🏗️ Hidden Clauses in Builder-Buyer Agreements You Must Know

Buying a flat or an apartment in Karnataka, whether in Bengaluru, Mangaluru, or Udupi, involves signing a Builder-Buyer Agreement. While it may seem like a routine step, many such agreements contain hidden clauses that can jeopardize your rights as a homebuyer. These clauses, if unchecked, may lead to legal complications, financial losses, and delayed possession.

Let’s uncover the most common hidden clauses found in builder-buyer agreements in Karnataka and understand how to protect yourself legally.

📜 What is a Builder-Buyer Agreement?

A Builder-Buyer Agreement is a legal contract signed between a developer (builder) and the buyer of a residential unit. It outlines the payment schedule, construction milestones, amenities, possession timelines, and legal remedies.

In Karnataka, such agreements are governed by:

• The Real Estate (Regulation and Development) Act, 2016 (RERA)
• The Indian Contract Act, 1872
• Karnataka Real Estate Rules, 2017

⚠️ Hidden Clauses Every Karnataka Homebuyer Should Watch Out For

⚠️ 1. Ambiguous Possession Clause – A Silent Trap for Homebuyers

One of the most critical yet overlooked clauses in most builder-buyer agreements in Karnataka is the possession timeline clause. While on the surface it may seem acceptable, it is often worded vaguely to give the builder a legal escape route in case of delays.

📄 What the Clause Usually Says:

“The possession of the apartment shall be delivered within 36 months from the date of agreement, subject to force majeure and other conditions.”

🚨 Why This is a Problem:

• No specific date is mentioned — only a time period (e.g., 36 months).
• The phrase "subject to conditions" is undefined, which leaves room for the builder to interpret it however they wish.
• Builders often invoke force majeure or “unforeseen delays” to extend the possession date without paying penalties.
• Many buyers assume possession will be timely, but they are legally powerless when the builder claims exemption due to these vague conditions.

⚖️ What the Law Says – Karnataka RERA Protection

Under Section 18(1) of the Real Estate (Regulation and Development) Act, 2016 (RERA):

“If the promoter fails to complete or is unable to give possession of an apartment in accordance with the terms of the agreement for sale, the allottee has the option to withdraw from the project and is entitled to receive the entire amount paid along with interest at the prescribed rate.”

In Karnataka, the prescribed interest rate is the State Bank of India’s Marginal Cost of Lending Rate (MCLR) + 2%.

So, if the possession is delayed without a justifiable reason, the builder is liable to pay interest or refund the entire amount — but this is only enforceable when a clear, specific possession date is mentioned in the agreement.

✅ What a Buyer-Friendly Clause Should Say:

Here’s a legally sound, buyer-protective clause you should negotiate and insert in your builder agreement:

“The builder shall complete construction and hand over possession of the apartment to the buyer on or before 30th June 2026, subject only to genuine force majeure events as defined under RERA. In case of any delay beyond this date (including the grace period of 90 days), the builder shall be liable to pay interest at the rate of SBI MCLR + 2% on the total amount paid by the buyer, until the date of actual possession.”

⚠️ 2. Force Majeure Clause (Overextended)

Another commonly abused clause in builder-buyer agreements is the Force Majeure clause. While the purpose of this clause is to protect both parties from liabilities arising out of uncontrollable and unforeseeable events, many builders overextend its definition to shield themselves from accountability for avoidable delays.

🔍 What Builders Typically Include:

Builders often define force majeure to include:

• Labour unrest or labour shortage
• Fluctuations in cost of raw materials
• Delays in approval from authorities
• Political disturbances or policy changes
• Supply chain issues

📌 Reality:

Most of these do not qualify as force majeure under Indian law or RERA. These are predictable business risks, and the burden of managing them lies with the builder—not the buyer.

⚖️ What RERA and Courts Recognize as Valid Force Majeure:

Under Section 6 of RERA, force majeure refers to:

"War, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project."

👉 Additionally, government actions such as lockdowns, demolition orders, or legal prohibitions may be considered but not poor planning or internal resource mismanagement.

✅ Safe, RERA-Compliant Clause You Should Ask For:

“The builder shall be entitled to an extension of the possession date only in the event of genuine force majeure events such as natural disasters (earthquake, flood, cyclone), war, or government-imposed restrictions which materially prevent construction. Any other form of delay, including shortage of labour, price escalation of materials, or internal financial difficulties, shall not be considered force majeure and shall attract delay penalties as per RERA.”

⚠️ 3. One-Sided Termination Clause

In many builder-buyer agreements, the termination clause is heavily skewed in favour of the builder. These agreements often state that if the buyer misses even a single payment milestone, the builder has the right to terminate the agreement and forfeit the booking amount or other payments made.

📌 Why this is unfair:

While the builder reserves the right to cancel the agreement for minor buyer defaults, there is no reciprocal clause allowing the buyer to terminate the agreement and seek a full refund in case of construction delays, non-compliance, or material changes in the project.

⚖️ Legal Position:

Such one-sided clauses are not compliant with RERA and can be challenged as unfair trade practices. Under Section 18 of the Real Estate (Regulation and Development) Act, 2016, the buyer has the right to:

• Withdraw from the project if there is a delay or default by the builder
• Receive a full refund along with interest

✅ What to Ensure in Your Agreement:

“In case of default by either party, the agreement may be terminated only after written notice and a reasonable cure period (e.g., 30 days). The builder may not forfeit any amount without justification. The buyer shall also have the right to terminate and claim a refund with interest in case of delay, non-delivery, or violation of project specifications.”

⚠️ 4. Pre-Possession Maintenance Charges

In Karnataka, it is common for builders to demand advance maintenance charges or a corpus fund even before handing over the Occupancy Certificate (OC) or offering legal possession of the apartment.

📌 Problem:

Without a valid OC, the flat is not legally fit for occupation. Charging maintenance before this stage means the buyer is being forced to pay for a service (like upkeep of common areas, security, lift, water, etc.) before they have any legal right to use or occupy the property.

⚖️ Legal Position in Karnataka:

As per:

• Section 11(4)(g) of the RERA Act,
• Karnataka Apartment Ownership Act, 1972, and
• Relevant Karnataka RERA rules,

👉 Maintenance charges are payable only after:

1. OC is issued, and
2. Possession is offered or taken by the buyer

Until then, the responsibility of maintenance lies with the builder.

✅ What to Ensure:

“The buyer shall not be liable to pay any maintenance charges or corpus fund until the builder obtains the Occupancy Certificate (OC) and formally offers possession of the unit in writing. Any such charges collected in advance shall be adjusted or refunded.”

⚠️ 5. Carpet Area Variations and Misleading Terms

Many builder-buyer agreements contain a clause that allows the builder to alter the carpet area usually up to 5% variation and charge the buyer for the increased area. Buyers often discover this only at the time of final payment or registration.

📌 Red flag:

Such variations are often introduced without consent or justification and can significantly increase the total cost. This practice is misleading if the term "carpet area" is not clearly defined or RERA-compliant.

⚖️ Legal Position:

Under Section 2(k) of the Real Estate (Regulation and Development) Act, 2016, carpet area is strictly defined as:

“The net usable floor area of an apartment, excluding the area covered by external walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace area.”

👉 Builders cannot arbitrarily change this area or impose extra charges without providing a basis and adjustment.

✅ What to Demand in the Agreement:

“The total consideration is based on the RERA-defined carpet area. Any increase in carpet area beyond 3% shall require written consent of the buyer. In case of any deviation, the price shall be adjusted on a pro-rata basis, and any excess payment shall be refunded within 60 days with interest.”

⚠️ 6. Escalation in Cost Clauses

Many builder-buyer agreements contain a clause like:

“The price may be revised based on cost inflation, changes in government policy, taxation, or other unforeseen circumstances.”

📌 Loophole:

This open-ended clause gives the builder unchecked power to increase the total cost of the apartment after the agreement is signed, without requiring the buyer’s consent. It can result in surprise charges at the time of final payment or possession—sometimes running into lakhs of rupees.

🔍 Common Escalation Tactics Used by Builders:

• Claiming increase in cost of raw materials like steel, cement, etc.
• Levying additional charges due to policy changes or environmental compliance
• Introducing new amenity or infrastructure charges mid-way through construction
• Recalculating cost based on change in carpet area

⚖️ Legal Viewpoint:

Under Section 13 of the RERA Act, the builder cannot alter the price of the apartment once the agreement for sale is signed, unless such escalation is:

• Specifically agreed to by the buyer in writing, and
• Backed by documentary evidence justifying the increase (e.g., new government levies)

Any arbitrary or unilateral price hike is unenforceable under RERA.

✅ Tip: Insist on a Price Freeze Clause

Ask for this protective clause in your agreement:

“The total consideration amount agreed herein is final and fixed. No escalation in price shall be permitted on any ground, including increase in input costs, unless arising from a change in statutory taxes or levies imposed by the government after the date of this agreement.”

⚠️ 7. Waiver of Legal Rights Clauses

One of the most deceptive tricks builders use is hiding waiver clauses in the fine print of the agreement. These may read:

“The buyer waives the right to initiate any legal proceedings or claim compensation in respect of delays, changes in layout, or quality issues.”

📌 Why this is a serious issue:

Such clauses attempt to strip buyers of their legal remedies, even when the builder fails to meet essential contractual or statutory obligations.

⚖️ Legal Position Under RERA:

As per the Real Estate (Regulation and Development) Act, 2016, statutory rights cannot be waived by a private agreement. Even if a buyer signs such a clause, it has no legal effect.

👉 This has been upheld in various consumer court decisions where buyers successfully challenged such clauses as void and unenforceable under Indian contract law and RERA.

✅ What to Do:

• Strike out any clause that mentions the buyer waives rights, relinquishes compensation, or agrees not to pursue legal action.
• Insist that the agreement acknowledges the buyer’s rights under:
• Section 18 (right to refund/interest on delay)
• Section 31 (right to file complaint)
• Section 14(3) (defect liability for 5 years)

✍️ Suggested protective clause:

“Nothing in this agreement shall be deemed to waive or restrict the statutory rights of the buyer under the RERA Act, 2016, or any applicable laws.”

⚠️ 8. Dispute Resolution and Jurisdiction Clauses

Some builder agreements include jurisdiction clauses like:

“All disputes arising out of this agreement shall be subject to the courts of Mumbai/Delhi/Chennai only.”

📌 Why this matters:

This can burden Karnataka buyers with travel and legal expenses, especially if the property is located in Mangaluru, Udupi, Bengaluru, or any other city within Karnataka. This clause intentionally creates a disadvantage by keeping the legal forum far from the buyer's location.

⚖️ What the Law Says:

• Under the Indian Contract Act, 1872, and RERA, the jurisdiction clause must be reasonable and logical.
• Courts have ruled that jurisdiction must lie where:
• The property is situated, or
• The agreement was signed or executed

➡️ In the case of property in Karnataka, buyers can rightfully file complaints or suits in Karnataka RERA Authority, or local civil/consumer courts.

✅ What to Ensure:

“All disputes shall be subject to the jurisdiction of courts or RERA authority where the property is situated or where the agreement has been executed.”

🔎 Pro Tip: Buyers in Karnataka should never agree to exclusive jurisdiction outside the state, especially when both the project and buyer are located in Karnataka.

🧾 Sample Clauses – Before & After

❌ Problematic Clause:

“The builder shall attempt to complete construction within 3 years. However, in case of unforeseen circumstances, the timeline may be extended without liability.”

✅ Suggested Revision:

“The builder shall hand over possession by 30/06/2026. Any delay beyond a grace period of 90 days shall attract interest @ SBI MCLR + 2% as per RERA Karnataka Rule 18(1).”

🛡️ How to Protect Yourself in Karnataka

✅ 1. Always demand a RERA-registered agreement

Verify the builder’s project and agreement on the K-RERA website.

✅ 2. Get the agreement reviewed by a property lawyer

Hidden clauses are often buried in legal jargon. The Services we offer include a detailed contract review to protect buyer's interests.

✅ 3. Check for these key documents:

• OC (Occupancy Certificate)
• Completion Certificate
• Approved Building Plan
• RERA Registration Number
• Sale deed draft and payment schedule

📌 Legal Remedies for Buyers in Karnataka

• File a complaint with Karnataka RERA Authority under Section 31 for:
• Delayed possession
• Misleading terms
• Forfeiture without cause
• Approach Consumer Forum for deficiency in service
• Civil suit for breach of contract if required 

🌐 Understanding the Karnataka RERA Website

(https://rera.karnataka.gov.in)

The Karnataka Real Estate Regulatory Authority (RERA) website is a crucial tool for homebuyers, builders, and agents involved in real estate transactions in Karnataka. It promotes transparency, accountability, and timely delivery of real estate projects.

🔍 What You Can Do on the Karnataka RERA Portal

Here are the top features and services available to buyers:

1. ✅ Search Registered Projects

• Use the “Projects” tab to search for any real estate project by name, builder, or location.
• View details like:
• RERA registration number
• Project layout plan, approved documents
• Date of possession promised
• Status of completion
• Legal complaints (if any)

📌 Why it matters: This helps you verify whether a project is legally registered and compliant under RERA before you invest.

2. ✅ Search Registered Builders / Promoters

• Under the “Promoters” section, search by builder name.
• Check if the builder has:
• Valid registration
• History of previous projects
• Any penalties or violations

📌 Helps in identifying reliable and law-abiding builders.

3. ✅ File a Complaint Online

• The “Complaints” tab lets you:
• Register a grievance against a builder or agent
• Upload documents and evidence
• Track status of your complaint

📌 Under Section 31 of RERA, any aggrieved buyer can file a complaint online for project delay, unfair clauses, or quality issues.

4. ✅ Download Legal Documents

• Projects usually upload:
• Commencement certificates
• Approved building plans
• Title documents
• OC/CC status
• Agreement formats

📌 You can compare the agreement terms provided to you with the one uploaded on the portal to check for tampering.

5. ✅ Check Agent Registrations

• Real estate agents must also register under RERA.
• This ensures that only verified agents are allowed to broker deals in registered projects.

🎯 Why Karnataka RERA Portal Is Important

✅ Helps in avoiding fraudulent builders and illegal layouts

✅ Ensures your flat or plot is part of a lawfully approved and monitored project

✅ Provides a platform for dispute redressal

✅ Encourages timely possession and transparency

📝 Conclusion

Buying a home is one of the most significant investments in one’s life but hidden clauses in builder-buyer agreements can turn it into a legal and financial nightmare. In Karnataka, while RERA has brought much-needed transparency, many agreements still contain clauses that unfairly favor the builder at the buyer’s expense. From vague force majeure provisions to unlawful cost escalations and jurisdiction traps, these hidden terms can severely compromise your rights.

It is essential to read every line of your sale agreement carefully, get it vetted by a legal expert, and verify the project details on the Karnataka RERA website. An informed buyer is an empowered buyer never sign blindly, and don’t hesitate to negotiate or strike out unfair clauses. Legal awareness today can save you years of distress tomorrow.