STEP-IN RIGHTS
A contractual right granted by one party to another party that allows the second party to
step in and take over performance of the first party's obligations.
The right is normally triggered by similar circumstances that would often give rise to a
termination (such as non-performance or an unremedied breach of the contract). The
purpose of a step-in right is to give a party that is procuring a service or undertaking
certain obligation in favour of another party an extra option that falls short of termination
and which ensures continuity of service or performance of the relevant obligation while
the party remedies the default
THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016
Important sections regarding step in rights:
Section 8.
Obligation of Authority consequent upon lapse of or on revocation of
registration.—
Upon lapse of the registration or on revocation of the registration under this Act, the
Authority, may consult the appropriate Government to take such action as it may deem
fit including the carrying out of the remaining development works by competent
authority or by the association of allottees or in any other manner, as may be
determined by the Authority:
Provided that no direction, decision or order of the Authority under this section shall take
effect until the expiry of the period of appeal provided under the provisions of this Act:
Provided further that in case of revocation of registration of a project under this Act, the
association of allottees shall have the first right of refusal for carrying out of the
remaining development works.
(the right of step in is triggered here due to circumstances and it hence in not done
voluntarily)
Section 15.1
Obligations of promoter in case of transfer of a real estate project to a third
party.
(1) The promoter shall not transfer or assign his majority rights and liabilities in respect
of a real estate project to a third party without obtaining prior written consent from two-
third allottees, except the promoter, and without the prior written approval of the
Authority:
Provided that such transfer or assignment shall not affect the allotment or sale of the
apartments, plots or buildings as the case may be, in the real estate project made by the
erstwhile promoter.
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Explanation.— For the purpose of this sub-section, the allottee, irrespective of the
number of apartments or plots, as the case may be, booked by him or booked in the
name of his family, or in the case of other persons such as companies or firms or any
association of individuals, by whatever name called, booked in its name or booked in the
name of its associated entities or related enterprises, shall be considered as one allottee
only.
(2) On the transfer or assignment being permitted by the allottees and the Authority
under sub-section (1), the intending promoter shall be required to independently comply
with all the pending obligations under the provisions of this Act or the rules and
regulations made thereunder, and the pending obligations as per the agreement for sale
entered into by the erstwhile promoter with the allottees:
Provided that any transfer or assignment permitted under provisions of this section shall
not result in extension of time to the intending promoter to complete the real estate
project and he shall be required to comply with all the pending obligations of the
erstwhile promoter, and in case of default, such intending promoter shall be liable to the
consequences of breach or delay, as the case may be, as provided under this Act or the
rules and regulations made thereunder.
(the right of step in is triggered voluntarily)
PROCEDURE FOR STEP IN2
Common steps:
submit
application + written consent
of 2/3 allottees + necessary can be done online
documents
to RERA authority
Authority passes an order
withing 1 month or a incase of rejection a
resonable time, of either hearing is conducted.
acceptance or rejection.
every state has certain
on acceptance within 7 days,
different procedures
registration details of the
which are specific to
project must be changed.
their state.
State specific rules examples:
1. Maharashtra RERA- a new certification application by a new architect, engineer
and CA to be appointed.
2. Haryana RERA- existing developer must freeze all financial transactions from the
RERA account (ESCROW) upon filing of the application.
3. Uttar Pradesh RERA- Publish a notice in minimum 4 newspapers, a period of 15
days for stakeholders to raise objections.
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CASE STUDY:
1. MAHARERA3
The following is a MahaRERA case which had a third party stepping in to complete the
project initially started by a promoter.
In the case of Tatva Towers, Gitanjali Infratech Ltd. transferred its rights and liabilities of
developing the project to a third party through an agreement. The stalling of the project
resulted in the stepping in of the third party (Laxmi Infra Developers) to complete the
project.
2. UPRERA
The UPRERA has taken leaping steps to ensure that all stalled projects are rehabilitated
and completed so that the allottees are ensured that they will get the possession of their
flats.
1. Jaypee Greens Kalypso Court4
The completion date of the project had lapsed along with the registration of the project.
Hence the promoter and the association of allottees were directed to reconcile by the
authority to complete the project. On reconciliation the promoter submitted a completion
plan which was later approved by the authority.
1. Le Garden Phase 35
The promoter and the association of allottees both intended to complete the project. The
authority directed the promoter to form a viable plan and get it approved from the
committee appointed by the authority. On approval of the plan the association of the
allottees were asked to submit their consent regarding putting the plan into action.
1. Elegant Splendour Phase 16
The promoter defaulted in completing the project in time and submitting the necessary
documents. Although he showed an intention to complete the project. The authority
directed him to submit a completion plan along with the consent of the majority of
allottees. On approval of the plan the project was put into motion again.
1. Rohtas Plumeria Homes7
The registration of the project was revoked due to multiple defaults on the part of the
promoter. The authority therefore had to publish a public notice in the newspaper to
invite the association of allottees to submit a viable plan for the completion of the
project. After seeking the necessary approval it was the responsibility of the association
of allottees to appoint a suitable promoter.
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4
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Examining the above case studies a pattern of procedure followed by the RERA
authorities can be concluded, which proves efficient for directing incomplete projects to
the route of completion.
PROCEDURE FOLLOWED BY RERA IN CASES OF STEP IN BY A THIRD PARTY:
[Link] problem:
Either the registration of the project has lapsed, or the registration of the project has
been revoked by the authority.
[Link] a plan
In case the promoter whose registration has lapsed still wishes to complete the project,
he must prepare a viable plan and submit it to the authority accompanied by consent of
the allottees.
In case of revocation of registration, the authority publishes a public notice in
newspapers inviting submissions of a viable plan from the association of allottees.
[Link] the plan
This submitted plan gets scrutinized by the Project Advisory and Monitoring Committee,
which may suggest any recommendations they deem fit.
[Link] consent
On acceptance of a viable plan the association of allottees are required to pass a
resolution which states explicit consent of at least 50% of the allottees.
( In the case of revocation of registration, the allotees must appoint a promoter to
execute the completion plan. This must be done with transparency)
References :
Tatva Towers case:
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mumbai-builder-of-rs-30-crore/articleshow/[Link]
(registration certificate)
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Kalypso court order
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Le garden Phase 3 order
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Elegant Splendour Phase I and III order
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Rohtas Plumeria Homes
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