The Maharashtra Ownership Flats Regulation of Promotion of Construction (Sale Management and Transfer) Act, 1963 (MOFA) and The Real Estate (Regulation and Development) Act, 2016 and Rules 2017 RERA are two pivotal legal frameworks aimed at safeguarding the rights of homebuyers and overseeing the operations of the real estate sector in Maharashtra. Although both acts may pertain to similar concerns, it is imperative to note that their provisions exhibit notable disparities. Let us delve into these disparities in a concise manner.

1 . Applicability 

In terms of applicability, the MOFA primarily pertains to real estate development within the state of Maharashtra. On the other hand, RERA applies on a national level, with each state having duly notified and implemented the Act in accordance with the central legislation, albeit with a few specific modifications. RERA was enacted with the purpose of establishing a regulatory framework for the real estate sector across India with the aim of ensuring transparency, accountability, and fair trade practices.

2. Registration

Pursuant to the MOFA, it is not obligatory for Developers to register the project with any regulatory bodies. In contrast, the RERA unequivocally stipulates the obligatory registration of all nascent and ongoing real estate projects with the corresponding state’s enacted RERA, subject to the said project surpassing the prescribed threshold. Further, if the Promoter does not undertake the sale and marketing of the Project, it is not required to be registered with RERA.

3. Carpet Area Definition

The term “carpet area” is not explicitly defined in MOFA, which results in disputes between buyers and developers regarding the effective usable area of the flat. However, RERA offers a precise and unambiguous definition of the term “carpet area.” This pertains to the net usable floor area encompassed by the apartment’s walls, specifically excluding external walls, balconies, and other communal areas.

4. Disclosure of defects in title, Sold inventory, etc

Under MOFA whilst the Promoter was required to annex the title certificate and give inspection of all title documents, plans, sanctions, etc.; however, in practice, this was rarely done due to a lack of awareness amongst the purchasers or the hesitation of small-time Promoters to permit inspection of the title documents and sanctioned plans.

Under RERA, it is incumbent upon the Developer to provide a comprehensive and complete disclosure of the sold or booked inventories, including title and encumbrances, as well as the draft of the allotment letter and Agreement for Sale, among other pertinent details, in order to enhance transparency and establish a proactive Regulatory authority. It also provides for a mechanism whereby if the project is marketed by the promoter or real estate Agents prior to the sanctioned plans or approvals, the authority has the power to impose financial penalties.   

5. Escrow Account

In the good olden days under the MOFA regime, the Developers collected the sale proceeds from purchasers and invested/ allocated in other projects or utilized the proceeds to fund other projects for personal gains without any accountability to the purchaser, thereby leaving the purchasers in a precarious situation, wherein the only purchaser adopted a wait and watch or exited with or without @ 9% per annum interest and in the event of withdrawal, enriching the Developer who would sell at a higher price. In contrast, RERA mandates that Developers shall open an escrow account for each project and deposit the entire receipts from buyers into a separate escrow account. This account shall exclusively serve the purpose of the development and construction of the specific project at hand. RERA provides a complete mechanism for withdrawal from the escrow account, and the balance in the escrow account can be withdrawn by the promoter on completion of the project.

5. Real Estate Regulatory Authority

Unfortunately, MOFA does not encompass establishing any regulatory authority to effectively oversee, monitor and regulate the real estate sector. RERA encompasses the creation of a specialized governing body, known as the Real Estate Regulatory Authority (Regulator/Tribunal), within each state jurisdiction, with the primary objective of proficiently overseeing and regulating the real estate sector and addressing the stakeholder’s grievances. The responsibilities of the authority include ensuring the timely completion of projects, addressing grievances, and imposing penalties for non-compliance. In fact, the RERA also regulates and contemplates the registration of Real Estate Agents.

6. Timelines for Completion

Albeit, under the MOFA era, the Developer provided the Possession date but there was no mechanism to monitor the default and breaches and the Purchaser’s only option was to exit or file civil or consumer litigation. In contrast, the RERA necessitates Developers to furnish the completion timeline when registering the project with the regulatory authority. In the event that the project is not duly finalized within the designated timeframe, the Developer is liable for payment of interest on delayed possession and appropriate compensation, as well as facing penalties for any violations or non-adherence as per the stipulated provisions of RERA.

7. Penalties and Compensation:

In regards to penalties and compensation, under MOFA, the non-compliance penalties are comparatively lenient, and therefore the industry had various malpractices such as diversion of funds and unfair trade practices such as double or multiple booking of the same unit and no or negligible liability for delayed possession. In short, no provision that entitles buyers to compensation for any potential delays or deficiencies in construction. However, it should be noted that the MOFA has established provisions that may result in the imposition of imprisonment, fines, or a combination of both, in cases involving violations of the aforementioned Act. In complete contrast, RERA enforces more stringent consequences upon developers who fail to comply, specifically in the form of financial penalties for violations, and also regulates the malpractices and unfair trade practices referred to above. Moreover, in the event of non-compliance by the Promoter with the order of the RERA Tribunal, RERA issues a recovery warrant and proceeds to attach the properties of the Promoter, excluding those related to the Project. In case of non-compliance or contravention of the Order of the RERA Tribunal, section 63 provides for a penalty. However, the provision of imprisonment as stipulated by section 64 of RERA are only on, failure to adhere to the Order of Appellate RERA Tribunal alone.

8. Deemed Conveyance

In relation to the matter of deemed conveyance, it is important to note that the Maharashtra Ownership of Flats Act (MOFA) was amended in 2008 incorporating the provision allowing unilateral deemed conveyance. This provision grants the Competent Authority, specifically the District Deputy Registrar, the authority to carry out the conveyance in favor of the Society, Company, Association, or Apartment Owners in the event of the Promoter’s failure to do so, subject to certain conditions. 

Section 17, delineates the obligations of promoters, specifically the Developer/landowner, with regards to the transfer of title of Flat, land, and building to allottees, as well as the transfer of title of land and common areas of the building to the body of Allottees. The MahaRera Rules encompasses the provision of Conveyance, which facilitates the transfer of the common area and Conveyance of the building and Land beneath the to the association of Allottees/owners and failure of the Promoter to give Conveyance RERA may impose financial penalties and or the association of allottees will be required to fall back on the provision of MOFA for deemed Conveyance and therefore to this extent RERA has reliance on MOFA.

9. Obligation of Flat purchaser

Under the MOFA, it is the duty of the flat purchaser to ensure timely payment of the consideration and their proportionate share of all charges as agreed upon in the agreement. Any individual who fails to comply with the aforementioned shall, in accordance with section 12(2), be subject to punishment in the form of a fine, with a maximum limit of Rs 2000/-, whereas under RERA the buyer/owner to fulfill their obligation of making the payment as per the agreed schedule stated in the Agreement and failure to do so encompasses the imposition of interest, at the same rate as the Promoter is liable i.e. at a rate that is 2% higher than the marginal cost of lending rate of the State Bank of India. Additionally, it is the responsibility of the buyer/owner to obtain physical possession of the flat/apartment within a period of 2 months, specifically 60 days, subsequent to the receipt of the occupancy certificate from the development authority.

Conclusion

Enactment of RERA is a progressive step to regulate the Real Estate Industry and safeguard the interest of all the stakeholders, however, certain provisions for non-compliance, deemed conveyance, enforcement, and implementation provisions need to be further tightened for the delivery of justice in time and benefit of all the stakeholders.

Article by Ayush Karia and Medhavi Dalvi under the aegis of Adv Shankarlal Raheja and published on his website www.shankarlalraheja.com