Builder fined for charging parking space separately over the flat price; Know what your legal rights are

When you invest a substantial portion of your savings to buy your dream home, you expect the builder to strictly adhere to the law and not deceive you into paying extra money. Unfortunately, an 81-year-old retired Major of the Indian Army faced misfortune when he bought a residence with the 3 BHK at Hill View Garden Housing Complex in Rajasthan. In this instance, the developer sold him the parking space as a separate unit, despite the real estate law prohibiting this practice and the homebuyer's agreement stating otherwise.

The retired Major took action against the builder for various violations, including the illegal sale of parking spaces and the delay in obtaining an occupation certificate. Initially filing a case in the State Consumer Commission, the dispute eventually escalated to the National Consumer Disputes Redressal Commission (NCDRC) after a long legal battle spanning seven years. The NCDRC found the promoter guilty of breaching both the law and the homebuyer's agreement and consequently supported the claim for compensation.

Short brief about the case

According to the order of the NCDRC, here are some important facts of the case:

• The retired Major booked a 3BHK unit measuring 1350 square feet in an upcoming project of Trehan Home Developers in Bhiwadi, Rajasthan by paying Rs 2.5 lakh as booking amount on October 25, 2006.
• The basic cost of this unit was set at Rs 17,95,500 plus PLC, DC and other charges.
• The retired Major claimed that the developer offered him a larger flat (39 square feet bigger than the original) without his knowledge or consent, and without obtaining an occupancy certificate.Lastly, the promoter charged Rs 50,000 towards the covered car parking space separately.

What did NCDRC say about the promoter charging separately for covered car parking space?

Lawyers representing the retired Major said before NCDRC, "It is submitted that despite the settled position that builder/developer/promoter cannot sell parking areas as independent unit as the same is extended as common areas and facilities for the Owners, the builder contrary to the settled position of law and in contravention of clause 3 of the flat buyer's agreement forming part of the proceeding, charged Rs 50,000/- towards covered car parking from the complainant, which amounts to unfair trade practice."

After a thorough evaluation of the case, NCDRC said, "The complainant's assertion regarding charging of Rs 50,000/- towards covered parking area is found to be valid. Clause 1.2 of the buyers' agreement specifies that the sale price includes the exclusive right to use open/covered car parking. Consequently, the Rs 50,000/- charge for the parking space is deemed arbitrary and a breach of contract. Therefore, this amount shall be refunded to the complainant."

NCDRC, in its order dated September 20, 2024, said, "The builder is directed to refund an amount of Rs 50,000/- to the complainant charged in lieu of covered parking area with interest at the rate of 6% p.a. from the date of deposit till its realisation."

If Trehan Home Developers decide to pay the compensation, the amount comes to Rs 50,000+50,000*6%*18 years= Rs 50,000+54,000= Rs 1,04,000.

An email was sent to Trehan Home Developers on October 8, 2024, but no response was received until the time of publishing.

What does the law say about selling parking space separately?

Ashish Jain, Partner, Cyril Amarchand Mangaldas says that there are two separate aspects to note in this case:
1. Homebuyer agreement's clause 1.2.
2. Rajasthan Apartment Ownership Act, 2015.

• Homebuyer agreement's clause 1.2: "NCDRC while accepting the claims / arguments of the complainant held that it was contractually agreed between the builder and the complainant under clause 1.2 of the buyer's agreement that total sale price of the premise included the exclusive right to use the car parking. Therefore, charging a separate amount for providing the parking space was arbitrary and amounted to breach of contract," says Jain.
• Rajasthan Apartment Ownership Act, 2015: "In addition to the above discussed contractual obligation of the developer, it may be noted that as per the Rajasthan Apartment Ownership Act, 2015, parking spaces are covered under the definition of 'common areas and facilities'. Common areas and facilities, being appurtenant to the apartments, involve undivided interests of multiple apartment owners in a project, wherein such undivided interest is presumed to have been bought by the apartment owners along with the individual apartment in the project. Additionally, parking spaces typically form part of the non-FAR area in a project and therefore, the same cannot be separately sold / transferred," says Jain from Cyril Amarchand Mangaldas.

Sumant Nayak, Senior Partner, Desai & Diwanji agrees with Jain and says that the homebuyer's agreement is sacrosanct and cannot be altered once agreed and signed. "It is a settled position of law that the covenants of the builder buyer agreement (BBA) are sacrosanct and the breakup of the total price of the apartment shall include the charges towards earmarked parking spaces. Additionally, the courts vide a catena of judgments have held that the developer shall be liable to compensate the buyer in cases where the BBA is ambiguous and later on the developer attempts to separately charge the buyer for facilities such as car parking. Therefore, it is clear that a BBA entered into between the parties is pivotal and must capture succinctly all kinds of charges."

According to Sadhav Mishra, Partner and Head of Real Estate, SNG & Partners, Advocates & Solicitors, "Prior to enactment of RERA/MahaRERA, the sale of car parking (stilt/open) by the builder was prohibited in view of the landmark judgment by the hon'ble Supreme Court of India in Nihalchand Laloochand Pvt. Ltd. Vs Panchali CHS Ltd. whereby the hon'ble court interalia held that stilt/open car parking space of a building is nothing but a part of common areas and hence only a flat within the meaning of section 2 (a-1) of Maharashtra Ownership of Flats Act, (MOFA) can be sold along with garage," says Mishra.

Kunal Sharma, Partner, Singhania & Co says, "while builders can include parking spaces in the sale of flats, they cannot sell them separately. The value of the parking space should be incorporated into the overall flat price. Additionally, the sale agreement must clearly outline the details of the parking space. Failure to comply with these legal requirements can result in penalties and legal disputes."

"The Supreme Court held that builders cannot sell parking spaces separately as they are part of the “common areas” defined under Section 2(n) of the RERA Act. This section includes open parking areas, basements, and other shared spaces as common property for all allottees. The Court concluded that such spaces must be available for the common use of residents without extra charges, and the cost for these common areas and facilities should be proportionately included in the flat’s price. In another ruling, the Apex court, emphasized that once the original plan is approved by the competent authority, the areas of residential units and common spaces are fixed. Any change in the super area must correspond to changes in the flat area, common buildings, or the total project area," says Sharma.

According to Nishant Datta, Advocate, Delhi High Court, "In this case cited above the builder demanded additional money for parking space, which has been held to be illegal through a series of long standing judicial pronouncements and there has not been any diversion of opinions or conflict of judgements also. The Supreme Court of India upheld the 2011 Bombay High Court verdict in the Nahalchand Laloochand Pvt Ltd vs. Panchali Cooperative Housing Society case. Initially, builders were permitted to sell parking spaces as independent units to outsiders, but this led to objections from society residents. The Supreme Court’s decision reaffirmed that parking spaces are common facilities provided by society and cannot be sold separately. Similarly the Supreme Court in the Nahalchand Laloochand Pvt Ltd vs Panchali Co-operative Housng Society Ltd, held that builders or promoters cannot sell parking areas as independent units or flats. These are to be extended as common areas and facilities."