Lack of clear-cut laws has helped dodgy promoters take uninformed buyers on a litigious ride

You have shed blood, sweat and tears to finally buy that apartment. You have processed the papers, got that bank loan and finally, when you think you have that dream roof over your head, you realise you have stepped into a nightmare.

Blame the State government’s failure to implement the laws, enacted 40 years ago to protect apartment owners’ interests — and to remove ambiguities in these laws — though apartments have mushroomed in Bangalore city.

A typical problem new owners face would be building plan was not approved by the competent authority or dispute over title of the land on which the apartments were built.

The big two

The Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act (KOFA) and Rules 1972, and the Karnataka Apartment Ownership Act 1972 (KAOA) are the two laws governing the apartments sector.

Through these laws, buyers of apartments in multi-storeyed buildings are given the ownership right, which is inheritable and transferable as immovable property, along with certain portions of undivided rights over common areas and facilities.

While KOFA prescribes a series of responsibilities of the promoters/developers of a residential apartment complex, KAOA mainly lays down the responsibilities of apartment owners as well as their registered association and its by-laws.

Recent appointment

However, the government failed to appoint a “competent officer” under these laws to look into certain grievances till March 2012. The Deputy Registrar of Cooperative Societies was designated as a competent officer under Section 5 of KOFA only on March 8 when owners of apartments in Diamond District on HAL Airport Road knocked on the doors of the Karnataka High Court for resolution of their disputes over khata and title of the property with the builder and the Bruhat Bangalore Mahanagara Palike.

Henceforth, the promoters/developers have to submit crucial details and accounts within a prescribed period to the competent authority. The absence of such an authority benefited the promoters/developers as they were not made accountable. The intended purchasers of apartments/owners were denied their rights, and the government was left with no statutory details about apartments.

Scarce information

With this crucial information not widely disseminated, a large number of promoters/developers deprived the purchasers of many mandatory details [see box], like approved plan, original records related to title of property on which the apartment complex is being constructed, details of persons already purchased apartments, and so on.

At the same time, not implementing these laws has been causing hardship to apartment owners while dealing with promoters/developers. Among the more serious problems they face are builders refusing to transfer the corpus fund to the apartment owners’ associations (often involving crores in large apartment complexes) and not handing over undivided interests on common facilities like club, gymnasium, swimming pool, sports facilities and so on.

Ambiguities

A provision in the KOFA makes it mandatory for the promoters/developers of apartments to create a cooperative society or a company comprising the apartment buyers but none follows this provision, points out T.S. Mahantesh, an advocate. KOFA also permits promoters/developers to hand over the title and documents of the land and building to the apartment owners’ association, a cooperative society or company, but there is no compulsion in the Act to mandate promoters/developers to form an association, says Mr. Mahantesh. It only says promoters should inform the Registrar of Cooperative Societies that the buyers want to form an association.

This lack of clarity benefits the promoters/builders as there is no regulator. Moreover, ambiguity over authority for registering the associations leads to litigations besides depriving owners of their rights, points out another advocate, B.C. Thiruvengadam.

Kafkaesque scenario

Now, with the Registrar of Cooperative Societies, being the competent authority as per KAOA, apartment owners associations have to register themselves with this office. However, in a classic Kafkaesque scenario, no such registration is permitted by the Department of Cooperative Societies. Instead, owners are directed to register their associations under the Karnataka Societies Registration (KSR) Act on the lines of residents’ welfare associations.

Unique

Legal experts point out that the formation of apartment owners’ associations is unique as they have to function as per the by-laws and the Declaration and Deeds of Apartments. This entails control over undivided areas, and should be registered under KAOA, and not as per the KSR Act. Consequently, apartment owners’ associations, registered under the KSR Act, have been facing legal hurdles on the issue of their recognition during litigations against the promoters/developers.

Legal experts call for a comprehensive law — to regulate the apartment sector and private layout formation — to protect the interest of buyer, end confusion in existing laws, and stem the chaotic apartment construction in Bangalore.