Caution: If your apartment complex does not have a DoD, your Sale Deed may be invalid!

[Nagesh Aras]

Hi all,

In a typical situation, the developer does not submit the property to KAOA (symptom: There is no DoD).

There is a school of thought that KAOA allows "all of the owners" to submit the property to KAOA.
So the purchasers can go ahead and do it.

My submission is, This is not legally tenable at all.

Here is the logic:

1. KAOA is the only act that can give a title to the individual apartment (along with its UDS in common areas).
   
   
2. Therefore, if the developer has not submitted the property to KAOA, he has not acquired a title for the apartments+UDS.
   If he does not have a title to any property, he cannot transfer it to the purchasers.
   In other words, it is illegal for him to sell the apartments+UDS to anyone.
   
   On the other hand, he can legally sell a certain share of the whole property to each purchaser.
   (Provided that the Sale Deed does not refer to any apartment, or a % UDS in the common area.)
   
   
3. In this context, the content of Sale Deed determines whether it is legal:
   
   
1. If Sale Deed promises a % share in the whole property, it is a legally valid contract.
   Therefore all the purchasers can jointly submit the property to KAOA.
   
   
2. If a Sale Agreement promises a specific apartment or UDS in common areas, these are not legal objects.
   (Ground: If this is permitted, it would defeat the very purpose of KAOA) [Cl 23 of Indian Contracts Act, 1872]
   
   Therefore, such a Sale Deed is a void contract [Cl 24 of Indian Contracts Act, 1872]
   
   Such a Sale Deed is considered non-est ("something that never existed").
   It does not transfer anything to the purchasers. Worse, a void contract cannot be enforced in court.
   
   The purchasers do not own their respective units, so even jointly they do not own any part of the property.
   Thus they cannot jointly execute any document for a property that does not belong to them.
   
   Thus, in this case, the Sale Deed fails to transfer any property to them at all.
   


4. The only way to salvage the situation is to file a case in a court, with the following prayer:
   
   The developer sold the apartments without submitting the property to KAOA. This voids the very Sale Deed.
   
   However, since such Sale Deeds were duly registered by the Subregistrar, innocent citizens were led to believe that the sale is completely legal.
   
   The developer has promised the purchasers to transfer the apartment and UDS in common area.
   However, these would be lawful objects only if he submitted the property to KAOA.
   If he skips this first step, he would be unable to fulfill his contract.
   
   The developer has no reason to skip this step.
   
   Further, as explained in 3(2), the Sale Deeds are unable to transfer the units to the purchasers if the property is not submitted to KAOA.
   Therefore the possession of the entire property is still with the developer.
   As the "sole owner" of the property, only he can execute the DoD. [Cl 4, KAOA, 1972]
   
   On the other hand, the purchasers do not have the legal right to execute the DoD, as they do not own their respective parts in the property yet.
   
   Therefore the court should direct all the developer to complete this first step and fulfill his obligation.
   In case the developer denies to create DoD, the authority should prosecute the developer under RERA Act.
   
   
5. The court should also direct the subregistrars to stop registering Sale Deeds of apartments if they don't have DoD.
   

***********************
In fact, considering the fact that > 95% of the apartments are in the same situation, this court case should be a PIL.
I suggest that our group should take this up ASAP.

We should also suggest the solution if the developer has disappeared, or wound up his business.
I suggest the following process:

1. The court issues a summons to the developer to appear before the court.
2. After a mandatory waiting period of 1 month, if the developer fails to appear, declare him insolvent/absconding.
   
3. Let the purchasers create DoD and file with the subregistrar, along with the court order.
   

[Ramanathan Chellappan]

Hi Nagesh,

In Bangalore, more than 95% of  apartments are  likely to have registered under KSRA. Sub point -2 under main point-3 that you have mentioned, is also widespread among Sale deed template that builders use for registration. After all, both the types of the sale deeds that you have mentioned  are basic standard copy-paste templates that every builder has and use it for registration.

I would think that thousands of apartment owner  with combination of KSRA + Point (3.2) of your mailer would have purchased from builder and also sold it to 2nd level/3rd level purchaser. Transactions are still happening  successfully without any issues under such a setup , which is defeating KAOA rules . What is your thought on this ? 

Also, What is the way out for apartments which have 3.2 type of template for submitting the property to KAOA. Our Apartment is KSRA registered and i was just starting to get support for KAOA migration from other owners, but your mailer on 3.2 has brought me down as our sale deed is in line with 3.2.

Regards,

Ramanathan c

  

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[Ramanathan Chellappan]

Hi Nagesh,

Also, What if apartment owners with 3.2 type sale deed were able to submit the property to KAOA. Will that be void?  Please clarify this point as well.

Regards,

Ramanathan c

[Nagesh Aras]

Well, first of all, the purchasers cannot register their body under KSRA (see link). Such a registration is invalid.
It may be noted that the Registrar of Societies & Firms (Church Street) forces people to insert a paragraph to this effect in the registration papers.

However, they do not need to form a society (or any other legal entity) in order to submit the property to KAOA.
Thus, so far as submission to KAOA is concerned, it is not important whether a owners' society exists or not.
(If they are really the part-owners, they can submit the property jointly.)

But the real problem is that they are not the part-owners yet!
The developer has not created a title for the apartment+UDS. Therefore, this property transfer cannot take place.

And if the purchasers have not become the owners of the apartments+UDS, how can they submit the property jointly?

On the other hand, since the property is still with the developer (thanks to the voided Sale Deeds),
he is the only entity (the "sole owner") who can submit the property to KAOA.

**************
Let us take a step back from this complex case and understand the term "TITLE" :

1. If I do not own a property, I do not have a title to it. Therefore I cannot sell it.
  
2. If I want to sell it, I have to acquire a title to it first.
    I do that by (a) buying the property from its current owners, (b) paying off all mortgage on it.

3. If that property is owned by multiple people, none of them can sell it to me individually: All owners must agree and execute the deed jointly.
    Or they have to split the property such that a part of it belongs exclusively to a single owner, and then each owner can sell his part only.

4. If I have entered into an agreement with the owner to transfer the title to me, that's only a promise.  
    I am not the new owner till the title is formally transferred to me.
   
Now look at the problem at hand: The whole property has a title, but each of the apartment+UDS do NOT have an independent existence at all.
For example, any encumbrance is applied to the whole property; and not to a specific apartment.
Thus you cannot take a loan against a specific apartment!

The title can be created only by submitting the property to KAOA.
Therefore the developer has to do this.
He can sell the apartment+UDS legally only after that.

And why should the developer not want to create a DoD? It is a simple task (just copy-and-paste from KAOR)!

[Utkal Mohanty it]

As long as the building is intact and safe for living, based on the sale deed one can claim the ownership for their flats.

As there will be no UDS ownership, the real problem starts, once the building has become unsafe and need reconstruction.

Thanks,
Utkal

On 30-May-2016 00:10, "Nagesh Aras" <nagesh...@gmail.com> wrote:

Well, first of all, the purchasers cannot register their body under KSRA (see link). Such a registration is invalid.
It may be noted that the Registrar of Societies & Firms (Church Street) forces people to insert a paragraph to this effect in the registration papers.

However, they do not need to form a society (or any other legal entity) in order to submit the property to KAOA.
Thus, so far as submission to KAOA is concerned, it is not important whether a owners' society exists or not.

The real problem is that the developer has not created a title for the apartment+UDS.

Therefore, this property transfer cannot take place.

And if the purchasers have not become the owners of the apartments+UDS, how can they submit the property jointly?

On the other hand, since the property is still with the developer (thanks to the voided Sale Deeds),
he is the only entity (the "sole owner") who can submit the property to KAOA.

**************
Let us take a step back from this complex case and understand the term "TITLE" :

1. If I do not own a property, I do not have a title to it. Therefore I cannot sell it.
  
2. If I want to sell it, I have to acquire a title to it first.

    I do that by (a) buying the property from its current owners, and (b) paying off all debt (encumbrances) on it.

--

the receipants are requested take appropriate decisions based on the email which are being initiated by the members of RERA- Karnataka. The Manager and or Owner and Members who post such materials and guidance are not responsible for any such act that may have prompt the receipants to take or to be taken.
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[Nagesh Aras]

Well, even when the building is sound, KAOA helps the owners in resolving many issues (see example)
When there is no DoD, these benefits are lost.

And of course, not to forget that all the protections defined in KOFA are lost when there is no DoD.

But all these considerations are secondary: The main loss is that legally the property is NOT transferred to you when there is no DoD!

On Sunday, May 29, 2016 at 8:47:08 PM UTC+5:30, Nagesh Aras wrote:

[sandeep kumar]

Hello Nagesh,

I am an mc member for an apartment complex in Bangalore .  The property is in deemed handover (No handover doc signed with the builder) from September 2017 .

The OC is in process and the builder has shared the receipts of payment for OC . I do not think the builder has created title for apartment by way of DOD .

I can persuade the builders legal team to do it asap . We are running an association  as a society registered under KSRA  act . The bye laws states that it is an owners association and back refers to the sale deed . The sale deed mentions apartment +UDS and also makes clear that the owners association can collect common expenses and a deemed handover possible .

We have PANCARD in AOP category and also TAN and GST registration .

1. Now since OC is underway , we can push for a DOD .But for that it seems builder has to  claim as sole owner as stated in FORM A . Isnt it a conflict since the individual sale deeds are executed ?

2. What can be the next step  if the builder states the above as a reason for declining DOD (They are not sole owner/Grantor) ?

Thanks

Sandeep

On Sunday, May 29, 2016 at 8:47:08 PM UTC+5:30, Nagesh Aras wrote: