Can a Builder Cancel a Registered Flat under RERA?

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to protect homebuyers and bring transparency, accountability, and fairness to the real estate sector in India. One common question that arises among homebuyers is whether a builder can cancel a flat that has already been registered under RERA. 

This article explains the legal position regarding cancellation of a registered flat by the builder, the rights and remedies available to buyers, and important considerations under RERA.

Understanding RERA and Its Purpose

RERA is a comprehensive law enacted by the Parliament in 2016. It aims to regulate the real estate sector by ensuring that builders adhere to agreed terms and conditions, complete projects on time, and maintain transparency in dealings with buyers. 

RERA mandates that every real estate project must be registered with the State RERA Authority before it can be marketed or sold. The builder must also execute a formal Agreement for Sale with the buyer, which is registered with the appropriate authority, giving the buyer legal rights over the property.

One of RERA’s key features is to protect the buyer from unfair practices by the builder, including unlawful cancellation of allotments or agreements. Hence, the issue of cancellation of a flat by the builder post-registration is heavily regulated.

Can a Builder Cancel a Registered Flat?

The short answer is no, a builder cannot cancel a registered flat arbitrarily or at will. The builder’s right to cancel is limited and regulated by both the Agreement for Sale signed between the parties and the provisions of RERA.

When Can a Builder Cancel a Flat?

• Default by Buyer: If the buyer fails to comply with the terms of the Agreement for Sale, especially non-payment of dues as per the agreed schedule, then the builder may have a right to cancel the allotment.
• Specific Agreement Clause: The Agreement for Sale must expressly provide for cancellation in case of buyer’s default or other specified circumstances.
• Legal Proceedings: The builder cannot cancel the allotment unilaterally. Cancellation must follow due legal process, often including serving notices and obtaining orders from courts or the adjudicating authority under RERA.

No Unilateral Cancellation Allowed

Under RERA, the builder cannot simply decide to cancel your flat because of personal reasons or arbitrary decisions. If the Agreement for Sale is registered and you have complied with its terms (including payment), then the builder is legally bound to honour the contract.

Any attempt to cancel the allotment without valid grounds and without following the agreed process is a violation of RERA. If a builder tries to do so, the buyer has the right to approach the State RERA Authority or the adjudicating officer to challenge such cancellation.

What Happens After Full Payment and Sale Deed Registration?

Once you have made the full payment and the sale deed is registered, the builder’s right to cancel becomes even more restricted. At this stage:

• The builder can no longer cancel the flat based on non-payment because the payment is complete.
• Cancellation can only be done through a court order or RERA adjudicating officer’s order in very rare cases, such as where fraud, misrepresentation, or other illegalities are proved at the time of execution.
• Simply put, after registration, the buyer’s rights over the property are secure unless the court or RERA authority decides otherwise.

Cancellation Clause in the Agreement for Sale

The Agreement for Sale is the primary document that governs the rights and duties of both the builder and the buyer. It usually contains a clause detailing the circumstances and procedure for cancellation.

Important points regarding this clause:

• The builder’s right to cancel is strictly limited to conditions mentioned in this clause.
• Commonly, cancellation is permitted if the buyer defaults on payments after due notice.
• The agreement usually stipulates the process to be followed, such as issuing notice to the buyer with an opportunity to cure the default.
• The agreement also often specifies the consequences of cancellation, including forfeiture of booking amount or other charges.
• Any cancellation outside the scope of this clause would be legally invalid.

Buyer’s Legal Remedies Against Illegal Cancellation

If the builder cancels the allotment without valid grounds or violates the cancellation procedure, you as a buyer have the following remedies under RERA:

• File a Complaint with the State RERA Authority: The authority can adjudicate disputes and pass orders to protect your interests.
• Seek Specific Performance: You can ask the authority or court to direct the builder to perform the contract instead of cancelling it.
• Claim Compensation: You may claim damages for illegal cancellation and loss suffered.
• Get Refund with Interest: If cancellation is justified, ensure the builder refunds your money within the stipulated time, failing which you can claim interest.

Refund on Valid Cancellation

If the cancellation is lawful and in accordance with the Agreement and RERA provisions:

• The builder is required to refund the amount collected from the buyer within 45 days (or the period prescribed by State RERA rules).
• Only the amounts specified in the Agreement may be deducted (for example, booking fees or administrative charges).
• Any delay in refund entitles the buyer to interest, typically at 2% above the State Bank of India’s highest Marginal Cost of Lending Rate.
• This refund and interest clause is strictly enforced by RERA to protect buyers from undue financial loss.

Builder’s Registration Cancellation by RERA

RERA also gives powers to the regulatory authority to cancel or suspend the builder’s project registration in cases of misconduct or non-compliance. This includes scenarios where the builder unjustly cancels buyer agreements or commits other violations.

Such actions by RERA help maintain discipline in the real estate sector and ensure builders adhere to legal and ethical standards.

Conclusion

In conclusion, a builder cannot cancel a flat registered under RERA arbitrarily or unilaterally. The builder’s cancellation rights are limited to strict conditions laid down in the Agreement for Sale and the procedures mandated by RERA. Once full payment is made and the sale deed is registered, the buyer’s rights become stronger, and cancellation is only possible through court or regulatory orders on valid grounds.