Comments on Draft RERA Rules, Karnataka The core idea itself is missing from the Rules (“How to file a complaint under RERA”)! In the UT version, Rule 36 and Form M provide method to file a complaint with RERA; and Rule 37 and Form N provide method to file a complaint with the adjudicating officer. Both sections are entirely missing from the Karnataka version! We definitely will need a revised Rules document to see how the state government implements it. (we cannot assume that it will be a verbatim copy of the UT version.) –

The RERA Act Section 71 states that RERA will appoint the adjudicating officers in consultation with the government. However, the Rules do not define how they are to be appointed. While there are selection committees to appoint the RERA team and the Appellate Authority, no such due diligence exists in the most crucial link! This has a serious implication on impartial and fair implementation of RERA, as the bulk of the complaints (against Sections 12, 14, 18 and 19) will be handled by adjudicating officers. There must be a process and criteria to screen and find upright officers from the available District Judges. This record must be available in public domain. At minimum, check the service record, number of years of experience in land matters, and what % of judgments were overturned by HC.

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The bulk of the complaints would be against Sections 12, 14, 18 and 19, and to be handled by the Adjudicating officers. Section 72 defines how he should quantify the compensation and interest. Also, RERA Section 61 defines a penalty for the same violation. (while the compensation and interest go to the client, the penalty goes to the state). But the adjudicating officer is not authorized to handle Section 61! Only RERA Authority can do that. This implies that the adjudicating officer must first investigate the issue to confirm whether the offense has indeed taken place, and determine the quantum of compensation and interest. After that, he must send the file to RERA to determine the penalty. Further, if the developer does not cooperate, the RERA Authority must retain the file and revise the penalty upwards from time to time. How this will be monitored, and how frequently the penalty would be reviewed is not defined at all. Please define this entire process in the Rules.

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Sections 61 and 72 provide huge discretionary powers to the person: He can arbitrarily set the penalty in a very wide range (up to 5% of the project cost; which means a range of several crores). Yet RERA does not provide a consistent yardstick. This will allow corrupt officers to let off a “friendly” developer with a token penalty, or apply harsh penalty if the party does not agree to his demands. Even honest officers would naturally differ in applying the penalty. Since case-to-case comparison is never made, such anomalies will never be highlighted!

Justice must not be person-dependent. Therefore the Rules must provide a guideline so that penalties are applied consistently without arbitrariness; or personal biases. For example, if the same developer has a previous violation, the next penalty should go up by 5% compared to penalty rate for the previous case (to be considered across all his projects in the state). –

For apartments, KAOA and KOFA are reference “local” acts. Therefore Agreement of Sale must comply with them. But the Sale Agreement differs from KAOA/KOFA at several places, because it is copied from the central rules without adopting to the local laws of Karnataka. Please correct all anomalies from the Sale Agreement form. Some examples are given below: Clause 6 of KAOA defines how the %UDS in the property is calculated from the apartment’s value along with its attached limited common areas. The Sale Deed does not follow this formula. The Sale Agreement clause 1.8 (ii) violates KAOA: It is clarified that the promoter shall convey undivided proportionate title in the common areas to the association of allottees as provided in the Act; However, in Karnataka, KAOA conveys the title to the individual buyers, and NOT to the MC or the “Association” as a whole. 

In fact, it is impossible to register the “Association” as a society under KSRA or KCSA. And even it is somehow registered as a society, any property owned by it cannot be returned to the members: Thus if the property is removed from KAOA, the common areas will have to be transferred to the government, or another society! This proves that the common areas cannot be conveyed to the Association.

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The officer-holders are merely elected from among the buyers for the sake of property management. The Association as a legal entity does not own the common areas.

The Sale Agreement clause 7.4 violates KAOA: […] it shall be the responsibility of the Promoter to hand over the necessary documents and plans, including common areas, to the association of the Allottees or the competent authority, as the case may be, as per the local laws. Well, MHUPA cannot leave this “as per local laws” statement in the Rules: It must mention KAOA. –

The Sale Agreement clause 7.2 violates RERA Act: While RERA Act Section 17 (1) and (2) provide that after getting the OC, the developer must convey(a) the documents and plans of the common areas within a month, and(b) the title of the apartments and common areas within 3 months. Against that, this clause allows 3 months for handing over both items. (must be “one month”).

2(e)

The Rules state: “…deemed to be registered cooperative societies” Please clarify what “deemed” is!

3(1)(c) The word "open park" is confusing. Why is RERA Rules so particular about this particular type of parking? Why not ask the developer to declare “covered” and “underground” (basement) parking also? In fact, rather than those types, the Rules must call for declaration of visiters’ parking slots, because it this category that is being violated flagrantly in Bangalore, in violation of the minimum requirements set by the Bangalore Building Byelaws in BDA area, and by zonal regulations in BMRDA areas. 3(d)

KOFA Section 2(a) refers to a disclosure of title certified by an advocate of more than 7 years standing. But this does not match Rule 15(D) (vi)(c), which requires a land title report from an advocate with ten years experience in land related matters.

3(d)

While this requirement is listed under documents the authority displays on its website, but not listed as the information to be submitted by promoter. If the promoter does not submit it, how will it be displayed on the RERA website?

3(h)

Often the plot encroaches on neighboring government land (lake, wetland, kharab land, buffer zone…) The Rules does not specify any measure against this. We suggest that if a government-owned land is adjoining, get NOC from them (just like how Bangalore Building Bye-Laws specify that when a property abuts a railway property, an NOC from the Indian Railweays is mandatory.)

3(2)

What are the typical nondiscriminatory acts? How will RERA deal with it?

4

Almost 93% of existing projects are incomplete. This is a huge number! Most of them suffer from very few known issues: They do not have specific NOCs or the final OC is missing. Many of these have illegal extra floors, which deserve to be demolished ASAP. BBMP cannot possibly live with this problem indefinitely, considering that When RERA opens, it will be flooded by these projects, and bring its function to a grinding halt. On the other hand, the past projects cannot be ignored. It would be prudent to deal with these projects en masse: (a) First, define the criteria for each NOC (b) Specify which of these criteria are critical for existing projects (c) Deal with all projects in bulk.

4(1)

What is the penalty if the promoter of an ongoing uncompleted project does not submit his details? What is the penalty if the proponent gives falsified information? (This is very likely, as 93% of the apartments do not have OC.) In the BMRDA areas, OC is not issued. Are all of those projects to be included?

4(1)

This clause should mention OC (Occupancy Certificate) in place of “Completion Certificate”. A CC is issued by the Certified Engineer/Architect hired by the developer himself. Such self-declaration cannot be held as proof that the project has received all approvals; and therefore formally completed.

4(2)

The developer is free to submit only the latest sanctioned plans (or even non-sanctioned plans!)

The Rules must mandate the developer to submit(a) the original sanctioned plans, and (b) all the consequently amended and sanctioned plans. 4(2)

Most of the disputes arise because the developer has changed the sanctioned plans without taking prior permission of the buyers. Therefore in the existing projects, the developer must also submit a NOC from all the buyers that they are willing to accept the latest sanctioned plans. In absence of this NOC, RERA must prosecute the developer for changing the plans without agreement of the buyers.

4(2)

The Rules do not mandate the contractor of existing projects to make disclosure of the money collected, and money spent; including Corpus and the deposits collected for third-party work, such as BESCOM, BWSSB connection, etc.

4(2)

The Rules do not mandate the contractor of existing projects to deposit the balance money in an escrow bank account.

4(2)

While the developer applies for a fresh registration, he is supposed to undertake the timeframe within which he will finish the project [ref RERA 4(2)(l)(C)]. But in most of the existing projects, this timeframe is already exceeded by far (in most cases). Is RERA supposed to start fining those projects as per the same yardstick? Also, for these projects, would RERA take up suo motu case on behalf of all the customers and award them compensation from the developer?

4(3)

This clause is applicable to new projects as well. So why restrict it for existing projects only?

4(4)

This clause is applicable to new projects as well. So why restrict it for existing projects only?

5

Instead of imposing 70% of the money to be deposited in an escrow account, it would be easier if the customer deposits all his money (including the booking money) into this account directly. Let the developer withdraw money from this account as per criteria. The bank in turn can provide a sub-number (like home loan), so that payment by each customer can be independently tracked. This method ensures instant traceability of money, and does not require additional audits.

6

The registration fee is not defined (when the developer applies for registration).

6(1)

The Rules do not define the process when the application is to be rejected, and the manner of rejection. The Draft RERA Rules for UT define it as Rule 6(2), which is deleted here, and replaced with an extension-related clause (see below). Clause 7 on the other hand addresses revocation of an existing permission, not rejection of a first-time application.

6(2)

This text does not belong here (clause 6 is about first-time registration, not extension). BTW In the UT version of the Rules, clause 7(1) mandates the developer to apply for extension at least 3 months before the expiry of the current deadline. This condition has disappeared here. A late penalty (per week) should be set to discourage the developer from delaying the renewal.

6(2)

Clause 7(3) of the UT version of the Rules states thatExtension of registration of the project shall not be beyond the period provided as per local laws for completion of the project or phase thereof, as the case may be. But this requirement is removed in Karnataka version (This refers to the building license period.)

6(2)

The process for rejection of extension is removed! Indeed, this clause must define how to handle projects that are delayed beyond reasonable limit, or simply abandoned, where there is no developer to even apply for extension.

8

Upon lapse of registration or revocation, carrying on the remaining development work is not straightforward. The state government does not have the resources to carry out this on its own. This calls for development of a consensus-based process.

9

Can an uneducated or unskilled agent play the part expected out of him? Is must be mandatory for him to be completely familiar with the facts and figures of the project he represents. He must also know the real estate laws (KAOA, KOFA, RERA, registration act, transfer of properties act, etc.).

9(2)

Why are there two different rates within BDA and outside BDA areas?

10(2) The Rules must provide the criteria for rejection of the application for registration as a real estate agent. This could be based on (a) professional qualification, (b) financial solvency status. 11(4) The UT version cl 12(4) provides a check-and-balance: No application for renewal of registration shall be rejected unless the applicant has been given an opportunity of being heard in the matter. This is missing from the Karnataka version. 15(3) The 15(3)(b)(iii) mentions “in case of other persons”. This should be corrected to “in case of other entities”, such as companies, societies, co-op societies, etc.. 15

The Rules must specify the minimum frequency of updating of the information provided. In case the project documents and plans (ref: Rule 15(B)) are updated, they must be uploaded within a week. Otherwise the developer can get the sanctioned plans updated but keep it hidden from buyers.

18(5) Why should the selection committee make its own selection guidelines and procedures each time? If they are allowed to do that, the results won’t be consistent. Therefore the guidelines and procedures must be included in the Rules. Further, if the selection process is not subject to RTI, the appointment itself won’t be transparent. Therefore the Rules should make a provision to make the process transparent to the public. 20

Currently, the maximum age limit is 65. This could be used as a post-retirement reward for favored persons, even if they are enfeebled with age.

The RERA needs energetic and efficient chairman and members to be efficient. Therefore this age limit should be the same as the superannuation age of a IAS or KAS officer. 24

This section must empower RERA to deal with violation of the local acts and regulations. Most of the buyers suffer because the developers violate the provisions of KAOA, KOFA, Building byelaws (or zonal regulations) and Registration Act.

29(6) Same as above, for the appointment of the members of Appellate Authority. These documents must be placed in public domain (or subject to RTI) to ensure total transparency. 29(7) This does not make sense! What is a "panel" of <= 3 persons for one or more vacancies? The UT version is much clearer: The committee will shortlist two candidates for each vacancy. Then the government is supposed to finalize one of them. 30

Too vague! Does ever a government (as a whole) become “aware” of anything?? It is OK to have this text in the Act, which only defines the concept, and expects that a Rules will flesh it out. But the same text cannot remain untouched in the Rules! For example, if a person or NGO or association has a grievance, where are they supposed to complain? How will each of these complaints supposed to be processed, to the satisfaction of the complainant? How to ensure that the government will not sweep it under carpet?

30(2) The Chairman of the Appellate Authority is a sitting/retired judge of the High Court (Ref. Section 46 of RERA Act). Is it OK to appoint another HC judge to probe the allegations against him? 31(2) In part (c), there is a typo: “evidence” 31

What is the significance of the following rule: The designated Judge shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (Central Act 5 of 1908), but shall be guided by the principles of natural justice. What specific advantage does “natural justice” have over the Code of Civil Procedure?

33

According to Section 46, the chairman can be a sitting HC judge. Does he have to retire from HC before accepting the Chairmanship?

36

The Appellate Authority is supposed to refer to the government for matters not covered in the Rules. But which department/designation represents "Govt"?

38

The Rules should state that the condition of service must include punishment for official/criminal misconduct. (leave the actual definition to the tribunal itself.) Also include a clause that the public can approach the Lokayukta to complain against the RERA or the Appellate Authority, as public servants.

38

The Rule states that the KCS Rules 1957 apply, “subject to modifications specified in the schedule”. But the Rules do not provide this schedule!

42

Please confirm the following: Rule 42 authorizes RERA to impose 30% of the project cost, and if that is not paid, RERA can suspend or withdraw the registration of the developer. Here is the calculation: Offense Violation of Section 3 of RERA

Section 59(1)

continues to violate the provisions of section 3 59(2) OR does not comply with the orders 70

Punishment 10% of the project cost (max) 3 years imprisonment (max) + 10% of the project cost (max) 10% of the project cost (max) (Result of compounding the imprisonment, regardless of what is the actual duration!)

TOTAL 30% of the project cost (max) 42(1) Instead of “The court shall...”, change to “The RERA Authority shall...” because it is not a court. 42(3) This rule is about a developer who is guilty of not only prolonged violation of RERA, but also of open defiance of the RERA Authority. Does his offense deserve to be purged from the records when he pays up the fine? Don’t the existing and future customers deserve to know of his offense and unlawful conduct? So why should he be acquitted (=released as “not guilty of the offense”)? At minimum, the original offense, the defiance of RERA orders and the penalty must be recorded by RERA on its website. The RERA authority must allow compounding only when the offender undertakes in writing that he will abide by the order. In fact, the rule wrongly assumes that the developer will mend his ways when the imprisonment term is compounded. Practically, this may not happen. Therefore, the Rule must clearly state that if the developer continues to defy the order, the imprisonment term shall be invoked again, and in this second instance, it shall not be compounded into a fine. 44

The RERA Authority is supposed to refer to the government for matters not covered in the Rules. But which department/designation represents "Govt"?

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P44 has a typo in the heading (“SIGHNED” in place of “SIGNED”)