• Prestige Waterford - Land dispute and builder indemnification

Hello, This is regarding Prestige Waterford project from Prestige Group. This project has ~700 apartments and is approved by SBI, HDFC, ICICI and other banks for home loan. The builder has shared documents supporting owner's claim on title for the land, sale deeds showing transfer of the land parcel dating back to 1947 is available. The RTC for the land reflects the name of the owner, the land is also converted for non-agricultural residential purposes in 2008 and khata mutated in 2013. However, in 2010 there was an incident when BBMP and Tahsildar of East Bangalore had approached asking them to vacate. Post this the sellers have obtained a temporary injunction against both from district court. Again in 2014, the Tahsildar had issued notice alleging that the sellers have encroached a parcel of land from an adjacent lake - to which the sellers objected and subsequently obtained a temporary injunction from the district court. Both these cases are under hearing still. In 2020, the Tahsildar has issued a notice alleging that sellers have concocted documents and asking the sellers to vacate the land, failing which they would initiate criminal proceedings. In response the sellers have filed a writ petition in the High court of Karnataka to quash this notice. The sellers in their sale agreement with us have kept an indemnity clause with the following wordings "The Sellers shall keep the Purchaser fully indemnified against all encumbrances, litigation claims, demands, costs and expenses occasioned or any persons having or claiming any estate, right, title or interest in or to the Schedule A property". Schedule A property here implies the land parcel. I would request your professional legal opinion on 1. What can be the worst case scenario in this case 2. What is the risk to the buyer (myself) under such worst case scenario 3. Does such indemnity clause provide adequate protection 4. Will reselling the property be of any concern if the litigations are not concluded 5. Is there any precedent of similar case where buyers have suffered Thanks Ashwin
Asked 8 months ago in Property Law
Religion: Hindu

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8 Answers

Indemnity clause protects you in event of third party claims being made 

 

2) reselling will not be an issue 

 

3) the risk is adverse decision by courts against the developer.if encroachment is priced tjen portion of land will have to be vacated 

Ajay Sethi
Advocate, Mumbai
94965 Answers
7576 Consultations

5.0 on 5.0

Indemnity bond can Secure your position if they default in any way but you need to again go for litigation. Bank guarantee will be better option.

yes g you have ownership then you can resell it

Prashant Nayak
Advocate, Mumbai
32093 Answers
183 Consultations

4.1 on 5.0

  1. The worst case scenario in this case could be that the court finds that the sellers have indeed encroached on the lake land or forged the documents, and orders them to vacate the land and demolish the project. This could result in a loss of your investment and legal troubles for you as a buyer.
  2. The risk to you as a buyer under such a scenario depends on the terms and conditions of your sale agreement with the sellers and the builder. You may have to check if there is any clause that protects your rights and interests in case of such an eventuality. You may also have to consult a lawyer to understand your legal options and remedies.
  3. The indemnity clause that you have mentioned may provide some protection to you, but it may not be sufficient or enforceable in all situations. For example, if the sellers are unable to pay the compensation or if they go bankrupt, you may not be able to recover your money. Also, if the court finds that you were aware of the disputes and still bought the property, you may not be able to claim indemnity. Therefore, it is advisable to seek legal advice before relying on such a clause.
  4. Reselling the property may be of concern if the litigations are not concluded, as it may affect the market value and demand for the property. You may also face difficulties in finding buyers who are willing to take the risk of buying a disputed property. Moreover, you may have to disclose the pending litigations to the prospective buyers, as per the law.
  5. There are many precedents of similar cases where buyers have suffered due to land disputes and builder defaults. For instance, in 2018, the Supreme Court ordered the demolition of four apartment complexes in Kochi that were built on a coastal zone in violation of environmental norms. The court also directed the builder to pay Rs 25 lakh each to 140 buyers who had invested in the project. Similarly, in 2019, the Supreme Court ordered the cancellation of registration of Amrapali Group, a real estate company that had failed to deliver flats to thousands of homebuyers in Noida and Greater Noida. The court also directed the National Buildings Construction Corporation (NBCC) to complete the pending projects and appointed a receiver to manage the affairs of the company.

Muraleedharan R
Advocate, Trivandrum
373 Answers
2 Consultations

5.0 on 5.0

1. There seems to be a violation of law and land grabbing issue involved in this. The seller should have sorted out the problem before selling the property.

The temporary injunction granted to the seller is not the proper remedy neither it is a licence given to seller to sell the illegally encroached or grabbed property.

Now you have to wait for the decision by High court in the writ petition.

2. If the court declares that the seller has illegally grabbed the portion of property now under dispute, then the decision about the sale of property also would be decided accordingly.

3. No doubt it will take time to enforce the indemnity.

4. It depends on the buyer, even otherwise the indemnity clause will continue from your side to the new buyer.

5. There are plenty of such judgements, you can ask your advocate to search for it 

T Kalaiselvan
Advocate, Vellore
85166 Answers
2222 Consultations

5.0 on 5.0

1. If the government's claim is proved, the promoters have to surrender that parcel of the property.

2. If the buyer's property falls within that parcel, the vendor-promoters have to compensate the buyer.

3. Yes, the buyer can invoke the built-in indemnity clause against the vendor-promoters.

4. Yes, it is not advisable to sell it pending litigation.

5. Yes, quite a lot.

Swaminathan Neelakantan
Advocate, Coimbatore
2823 Answers
20 Consultations

4.9 on 5.0

Dear Client

Worst Case Scenario:
The worst-case scenario in this case would likely involve a protracted legal battle with ongoing litigation surrounding the property. This could result in a significant delay in your ability to possess and use the property as intended. In the most extreme case, you may lose ownership rights to the property if the court rules against the sellers and finds that the property was obtained fraudulently.

Risk to the Buyer:
As the buyer, you could face several risks in this scenario:

Delayed Possession: You may not be able to take possession of the property as planned due to the ongoing legal disputes.
Financial Costs: You may incur legal expenses and costs related to defending your ownership rights or settling disputes.
Uncertainty: There could be uncertainty regarding the ultimate outcome of the litigation, and you may not have clear title to the property until the disputes are resolved.
Indemnity Clause:
The indemnity clause you mentioned is a protective measure that can offer you some recourse if you face losses due to encumbrances or legal disputes related to the property. However, the effectiveness of the clause depends on the financial strength of the sellers and their ability to fulfill their indemnification obligations. It's essential to consult with a lawyer to understand the specific terms and conditions of this clause and how it would apply in your situation.

Reselling the Property:
Reselling the property in the midst of ongoing litigation can be challenging. Potential buyers may be hesitant to purchase a property with unresolved legal issues, and you may not be able to get a fair market price until the disputes are resolved. You should also consider potential legal obligations and liabilities when reselling the property.

Precedents:
It's possible that there are similar cases where buyers have faced difficulties due to property disputes. However, each case is unique, and outcomes can vary based on the specific facts and legal arguments presented. Consulting with a lawyer who specializes in property and real estate law in India can provide you with more information on any relevant precedents and how they might apply to your situation.

Anik Miu
Advocate, Bangalore
9028 Answers
110 Consultations

4.7 on 5.0

If the legal disputes related to the property are not resolved in favor of the sellers, and the property cannot be said to be holding clear title or encumbrances. It will be considered as legally problematic or even unsellable.

As the buyer, you may face several risks:

  • If the property's title is found to be defective or encumbered, you may not have clear ownership rights.
  • It will be a time-consuming and costly affair, potentially leading to financial losses.
  • Reselling the property might be challenging until the legal disputes are resolved.
  • If the court orders eviction of occupants, including you, you could lose the property and your investment. Refer Campa Cola Case in Mumbai. 

The indemnity clause can provide some protection by obligating the sellers to compensate you for losses. However, the enforceability of the contract and the financial capacity of the sellers will be taken into consideration while dealing with indemnification obligations.

Rupali Ranait
Advocate, Vasai
6 Answers

Not rated

- As per law, the temporary Injunction is for the period of proceeding of the case , and it may lost it legal value upon the adverse decision of the court .

- Since, there is government departments are involved in the case , then there is chances of relief in the favour of the seller is not high . 

- Hence , you should wait for the final decision of the High Court and also trial court. 

- The indemnity bound will not safe you fully . 

Mohammed Shahzad
Advocate, Delhi
13377 Answers
199 Consultations

5.0 on 5.0

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