Viewing Apartment Ownership Laws through the lens of Real Estate (Regulation and Development Act, 2016 (RERA)

Introduction

This article is being published during the times, when the Kerala State Government has initiated the process of amending the Kerala Apartment Ownership Act 1983 (KAOA) for short. A high level committee has been constituted to submit recommendations for the amendment of KAOA. The law relating to repugnancy of the provisions of KAOA, with reference to RERA and the possible ways for overcoming the repugnancy, if any, are discussed here.

RERA and the application of the Doctrine of Repugnancy

RERA, unlike  KAOA, has a universal application. The RERA is enacted to ensure efficiency and transparency in the sale of plots, apartments or buildings. Evidently, KAOA occupies the same field over which RERA has been enacted. Hence the doctrine of repugnancy as provided under the Article 254(1) of the Constitution of India would apply. The nature and extend of its impact needs to be looked into.

View of the Apex Court on Repugnancy with reference to RERA

In the judgment of the Apex Court in Forum for People’s Collective Efforts (FPCE) vs. State of West Bengal [WPC 116 of 2019] the question of repugnancy of a state law enacted by the West Bengal legislature with reference to RERA was considered. It was held, that  the  West Bengal Housing Industry Regulation Act, 2017 (WB-HIRA) is repugnant to RERA and hence unconstitutional. The Apex Court clarified that both RERA and WB-HIRA are enacted by virtue of the constitutional mandate contained under Entry 6 & 7 of List 3 (Concurrent List) under Schedule VII  of the Constitution of India.

Necessarily it follows that KAOA enacted with the object of providing exclusive ownership over individual apartment and making such apartment heritable and transferable property, and mandating the execution and registration of a declaration for the application of the Act, would derive the legislative competence from Entry 6 & 7 of List 3 of Schedule VII (Concurrent List) of the Constitution of India. Hence the provisions of KAOA require to pass the test of repugnancy prescribed by the Hon’ble Supreme Court, as provided in the above judgement, following the enactment of the central legislation, RERA.

Tests of Repugnancy

The Apex Court has enunciated the following tests of Repugnancy in a series of its judgements:

1. There may be a direct inconsistency or conflict between the actual terms of the competent statutes;
2. Even if there is no direct conflict, where Parliament has intended to occupy the entire field by enacting an exhaustive  or complete code, the state law in the same field would repugnant and inoperative ; and
3. A conflict may arise whether the state legislature has sought to exercise its powers over the same subject matter as legislation by the parliament.

Operation of KAOA preserved under RERA

KAOA and RERA does not come into direct conflict, as the operation of the former is preserved to a large extend by Section 88, 89 and through the usage of the phrase ‘in the absence of any local law’ in Section 11(4) (e) and Section 17 of RERA. These provisions are extracted below.

“Section 88 –The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.” 

“Section 89 : The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”

Section 11(4) of RERA – The promoter shall—

(e) enable the formation of an association or society or co-operative society, as the case may be, of the allottees, or a federation of the same, under the laws applicable:

Provided that in the absence of local laws, the association of allottees, by whatever name called, shall be formed within a period of three months of the majority of allottees having booked their plot or apartment or building, as the case may be, in the project;

Section 17 (1) of RERA – The promoter shall execute a registered conveyance deed in favour of the allottee along with the undivided proportionate title in the common areas to the association of the allottees or the competent authority, as the case may be, and hand over the physical possession of the plot, apartment of building, as the case may be, to the allottees and the common areas to the association of the allottees or the competent authority, as the case may be, in a real estate project, and the other title documents pertaining thereto within specified period as per sanctioned plans as provided under the local laws:

Provided that, in the absence of any local law, conveyance deed in favour of the allottee or the association of the allottees or the competent authority, as the case may be, under this section shall be carried out by the promoter within three months from date of issue of occupancy certificate.

A closer look at the term ‘in the absence of any local law‘ contained in the proviso to Section 11(4)(e) and Section 17(1) of RERA and KAOA, is sufficient to conclude that the latter is one of such local law. Moreover, Clause 20 of Annexure to the K RERA Rules 2018, is another tool to conclude that the local law intended in RERA is KAOA for the State of Kerala. The Annexure is a statutory form of the ‘agreement for sale’ referred in Section 13 of RERA and Rule 10 of the K RERA Rules 2018. Hence, while KAOA is preserved in RERA, a conflict is not expected between these two laws.

The Conflict with RERA

Section 2 of KAOA ideals with Application of the Act. The same is extracted for an easy reference

2. Application of the Act. – This Act applies only to property, the sole owner or all of the owners of which submit the same to the provisions of this Act by duly executing and registering a declaration as hereinafter provided:

Provided that no property shall be submitted to the provisions of this Act, unless it is mainly used, or proposed to be used, for residential purposes.

A closer reading of the above provision, would go to show that the application of the Act, in dependent on the Sole Owner or all the Owners exacting and registering a declaration, as prescribed under the Act. The Sole Owner referred here is the Promoter and All the Owners would mean the Apartment Owners, after the sale to them. Hence, KAOA has a limited and conditional application.

On the other hand RERA applies to not only apartment but also plots and buildings as well. While it apply to these three types of real estate properties, there is no requirement for any of the stake holders to take any positive move for its implementation. Hence, elements of repugnancy or conflict can be traced, in the provisions regarding Application of the Act. Hence the repugnancy of Section 2 of KAOA, with reference to RERA is evident.

Repugnancy of Section 2 of KAOA with RERA

A comparative table regarding the features of KAOA and RERA would be helpful to understand the nature of repugnancy of of the former

Kerala Apartment Ownership Act (KAOA)	Real Estate (Regulation and Development) Act 2016 (RERA)
Enacted by the Kerala State Legislature	Enacted by the Parliament
The source of power to legislate can be traced from Entry 6 and 7 of List III (Concurrent List) of Schedule VII	The source of power to legislate can be traced from Entry 6 and 7 of List III (Concurrent List) of Schedule VII
Application of the Act is dependent upon the Sole owner or all the owners executing and registering a Declaration submitting the property to the provisions of KAOA	Has a universal application
Operates in the same field as that of the RERA	Even though both the laws operate in the same field.  The operation of KAOA is preserved in RERA
Special statute to regulate the common area management of condominium-type of Apartment Buildings	General statute dealing with all types of real estate property, including condominium and cooperative types of real estate buildings.
Regulates the Apartments in a building to be owned by Apartment Owners.	Regulate the sale of Plots, Apartments or Buildings
Ensure exclusive ownership over the Apartment	Ensures exclusive ownership over Plots, Apartments or Buildings
The proportionate undivided title over the common areas is to be vested with the Apartment Owner	The proportionate undivided title and possession to be conveyed to the Association of Allottees
The right of the Apartment Owners Association is to manage the common properties provided in the Declaration, following the Bylaws	The Association of Allottees to have exclusive ownership and possession over the common areas.

A perusal of the above comparative table would go to show that the except for the application of the respective statute, they occupy the same field. But for the accommodation, by persevering application of local laws provided by RERA, the operation of KAOA would have been impossible. The RERA was enacted with the intention of co-existing with the KAOA, however Section 2 of the latter operates in a self destructive manner, through its limited and conditional application. Hence, Section 2 of KAOA is repugnant to the provisions of RERA and hence the same is void and unconstitutional.

Legal Solutions to overcome the constitutional challenge to Section 2 of KAOA

The resolution for the problem identified here, is possible through the application of Section 27 of KAOA itself. The repugnant Section 2 of KAOA is stumbling block in its implementation, in the State. It assumes the characteristic of a difficulty, as provided in Section 27 KAOA. The Government, however, is given the power to remove the difficulty. Section 27 is extracted for an easy reference:

Section 27 of KAOA “(1) If any difficulty arises in giving effect to the provisions of this Act, the Government may, as occasion may require, by order, do anything not inconsistent with the provisions of the Act which appear to them necessary or proper for the purpose of removing the difficulty.

(2) Every order issued under sub-section (1) shall be laid, as soon as may be after it is issued before the Legislative Assembly while it is in session for a total period of fourteen days which may be comprised in one session or in two successive sessions, and if, before the expiry of the session in which it is so laid or the session immediately following, the Legislative Assembly makes any modifications in the order or decides that the order should not be issued, the order shall thereafter have effect only in such modified form on be of no effect, as the case may be; so however that any such modification or annulment shall be without prejudice to the validity of anything done or omitted to be done under that order.

The Government may, therefore, exercise its powers under Section 27 of KAOA, to issue necessary orders, making the provisions of the KAOA, universally applicable. The order may mandate that the promoters of the apartment building, intended to be owned by apartment owners, execute and register declarations, before the sale of the apartments to the individual apartment owners.  Such an order may help the apartment owners to enjoy the benefits of KAOA.

While considering any amendment to KAOA, the requirement for obtaining the Presidential Assent is important. Any amendment that may cross the contours of the premise, preserved by RERA, would fall to the trap of repugnancy. Given the legal framework, the scope for a state legislation is limited to Condominium type of Apartment Buildings, only.