08 April 2024 Contract Law >> Corporate Law   |   Property/Real Estate Law >> Property & Real Estate  

A battle over a residential property in Mumbai has pitted a flat owners' society against an auction purchaser. Bombay High Court has ruled in favor of a flat owners' society (Society) in a property rights dispute with an auction purchaser. The case involved a residential building where the developer had sold flats to members of the Society but later defaulted on property taxes.

A tangled web of ownership claims:

The crux of the issue was ownership rights. The Society argued they had agreements with the developer for the flats, while the Petitioner claimed sole ownership after buying the property at an auction due to the developer's tax delinquency.

MOFA to the rescue:

The Society's case gained strength due to a recent amendment to the Maharashtra Ownership Flats Act (MOFA). This amendment allows Societies to seek unilateral deemed conveyance of the property if the developer fails to fulfill their obligations. The Society exercised this right and applied for the property's conveyance under MOFA.

Auction purchase no bar to conveyance:

The Petitioner challenged the Society's application, arguing that their ownership through auction took precedence. They further contested the validity of unregistered agreements between the Society and flat purchasers.

The court, however, disagreed. It acknowledged the Society's right to seek conveyance under MOFA despite the unregistered agreements. The court reasoned that even unregistered agreements could be considered under MOFA's provisions for achieving specific performance of the contract between the developer and the Society.

A twist, but not a roadblock:

The court further observed that the Petitioner, when purchasing the property at auction, was essentially stepping into the shoes of the original developer. This meant the Petitioner inherited the developer's obligations towards the Society, including the agreements for the flats.

The court also noted a pending lawsuit between the Society and the developer. However, due to the deemed conveyance granted under MOFA, this lawsuit became irrelevant.

Justice served for the Society:

The court's decision upholds the rights of flat owners' societies in situations where developers fail to meet their obligations. It also clarifies that under MOFA, unregistered agreements may still hold weight and that auction purchases may not automatically trump pre-existing claims by a Society. This verdict offers a sigh of relief for the Society, who can now rightfully claim ownership of the property.

  Maharashtra Rent Control Act, 1999    Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963    Transfer of Property Act, 1882