Is your agreement registered
2) if so builder could not have mortgaged your flat
3) you would get priority as far as your flat is concerned
Does bank have priority over buyer of property
I have enetered a sale and purchase agreement with builder. At that time no mortgage on the property. Subsequently the builder mortgaged the entire complex with bank. There was no consent or official notification to the owners. In the event of dispute who get priority to ownership, investor or bank? As my contract with builder precede the mortgage, is mortgage valid? Is there a reference case law. Regards
Asked 3 years ago in Property Law
Religion: Christian
15 Answers
I bought the apartment in construction. Still in contraction phase…land registered in my name but not Apartement. Please give me relevant case Law for clarity
Asked 3 years ago
It is necessary to peruse your agreement to advice
2)inform bank that you have purchased land by registered agreement
3) that mortgage of land is illegal
4) enclose copy of your agreement
It's illegal for the builder to mortgage the property after making a sale agreement with you. You can approach the adjudicating officer of the Real Estate Regulatory Authority (RERA) at Trivandrum and file a complaint against the builder. Ownership cannot be transferred to the buyer for a mortgaged property. In case of non-payment of loan the banks may take possession of the property. You may contact me for further clarifications regarding the matter.
Hello,
- If you had entered into a Registered Sale Agreement with the builder, you would get priority over the bank for your portion of the property as your Agreement precedes that of the bank.
- Even if the Apartment was not registered in your name and the land is, you still have the precedence over the bank.
- It is necessary to peruse the Agreement you have with the builder to form specific opinion and advise you any further as the terms of the Agreement would determine your rights and justify whether the builder could have mortgaged without you being made a party.
Your question is very valid. Mortgage between bank and builder is invalid without notice and consent to the owner. Not only the contract is invalid it is also void as it contravenes Section 23 Indian Contract Act, 1972 therefore against public policy. Challenge the mortgage by builder it will be cancelled.
Dear sir/madam,
without notice, the Mortgage between bank and builder is invalid and consent to the owner. the contract will be invalid as well, it is also void as it contravenes Section 23 Indian Contract Act, 1972 therefore against public policy. you must Challenge the mortgage by the builder, it will be cancelled.
to get the priority of the bank, registration is a must.
You have entered into a sale agreement only hence you cannot be considered as the owner of the property with clear and marketable title to the property.
The subsequent mortgage loan with the bank gives bank full power to recover the loan amount with accrued interest and if the borrower fails to repay the loan amount or interest, then the bank can rightfully sue the borrower and invoke provisions of law to bring the property into auction sale to recover the loan amount.
The person entered into a sale agreement with the owner of the property can file a separate suit for recovery of his advance amount deposited with the owner/vendor in the event the owner/vendor refuses to return the amount.
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A master circular on housing finance issued by the RBI on July 1 has once again reiterated that builders publicly disclose names of the banks they have mortgaged their land and apartments to.
The RBI circular asked banks granting loans for housing projects to ensure that builders or construction companies disclose in pamphlets, brochures and advertisements in newspapers whom they have mortgaged their property to. "The builder will indicate in their pamphlets/brochures that they would provide no objection certificate/permission of the mortgagee bank for sale of flats/property, if required," said the circular.
Builders generally mortgage their land to get construction loans, a fact that most consumers are unaware of when they book flats in such projects.
The money paid by the buyer has to go into the account of the bank from whom the loan has been taken by the builder. In most cases, the builder puts this amount into his own bank account without informing the lender bank. This tantamount to a double sale. Every builder is doing this,"
In fact, the RBI circular has advised banks not to release funds if builders do not comply with this directive. The Bombay High Court had earlier observed that banks granting finance to housing projects should insist on disclosure of the "charge or any other liability on the plot, in the brochure, pamphlets etc., which may be published by developer/ owner inviting public at large to purchase flats and properties". Experts said if the builder defaults in repaying the bank after the flats are sold ..
Ordinarily, approaching the court in case of such defaults by builders would be an intimidating option due to the high cost of long-drawn judicial processes with no definitive guarantee of relief. But the Consumer Dispute Redressal Commission (CDRC), at the district, state and national level, offers a substantially better alternative. In recent cases, the commission has ruled against leading builders and imposed penalties for delays and non-delivery of possession. Moreover, many affected homebuyers are creating registered associations to file their cases before the National CDRC, saving their time and money by going for something akin to a class action suit.
If a construction project has been 'approved' by a bank, the bank can be made a party to the dispute, especially when it has lent construction finance separately to the project. In such cases, the bank can be made a party to the court proceedings. The bank can also claim the home loan debt from the builder as it is essentially two loans on the same asset, one from the bank for construction, pledging the entire project, and another from the consumer who purchases the flat in the same project that the bank has lent to.
For thousands of distressed homebuyers, the government is the last line of hope for some compensation. In the case of Amrapali, Uttar Pradesh Urban Housing Minister Suresh Khanna said, "There are nearly 40,000 homebuyers whose investments are stuck in various Amrapali housing projects.We have decided to give them relief. They will pay the remaining amount only when the builder readies the project for possession." Other affected homebuyers may get similar relief as the disputes continue to attract attention.
An agreement to sell was executed by you with the builder. But subsequently he mortgaged it. The bank has the first charge against the property. Now the property is encumbered and hence you have to take decision based upon this. The bank's claim has to be honoured. You have a choice to purchase the property along with the encumbrance.
If you have already purchased the apartment then you have a claim upon it but the buyer has to be held liable in case of loan default.
Institutional creditor will take precedence ie the bank.
If builder has rights to mortgage the same bank with some written contract with you then bank will have priority. If not then you can sue builder for the said illegal act.
Dear Sir
Both have equal rights because your registered deed might not have reflected in the Encumbrance Register maintained by sub registrar office. If banker got mortgage in its favor knowing about the transaction in your favor then your claim will be preferred.
1. Was your agreement registered?
2. Did you make any payment while entering in to the said sale agreement?
3. If yes, then you already had charge on the said property for which the builder can not mortgage your said property.
4. The Builder has suppressed the fact that charge has already been created on the said property for which it is a bad mortgage.
If your sale agreement has been registered and consideration has been paid for it and the title of the land stands in your name, then the property under construction belongs to you which can not be mortgaged with the Bank without your consent.
- Since, the said builder has already entered into an agreement with you , then without taking the buyers consent , he cannot mortgaged property to the bank.
- Further , in the event of failure of the loan amount , the bank can recover the amount after auctioning the mortgaged property legally without issuing any notice to the buyer .
- Further , if the land is registered in your name , then the builder cannot mortgaged property without your consent.
- You can lodge a compliant with the higher official of the bank and to the Consumer forum .
