Karnataka RERA Orders Developer to Transfer Corpus Fund and Fulfil Senior Citizen Project Commitments

Karnataka RERA Orders Developer to Transfer Corpus Fund and Fulfil Senior Citizen Project Commitments

The Karnataka Real Estate Regulatory Authority (KRERA) has ordered a private developer building a senior citizens' project in Mandya District to transfer all of the corpus fund of ₹62.26 lakh, which was collected from buyers to the owners' association.

The regulator emphasised that the common amenities in the project are shared resources that allottees from all phases can use and enjoy, and that they are integral to the project.

“Having regard to all these aspects this Authority is of the considered view that the respondent is liable to transfer the entire corpus fund in favour of Complainant's Association irrespective of whether he has completed the project phase-wise or not,” KRERA observed.

The Sharadindu–Stage III project, developed by Sree Senior Homes, has been met with concerns from the Sharadindu Senior Commune Owners Association, representing the residents. The association has raised concerns regarding the developer's failure to transfer the collected funds to the association, despite the association being officially formed and registered on April 7, 2022. Under Section 11 of the Real Estate (Regulation and Development) Act, 2016, the developer is obligated to transfer the corpus fund to the association.

The complainants allege that the developer violated the agreed-upon project timeline and failed to deliver the promised amenities, as specified in the promoter's agreements. This delay prevented the allottees from forming an association sooner.

The developer disputed these claims, arguing that they had used the corpus fund to cover ongoing maintenance costs, which the complainant association had refused to pay. The developer asserts that the complainant association owes a significant sum to cover these maintenance costs and service fees.

The dispute revolves around the question of whether the complaint complied with the Karnataka Apartment Ownership Act and the registered bylaws established on April 7, 2022. The developer contends that the complaints have failed to adhere to the correct procedures, which include obtaining authorisation from the majority of the owners, as stipulated in the bylaws.

It was pointed out that on the contrary, it is the complainant association that bears the responsibility of paying a sum of ₹1,65,72,221 to the respondent firm. This payment is due to the association's refusal to fulfil its obligations concerning the deficit maintenance costs and service fees, which are based on the services provided.

In addition, the developer asserts that Phase 1 of the project is exempt from RERA (Real Estate Regulatory Authority) regulations since all units were delivered before RERA's implementation. The RERA registration for the project is exclusively applicable to Phase III and does not encompass the entire project.

Upon thorough scrutiny of the records, KRERA determined that the developer had not provided sufficient evidence to support their assertion of developing the project in phases. Instead, it seems that the developer may have deliberately chosen not to register the entire project, potentially to evade specific RERA obligations.

“Therefore, the intention to develop the project in question, phase-wise was never contemplated by the respondent promoter. Only with an intent to dodge the accountability and various responsibilities as contemplated under the RERA Act and the rules made thereunder, the respondent has conveniently not registered the project as a whole,” KRERA observed.

The regulatory body determined that the unspecified phases could not be treated as independent real estate projects under RERA due to their failure to meet the occupancy certificate prerequisites. Given that there exists only one association covering the entire project, the developer's decision to withhold the corpus fund on a per-phase basis was deemed unjustifiable.

The authority further stressed that the complainant's claim lacked merit, as it could not reasonably be interpreted that the project was being developed in distinct phases. The cluster cottages, which were claimed to be part of "Stage-I," had already been completed at the time when the RERA Act came into effect.

“The complainant association sought for transfer of the corpus fund collected towards maintenance when the complainant association was formed in April 2022 and the demand made by the complainant association to the respondent was refused by the respondent. Hence the claim of the complainant being with respect to the entire project and not anyone single phase/stage, since there is only one association for the entire project,” KRERA ruled.

It was further noted that the township was being developed as a single, comprehensive project that was still in the process of construction. As a result, the corpus fund that has been collected must be promptly transferred to the registered Association once it is formed, in accordance with the provisions outlined in Section 11 of the RERA Act.

Additionally, it took into account that the project is an atypical development designed to provide essential amenities tailored to senior citizens. These amenities, such as a permanent kitchen and dining hall, a fully equipped medical centre, a library, and a gym, were already available at the time of the complainant association's formation.

Several of the promised amenities, including the emergency push button, intercom system, indoor shuttle court, swimming pool, Jacuzzi, and hobby room, etc. have not been made available to the allottees as agreed upon by the respondents. The respondent is still in the process of completing the construction of these facilities.

KRERA noted that the respondent, who had promised specific amenities for senior citizens, and given the nature of the development as a township tailored to the requirements of senior citizens, has not fulfilled this commitment.

Given the many outstanding promised amenities, the developer's decision to withhold the corpus fund was seen as an act of unjust enrichment.

Consequently, KRERA instructed the developer to finalise the project and deliver all the agreed-upon amenities within 60 days from the date of this order.