Purchasing a resale flat can be a real nightmare

It is much safer and better to buy your dream home directly from a reputed developer

They say when it rains, it pours and this adage applies to real estate transactions as well. During the first two weeks of September 2012 itself, several readers have been calling up with a recurring complaint. They had opted for a resale flat transaction, believing that it would be a simpler and quicker process. The reality of resale realty hit home when the transaction stretched into a prolonged nightmare.

By the end of it, they were either frustrated at being unable to deal with the multiple objections and issues raised by the housing society or upset about the transaction being called off at the last minute, after they had already invested a considerable amount of time, effort and money.

Based on their experiences, they have now come to the realisation that there are several hazards of buying a resale flat. Now, they firmly believe that it is much safer and better to buy your dream home directly from a reputed developer. Let us look at some of the problems that could be encountered by home seekers in a similar situation.

Society objections
If the person selling the flat has not followed the formalities of intimating the society regarding the intention, the office bearers could be hostile regarding the new entrant seeking membership, namely yourself. Unlike a first sale transaction, in a resale transaction, the buyer has no rights as such until the housing society admits him as a member and adds his name on the share certificate.

A person who recently purchased a flat in one of Mumbai’s extended western suburbs was informed that the seller had not submitted certain documents to the society. Until that process was taken care of, the society was reluctant to admit a new member in place of the existing one on record.

The list of pending issues was quite lengthy and it turned out that several office bearers were also operating as property brokers. Obviously they were upset about missing out on the commission that would have been earned if they had brought in a new member.

Deciding that the situation was unfairly balanced against him, the buyer felt that the best way to deal with it was to lodge a formal complaint against those office bearers with the registrar of co-operative societies. That was when he had to face another unpleasant fact. Until the society office bearers admitted him as a member, he did not even have the right to lodge a complaint at the registrar’s office. The existing member, from whom he had purchased the flat, would need to do that.

Since the transaction amount had already been paid in full, the seller, now comfortably settled in another city, was in no hurry to return and initiate proceedings against the society. After all, it would entail considerable time and expense towards complying with formalities that had been evaded for years altogether while residing there.

Money matters
Another bolt from the blue is when a buyer seeking membership is politely informed that the seller has departed leaving behind several years of unpaid maintenance dues, now payable with interest. There are also situations when a major building repair or renovation project, planned well in advance, commences just after the transaction. The new member finds that he needs to shell out a few lakh within a month of taking possession. Obviously, had he known about it in advance, this could have been adjusted with the seller who is now no longer interested in any such adjustments.

The worst situation is when the buyer is informed that expulsion proceedings had been initiated by the society against the seller for unpaid maintenance dues. There are instances where the seller may no longer be technically in the position to sell the flat.

Loan logic
In several resale transactions, the seller asks for a substantial amount at the agreement signing stage but is reluctant to provide the original agreement. Naive, trusting buyers often overlook this and end up paying a hefty price for their innocence in the long run. The reason why the original document is never shown, is because the flat has been mortgaged to a bank or financial institution and a substantial part of the loan repayment is still pending.

In some cases, the loan is repaid with the amount provided by the buyer and the transaction goes through, albeit with considerable delays. In other situations, the buyer finds that the seller is unable to prepay the loan or expedite the process of transferring the loan to him. The token money paid, initial expenses incurred for raising a home loan are all to be simply written off.

There are even certain instances when a flat is sold to multiple buyers or mortgaged to several institutions using forged documents. As a buyer, you will have to bear the brunt of even these manipulations.

Crisis scenario
Leave and License is a highly popular way of letting out flats in Mumbai. However, not many flat owners take sufficient precautions to ensure that the house is not effectively taken over on ‘long lease’ or sold off to a third party without their knowledge.

Most people who give a flat on leave and license tend to live far away and cannot check the premises on their own. In such circumstances unless if they have a reliable friend or relative who can visit the premises regularly and confirm who is residing there on a periodic basis, the so called ‘seller’ you have been interacting with may just be a licensee.

There is a constant danger that the licensee will either further sub-let the premises or even worse, represent himself as the true owner and sell it to a third party by forging documents. Worse still, if the actual member has not been interacting with the housing society members on a periodic basis, they may even end up supporting the licensee whom they meet everyday instead of the true owner whom they have not met for five to ten years.

So when it comes to buying a home, play it safe and go in for a direct transaction with a reputed developer. The additional money you pay will provide much-needed peace of mind!

Courtecy:
Vijay Pandya
Published Date:  Sep 15, 2012
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