• Cacellation Charges for Flat

Sir,

I am a builder and new to this field. One customer has made an agreement to buy the flat on Jan 2016. It was an agreement of sale and construction was at initial stage. According to the agreement, the customer has to pay certain amount at foundation level, slab level, brick level, etc. The customer has made excuses and has not paid any amount except advance when we signed the agreement of sale. In November 2016, the customer wants to cancel the agreement and want the amount refunded along with interest. As goodwill I didn't put any terms and conditions if the customer wants to cancel the agreement. I would like to know if I need to refund the customers money along with interest or do I need to charge the customer for canceling the agreement after several months (customer has not paid the amount at foundation, slab level during this period which is a breach of agreement) with baseless reason. Unfortunately there is nothing about cancellation charges in the agreement. I have lost customers who wanted to buy the flat. Appreciate if you can let me know how can I proceed with this.
Regards
Asked 7 years ago in Property Law
Religion: Other

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9 Answers

1) the terms of agreement are sacrosanct

2) if customer has failed to pay installments at at foundation level, slab level, brick level, etc. you are entiled to charge interestfor delay in making payment as per clauses in agreement

3) in the event of cancellation deduct 10per cent of booking amount as cancellation charges and refund the balance amount

4) no question of payment of interest to flat purchaser

Ajay Sethi
Advocate, Mumbai
95205 Answers
7607 Consultations

5.0 on 5.0

1) you would not be entitled to deduct 10 per cent of booking amount if agreement is silent on cancellation charges

2) however prior to cancellation you can recover interest for delay in payment of instalment amount

3) deduct said amount of interest from refund payable

Ajay Sethi
Advocate, Mumbai
95205 Answers
7607 Consultations

5.0 on 5.0

1. You are to act as per the agreement you have entered in to with your said prospective buyer while booking the flat.

2. You have not incorporated any term for forfeiting the advance paid for booking in case of cancellation of the booking.

3. Legally you can not charge any amount from him for his said cancellation.

4. However, you can take the risk of deducting an amount which you have lost on account of the interest of the total amount which he was supposed to pay as per the agreement signed by him.

5. this is a genuine cost for your holding the flat for him as per the agreement without being paid subsequently restraining you to sell the same to other buyer.

Krishna Kishore Ganguly
Advocate, Kolkata
27245 Answers
726 Consultations

5.0 on 5.0

1. it might not be fine to charge 10% of the booking amount flatly.

2. You shall have to charge the expenses you have incurred for keeping the flat booked for him without getting the money which he was scheduled to pay as per the agreement entered in to by and between you two.

3. While charging anything, you shall have to keep in mind that he will certainly approach consumer forum against you and you shall have to justify your action before the said commission to avoid any penal order.

Krishna Kishore Ganguly
Advocate, Kolkata
27245 Answers
726 Consultations

5.0 on 5.0

Since there is no cancellation clause you can not deduct any sum of money towards cancellation changes.

However you can delay the refund till you get a new buyers for the same flat.

Next time get the sale agreement drafted by an expert lawyer.

Devajyoti Barman
Advocate, Kolkata
22920 Answers
498 Consultations

5.0 on 5.0

Hi

1) It appears from your query that the customer has made only an advance payment which is technically an earnest money deposit given as a guarantee for fulfillment of a contract.

2) It also appears that the customer has failed to pay stage wise payment as stipulated in agreement of sale in the sense that he had failed to pay the monies for foundation level, slab level, brick level etc.

3) Technically an advance received from the prospective buyer, is an earnest money which is part of the purchase price when the transaction goes forward and it is forfeited when the transaction falls through, by reason of the fault or failure of the purchaser.

4) The legal position regarding earnest money or advance is that

a) It must be given at the moment at which the contract is concluded.

b) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract.

c) It is part of the purchase price when the transaction is carried out.

d) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.

5. Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest

6) Case law in support of your query Supreme Court of India, Satish Batra vs Sudhir Rawal ,18 October, 2012.

7) You have the option to retain the entire advance money based on above legal position or as a good will gesture you can choose to retain 10% of advance monies and refund the balance of monies to the defaulting purchaser.

Hope this information is useful

Rajgopalan Sripathi
Advocate, Hyderabad
2173 Answers
394 Consultations

5.0 on 5.0

Though, as per you there is no clause set out for refund, since there is a clause for payment slab wise, this clearly indicates tht the buyer has to pay the amount at every stage.

Thus at this stage the buyer should have paid an amount to the level of progress in construction.

If he has paid the amount to this level he may have to wait for someone to buy the property at this stage for refund of his amount.

You can argue on that point itself, let him go to the court seeking refund on whatever basis he relies upon, by the time the court passes an order you can find a new buyer and refund the amount.

Even then do not commit to pay any interest for the amount held by you.

Generally it would be a grievance against a builder by the buyer, your case is very rare.

T Kalaiselvan
Advocate, Vellore
85404 Answers
2236 Consultations

5.0 on 5.0

Thank you for the prompt response. As I said there was nothing about cancellation charges in the agreement. Is it fine if we charge 10% of the booking amount?

Also, when we went to registration office few days back, the customer was there registering for a flat bought from another builder.

If you are willing to return the amount then you may deduct the 10% booking amount, let him object, you may ask him to proceed legally, let the court decide based on the merits.

T Kalaiselvan
Advocate, Vellore
85404 Answers
2236 Consultations

5.0 on 5.0

What does the cancellation clause say? Here the buyer himself is at default in as much as he has not honoured the agreement, so he is not entitled to any interest. It was a mistake on your part to not to include forfeiture clause in the agreement. Be that as it may, now refund the customer the amount by deducting 10% of the amount. However, issue him a lawyer's notice for cancellation and annex the cheque covering the amount.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

5.0 on 5.0

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