluded even under Section 17 (2) (v) of the Registration Act. Also, the explanation pertaining to Section 17 provides that any document that purports or operates to affect any contract for the sale of any immovable property would not require any form of registration.
Section 49 of the Registration Act has provided that the instrument or documents that are required for registration under Section 17 or the Transfer of Property Act would not, unless registered-
- Influence any immovable property included therein;
- Bestow the power to adopt;
- Cannot be received as any form of evidence for transactions that affect a property or confer a power.
This proviso to Section 49 of the Registration Act sculpts an exception to the rules mentioned above and provides that an unregistered instrument affecting any immovable property, which is otherwise supposed to be registered under the Registration Act or under the Transfer of Property Act, may be received as some form of evidence to a contract in a case for collateral transaction or specific performance. In the case of KB Saha and Sons Pvt Ltd. v. Development Consultant Ltd.[1], it was held by the Supreme Court that a document that is supposed to be compulsorily registered, is unregistered in a case claiming for specific performance, this can be treated as a material evidence of the fact that there was a contract that was executed between both the parties, and this document that stands unregistered cannot be considered or read as a sufficient evidence for proving or verifying the contents of the contract. Subsequently, if there is a document that stands inadmissible as a material evidence for want of registration, hence none of the terms can be admitted as a form of evidence.
ALSO READ- MODES OF TRANSFER OF PROPERTY
Therefore, non-registration of any form of a document, which is sanctioned by the law to be registered, has very grave and serious outcomes, because the party seeking for its enforcement would not be able to rely on the document to prove its contents and details. This process may hence divest any party from specifically enforcing a contract.
Trends that have been noticed historically-
In case of absence of any kind of a legal provision affecting to the contrary, if an Agreement for sale that is in relation to any immovable property, that is executed between two private individuals, as well as the developers and the persons who allot, is for some reason not registered under industry practice. While the law has not mandated the registration, Agreement for Sale’s did not face any form consequence as under Section 49 of the Registration Act. Subsequently, all the courts and the consumer platforms have used this to give effect to Agreement for Sale’s that stands unregistered.
Changes in law-
The Real Estate (Regulation and Development) Act, 2016 was notified in the 1st of May, 2017. According to Section 3 of this Act, any Real Estate project is mandated to be registered by the developer, if the developer is seeking to market, advertise, book or sell the property in that Real Estate project. Registration is directed for ongoing projects as well, for which the developer has not received any completion certificates yet. Hence, the Act applies not just to projects that are about to happen in the future but also projects that are ongoing, if the construction began before May 1st, 2017. For some ongoing projects, an Agreement for Sale normally would be executed, that enlists the rights of the parties, their duties and their obligations. The buyers in turn would have made some part payments towards the total consideration. The amount and the quantum of payment is dependent upon the plan of payment that is opted by the allottee i.e. fixed period or the construction link. With regards this, Section 13 of the RERA provides for the compulsory registration of the Agreement for Sale.
ALSO READ- RERA SALIENT FEATURES
Section 13 of the RERA also prohibits the developer from the acceptance of an amount that exceeds 10% of the total cost of the property from the person who buys the property, without the execution of an Agreement for Sale and without having such Agreement for Sale registered. However, Section 13 does not specify the law, as in, whether it is the Registration Act, Transfer of Property Act or the RERA- in which such a registration falls under. Without a provision that strictly enforces the same, Section13 has the effect of amending Section 54 of the Transfer of Property Act and Section 17 of the Registration Act that does not provide for any mandatory registration of the Agreement for Sale.
There are a huge number of ongoing projects wherein the developer might have demanded or would have already been given by the buyer, more the 10% of the property cost under the Agreement for Sale, which are and still continue to be unregistered.
Issues and Consequences-
The provision does not offer any saving or a deeming provision under the RERA, that concludes that the fate of any unregistered Agreement for Sale’s executed prior to the 1st of May, 2017. In order to make a decision on the fate Agreement for Sale’s, the Act would either deem the Agreements executed prior to the 1st of May, 2017 to be registered under the RERA or provide that even the Agreements executed prior to 1st of May, 2017 would have to be registered within a specific period, as provided under Section 3 of the RERA which holds for the registration of ongoing projects.
If there is no such provision, there is an ambiguity with relation to the validity and the enforcement of such an unregistered Agreement for Sale which are required to be registered under law, currently. This above-mentioned ambiguity would have to be answered by the Parliament by the adequate amendment of the Act. Another solution for this would be the respective State Governments could issue and address the rules. In the absence of any provision, the developers would be within rights to take a defense, if proceeded based on an unregistered Agreement for Sale and the contents of such an agreement cannot be read as an evidence, under Section 49 of the Registration Act. Section 49 only deals with the documents that are not yet registered, which are to be mandatorily registered as per Section 17 of the Registration Act or the Transfer of Property Act. Section 13 of the RERA is not included under Section 49. But it is arguable that the purpose behind making any instrument registrable is to prescribe some form of action for the non-registration or the consequence as described under Section 13 of the RERA would be subject to Section 49 of the Registration Act. In such a case, the developers may take a stand, if confronted by the allottees for any breach, and then the allottees would not be able to use an unregistered Agreement for Sale and seek enforcement for wanting registration. Since there is no provision, it would be difficult to bring about a rebuttal against the defense in the Court of Law.
ALSO READ- AGREEMENT TO SELL REGISTRATION UNDER RERA
This post was written by Haritha Dhinakaran
For case specific advice on real estate matters, one may contact top/best expert Punjab Haryana RERA Appeal Lawyers in Chandigarh Panchkula Mohali Zirakpur Derabassi Kharar Mullanpur Baltana
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[1](2008) 8 SCC 564
