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Actions one can take against malpractices of real estate agents

June 26, 2021
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This article has been written by Saurabh, pursuing a Certificate Course in Real Estate Laws from LawSikho.

Introduction

As we know, the real estate sector is a very big sector and has a huge potential to increase and decrease the economy of any country. In India, before RERA came into the picture the real estate sector was unregulated, also biased towards the builders and developers and the home buyers have no such place to file a complaint against fraud or negligence. Many times, there come some cases where home buyers or purchasers need to vacate their home due to the builder’s negligence or mistake of not getting said approvals from the state government and the buyers have to leave their home in which they were living for decades or more. Many home buyers remain clueless about where to go to get justice and after all these, fraud or wrongdoing if some home buyers have courage, and they file a complaint, it takes years to get justice, till that they cannot do anything. However, to protect home buyers from the malpractices of the builders, the RERA Act, 2016 was introduced. RERA stands for Real Estate Regulatory Authority, it is the act that brings transparency and accountability to this sector. The main aim of this act is to make fair trade of properties between home buyers and builders.

Also, homebuyers can now approach RERA authority in any dispute related to the real estate sector as RERA gives hope for faster results because it only deals with real estate matters and it is consumer-friendly as well which will altogether benefit a home buyer. Since the RERA Act was passed, we have stringent provisions in place due to which the percentage of fraud and malpractices of real estate agents and builders is less as compared to before. The article reflects on the role of real estate agents, different malpractices that they can be involved in, and what actions can be taken against these wrongdoings.

Who is a real estate agent?

Real estate agents are defined in Section 2(zm) of the RERA act. In other words, they can be defined as, a professional person, who helps either a buyer to buy a home or a piece of property or a seller to sell homes and other properties. 

Altogether we can say that a real estate agent is a very important part of the real estate sector and a very important person between a buyer and a seller when it comes to negotiations. The job of a real estate agent is very good if you have great convincing skills and if you are loyal to your client. 

In India, a person must be registered with the RERA authority before performing their role as the real estate agent and the registration of the real estate agent is described in Section 9 of the RERA Act. One who wants to register himself/herself as a real estate agent must fill the application form and submit it to the competent authority with all the necessary details and documents mentioned in the form and after all the process he/she shall be given the license and become a professional real estate agent.

Also, if a real estate agent or broker does not register to the Authority and perform any sale or buy of property in a real estate project, and the project is registered under section 3 of the act, then that person shall be liable to the penalty under Section 62 of RERA Act and have to pay rupees ten thousand from the date of default. It can be extended up to 5% of the cost of the property that was sold or purchased by the real estate agent or the broker as determined by the authority.

Different types of malpractices done by real estate agents

Initially, before 2016 when the RERA act was not present, and hence the involvement of real estate agents or brokers in illegal acts and corruptions and was highly prevalent but now the RERA act has come up with rules and regulations to keep such actions in check and also achieve transparency so that any real estate agent or broker cannot deceive consumers or homebuyers. But there are some of the general illegal acts which are still done by the real estate agents or brokers which need to be watched by the consumers before purchasing any piece of property or home.

  1. Misrepresentation:- This is the most common practice done by real estate agents. In this type of malpractice, they do not give some important information about the property which they should have given but there is no intention to deceive. This is the basic difference between fraud and misrepresentation.
  2. Fraud:- In this type of activity, the real estate agents with the intention to deceive do not disclose information or intentionally give false information about the property.

Example:- There is a person ‘A’ who hires a real estate agent to find land which Mr. A wants to buy. The agent with bad intentions to deceive Mr. A takes him to an empty land and tells him that Mr. A can buy this land. So, Mr. A gives token money to the agent to start further proceedings, and the agent then suddenly disappears, this is a clear case of fraud. Some other examples are when a real estate agent intentionally gives false information about a property like the size of the property and other false title rights.

3. Negligence in performing fiduciary duties:The most important duty of a real estate agent is, to be honest in his work and act as he is performing the work for himself. The real estate agent is hired on trust as the person hiring him so that the agent should acts as a proxy for their client by making the best decisions for the client, giving the right information about the property without any bad intentions.

Negligence occurs when a real estate agent does any of the following:

4. Wrongfully inducing to buy or book or sell a property:- In these cases, a real estate agent wrongfully induces a client to buy or sell a property. For example, if a person Mr. A hires a real estate agent to help him in selling his property. The real estate agent finds a customer who is interested in the property but the customers have some specific criteria about the size of the property, to match the criteria of the customer the real estate agent intentionally does some changes in the documents of Mr. A to meet the criteria of the customer and wrongfully induces Mr. A to sell the property. These types of acts are illegal.

These are some common types of illegal acts done by real estate agents. Now, the question arises;

 Is there any action that can be taken against these malpractices? The answer is yes.

Types of actions taken against the malpractices of real estate agent

To tackle against the wrongdoings of the real estate agent, the homebuyers or anyone who gets damage due to wrongdoings of real estate agent hired by him can take the following actions:- 

The Authority or the Adjudicating officer shall impose the penalty or interest if there is any contravention of obligations cast upon any promoter or developer or real estate agent. 

This is one of the first steps which any aggrieved person should take against a real estate agent in any case of fraud or negligence or any other illegal act done by a real estate agent due to which the person suffered any loss. Before 2016, this remedy was not available to the aggrieved person and they had to approach the court to get justice but now the person who has suffered any loss due to fault of any promoter or developer or real estate agent can get compensation more easily and timely then going to the court.

Mr. A can file a case in Consumer Forum only if he is purchasing the house for living purpose and not for any commercial or reselling purpose as it is cleared defined in Section 7(ii) that if the services availed are for commercial purpose or reselling purpose then the person will not fall in the category of ‘Consumer’ under the Act.

The aggrieved person should be well aware of where he/she should go and what remedies they are expecting, also it is not barred by any law that if a person has filed a complaint in Consumer Forum then he cannot go to RERA Authority, but the person should be very specific about what type of remedy he is seeking from these Authorities.

Conclusion

In conclusion, we can say that there are many options available for the aggrieved person where he can get justice and claim remedies against the negligence and malpractices of real estate agents or promoters or developers. But it is the duty of the person who is hiring or dealing with anyone that he should take proper care and caution before trusting, especially against a real estate agent. Also, it does not mean that all the real estate agents are involved in malpractices as it cannot be denied that real estate agents are a very important part of the real estate sector. The job of a real estate agent is not an easy task to carry out. Staying cautious as a consumer is also important. One should have good knowledge about the local laws and should not be hesitant in taking legal action against agents who deceive them. The RERA has come like a boon to the consumers and now that we have the provisions in place, its proper implementation must be assured. 


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