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LEGAL CHAT

Buying a Housing Board property is not so simple

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What to look for: There are factors to note in purchasing a Housing Board property.

You have been lucky enough to get an allotment of a Housing Board Plot, house or a flat. Things appear to be very simple. You have been given a cost calculation. The cost suits your budget. You feel that you can pull the deal through on this basis. All things are apparently in place. You may reach a conclusion that all you have to do is to make the payments as per schedule given to you. You take it that you do not have to go through the usual rigmarole.

The Tamil Nadu Housing Board has various categories of properties. The allotments are made after taking into consideration the financial background of the allottees. For this purpose, the norms for prevalent classification include Economically Weaker Section (EWS), Low Income Group (LIG), Middle Income Group (MIG) and High Income Group (HIG).

Various schemes are envisaged based on this and other categories of persons. The initial deposits and payment schedule may vary depending on the category or other considerations.

The process of acquisition may also be in the nature of Lease-cum-Sale Agreement or Hire Purchase Scheme or an Outright Purchase Scheme. Payments have to be made in accordance with the terms and conditions stipulated in the documents.

At times, a person who has applied and obtained an allotment may expire before a Sale Deed is executed. There could be other reasons for seeking a transfer of name.

It is possible for change of the name from that of an allottee to certain close relatives like parents, spouse or children. In the event of death of an allottee, the name change can be effected in favour of one or more legal heirs, subject to production of documents required by the Housing Board. Once the payments are complete, the allottee has to make an application for execution and registration of the Sale Deed in favour of the allottee.

Normally, the Sale Deed is executed subject to certain conditions imposed by the Housing Board. The conditions are normally valid and can be enforced. The authorised officer of the Housing Board executes the Sale Deed and is not required to be personally present for registration. Hence, registration has to be effected by the allottee. If the allottee is not able to be personally present, he or she can authorise his or her agent to receive the Sale Deed from the Tamil Nadu Housing Board and complete the process of registration subject to compliance with the requirements of the Housing Board.

In the event that certain conditions are stipulated, the Housing Board normally executes a Release Deed which also needs to be registered. The Release Deed is in the nature of releasing the allottee from the conditions.

The Release Deed is executed on compliance with the conditions or on the request of the allottee subject to a decision to be taken by the Housing Board. Pending execution of the Sale Deed or Release Deed, it is possible for the allottee to mortgage the properties by obtaining clearance from the Housing Board.

The above procedures are fairly simple. However, an issue could arise on the payments. The Housing Board makes the allotment on the basis of an allotment letter. The schedule of payments to be made by the allottee usually covers a substantial period of time.

The Housing Board has the powers to change the scheme for a particular project. It has the powers to unilaterally revise the facts. It has the powers to rectify certain mistakes that may occur in certain documents. The agreements and other documents are so drawn that these powers can be exercised by the Housing Board any time and usually also have a document which may be in the nature of confirmation by the allottee for change of scheme or change of price.

The price is usually fixed on a provisional basis. As such, the provisional or the tentative price is not taken as a final price.

The price may be increased owing to change of scheme resulting in increased plinth area or increased extent of land or share of land or otherwise. It can also be increased on the ground that the payment of compensation to the erstwhile land owners has been enhanced and the Housing Board is called upon to make the enhanced compensation.

These facts may never be immediately known to an allottee. The real picture is that these facts crystallise over a period of time. As such, the price fixation depends on the above and various other factors.

At times, the Housing Board may choose to impose the increase in one type of project when similar but many projects are taken over as the facts may differ from project to project. The financial background of the allottee may also be considered. From outside, it may look like a situation wherein a group related to a particular project is burdened and that if the same group had been allotted a flat or a plot or a house in any other project or had even opted for purchase from any private developer, would have profited.

Many cases are filed by the distraught allottees questioning the demand for additional payments by the Housing Board. Except in exceptional cases, where the demand is unsustainable , most of these cases are disposed of in favour of the Housing Board. The reason is that the price increase is always attributable to a factor over which the Housing Board does not have control at the stage of announcement of the scheme. Further, the Housing Board always fixes only a tentative price. There will also be intimations to the allottees on the tentative price and the final price will be fixed by the Board.

The agreements will also contain clauses to this effect. At times, separate undertakings are also obtained. When possession is taken, intimation is usually given on the payments that have to be made by the allottee and if the allottee takes possession, the implication is that the allottee has accepted the conditions.

Though, by itself, it does not operate for profits, it cannot also operate in loss and has to take various decisions relating to pricing.

The matter of concern is that the allottee may not have even read the documents or ascertained various facts and circumstances relating to the purchase. At times, the allottee simply does not have the means to pay the extra amounts, which may arise in the aforesaid manner.

The author is partner, RANK Associates, Advocates, Chennai.

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