Should you trust homebuyers’ associations?

Ravi Sinha

The homebuyers’ associations meant to serve the purpose of consumer grievances are increasingly exceeding their legal and ethical limits to turn into de facto consumer courts.

Noida is definitely not the most happening real estate market in the country by any stretch of imagination. Yet, in terms of the consumer activism and its by-product consumer blackmailing it is by far the most happening market. There are no less than half a dozen homebuyers’ associations that are constantly at war with one another for being the frontrunner in championing the cause of the homebuyers.

Oneupmanship all the way

It has been an ugly spat in front of the Corporate Office of a Noida-based developer one fine morning that has failed to deliver the apartments to thousands of homebuyers. At least three buyers’ associations were jostling against each other to claim they are the official homebuyers’ voice to protest.

While the harassed homebuyers were looking clueless, the core agenda of ‘Justice for Homebuyers’ was lost in the dogfight of these associations. Each buyer association with a handful of slogan-raising supporters were name calling others, terming them outsiders, and glorifying their association as the only representative for the buyers of Amrapali.

Needless to add, in this cacophony the core issue was relegated to the dustbin and each association blamed the other for this lack of cohesiveness and defeat of the cause.

What is the legal standing

This raises a fundamental question as to whether any of these buyers’ associations have any legal right to intervene suo motto and address the grievances of the buyers. The legal opinion is pretty clear on this.

Advocate Aditya Pratap of Bombay High Court says that the homebuyer associations do not have the legal authority of consumer courts to decide disputes. Further, even if the by-laws of these associations contain dispute resolution mechanisms, they cannot bar any person from availing his statutory remedies under the law. If the by-laws of a homebuyer association restrict a member from approaching the courts, it would amount to being an agreement in restraint of legal proceedings, which is void under Section 28 of the Indian Contract Act, 1872.

“While a homebuyer association may publish advertisements inviting consumers to share their grievances and seek advice, it may not serve the purpose as the litigants have to be limited to that particular project in respect of which consumer rights have been violated,” says Aditya.

While class actions are allowed in India, they must conform to the requirements of Section 12(1)(c) of the Consumer Protection Act, 1986. As per Section 12(1)(c) one or more consumers, having the same interest and with permission of District Forum, can file a complaint on behalf of all interested consumers. The definition of the term ‘Consumer’ in Section 2(d) does not include any Association. 

This means that a class action under Section 12(1)(c) can be filed only by all homebuyers together and not through a homebuyers’ association. This has been explained by the NCDRC (National Consumer Disputes Redressal Commission). A reference made to it has held, “No society, firm, association or group of societies can file a complaint under Section 12(1)(c) because the term ‘consumer’ doesn’t include them.”

Therefore, while homebuyers’ associations may be gung-ho about class action consumer complaints, the truth is that they are legally incompetent to file these. No homebuyers’ association can file a class action under 12(1)(c).  

Even when the law of the land does not grant any constitutional teeth to these associations, they thrive with their clout due to cozy relationship with the media. 

Nexus with builders?

But the question is why do the builders entertain them? Is there something more than what meets the eyes? Are these associations proxies of the builders to bail them out? The developers maintain that by and large they too have their own compulsions to entertain what could be called as necessary evil.

Requesting anonymity, a builder in Greater Noida West admits that whenever there is any issue with the buyers, he gets the unsolicited message by one or the other associations. A formal meeting is asked for , which is not meant for understanding the buyers’ concerns or mediating for the common meeting ground but for negotiating on behalf of the association.

“If their demands are met, they withdraw themselves from the issue. They even offer to convince other buyers that the demands were not legitimate and would not sustain the legal scrutiny. But if their demands are not met, a protest and media trial is what we have to face. So, we are left with no choice but to entertain them,” says the builder. The builder’s version is just one part of the story. The experience of the homebuyers suggests some of these associations are definitely the veiled proxies of the builders to shield them and divert attention. The smart builders more often than not use these associations to make inroads in the protesting buyers’ group and break their unity.  

The harassed working class homebuyers looking for someone to represent their grievances, mostly due to lack of time, end up playing into the hands of one or the other associations. The collective consciousness of the homebuyers, more often than not, fails to differentiate legitimate consumer activism of harassed homebuyers and consumer blackmailing of buyers’ associations.

— The writer is CEO, Track2Realty

Reality check

• All homebuyers’ associations are not trustworthy; often self-serving or custodians of the interests of builders
• Homebuyers’ associations are not consumer courts; can only arrange legal help, protest and get media spotlight
• Check the credentials of buyers’ association before approaching them with your grievances
• Financial modeling and people behind the associations indicate genuineness 

Can they get the grievances redressed?

As a matter of fact, some of the buyers’ associations in the city are nowadays openly advertising on the social media to inform which project they are reaching next with date and time mentioned and invite the aggrieved homebuyers to come forward to share their grievances. The fact remains that none of these associations has the locus standi or legal teeth to get the grievances of the consumers redressed.   

Political angle

This is not just the reality in the case of Noida. The real estate markets across the major cities is today witness to a new spate of consumer activism which is more political in its functioning than consumer centric. Worse even, many of them operate as the de facto consumer courts in advising others in how they should take on the builders.