Real Estate Misrepresentation in India: Legal Remedies, Consumer Rights and Rescission
Misrepresentation in Legal Purview
- Real estate is often one of the most significant investments individuals make. Unfortunately, misinformation or deliberate misrepresentation by sellers or developers can jeopardize this investment, causing financial loss, legal disputes, or emotional distress. In many property-related matters, there are cases where false or misleading information is given about the title of the property. This can be in the form of concealing facts such as whether the property has any legal disputes, loans, encumbrances, or incomplete/unclear ownership details.
- Misrepresentation refers to a false or misleading statement that induces another party to enter into a contract they otherwise would not have. In property deals, this can range from unregistered titles and pending litigation to promised amenities that are never delivered. Often, the buyer is unaware of these facts and trusts the seller, which later leads to significant problems. This kind of act affects the whole transaction, because the buyer's consent was not free or fully informed.
- Misrepresentation is always done to influence or persuade the other party to take a decision that would not have been taken if there were no such act of misrepresentation. It is done to deceive someone for personal gain. Remedies are available under various laws depending on the scenario and facts of the case.
- According to section 18 of the Indian Contract Act, 1872, 'misrepresentation' means the positive assertion that is false but is presented as accurate to deceive the party. It occurs when one party makes a false statement, whether deliberately (fraudulent), negligently, or innocently, that influences the other party's decision to enter the contract.
- When misled, the buyer's consent is not considered "free and informed" under section 19 of the Indian Contract Act. 1872. The contract becomes voidable, meaning the buyer can choose to rescind it. Compensation may be sought if the investor suffered financial loss. Even buyers misled innocently can get relief, making this protection broad-ranging. Sections 18 and 19 of the Indian Contract Act empower buyers to rescind contracts and claim compensation under section 73. Section 20 deems consent invalid if induced by a mistake of the parties.
RERA (Real Estate Regulation and Development Act, 2016)
- Overview: This Act was enacted to make the real estate sector more transparent and to protect the interests of buyers. It outlines the rights and duties of both sellers and buyers. If a builder makes any kind of false promise or conceals essential facts about the property, project approval, layout, or facilities, it is considered misrepresentation under the Real Estate Act. There are many cases where buyers are promised facilities that are never provided, or they are provided with a different construction than what they were shown. RERA ensures that such actions are punished and that buyers get justice.
- Complaint with RERA: To file a complaint with RERA, it is essential to collect all relevant documents, including the property agreement, supporting papers, brochures, payment slips, and any other materials that can prove the promises made and the actual delivery. The complaint can be submitted in written format or through the RERA's online portal with the prescribed fees. The complaint should specify the misrepresentation or issue, including the actual instance where fraud and misrepresentation occurred. Once the complaint is submitted, RERA inquires into the matter and takes strict action.
- Some Punishments under the Real Estate Act
- It can impose fines on the builder,
- Cancel their registration, and
- Order compensation for the buyer.
- In some cases, the penalty can be up to 5% of the project cost payable to the allottee, and in other instances, imprisonment up to 3 years or a fine up to 10% of the project cost; as outlined under sections 60, 61, 63, and 64 of the Act.
Liabilities under Different Laws
- Criminal Liability under IPC/BNS: If the misrepresentation is intentional and done to cheat the buyer, then it can also be treated as a criminal offence. The Indian Penal Code (IPC) has certain sections that apply in such situations. Section 415 deals with cheating, and section 420 deals with cheating and dishonestly inducing the delivery of property. Sections 463 to 465, which relate to forgery, apply if the document used turns out to be forged. BNS has covered the provisions of cheating and dishonestly inducing the delivery of property under section 318. Forgery-related offences are covered under sections 336 and 338 of the BNS.
- Civil Remedy under Specific Relief Act, 1963: If the buyer prefers not to pursue criminal action and instead wants the terms of the agreement fulfilled, they can avail themselves of civil remedies. Under the Specific Relief Act, 1963, the buyer can seek an order for specific performance of the contract. This means the seller will be ordered by the court to follow the terms of the agreement exactly as agreed. This remedy is helpful in property matters where just compensation is not enough, and the buyer seeks the actual property or service as promised.
- Consumer Rights in Real Estate: Under the Consumer Protection Act, 2019, real estate buyers are legally recognized as consumers. This means if a builder or developer delivers false information or fails to deliver what was promised (such as possession, amenities, or a clear title), the buyer can file a consumer complaint and seek compensation, a refund, or corrective action. The Supreme Court of India has confirmed in several rulings that homebuyers fall within the ambit of "consumers," making real estate transactions subject to consumer law, especially when there is misrepresentation or deficiency in service.
Conclusion
Real estate misrepresentation is a serious legal and financial risk, but over time, buyers have been provided with protection under the law. Whether you are misled about a property's title, approvals, or features, Indian law provides remedies, reliefs, and penalties under consumer, civil, and criminal laws. The Real Estate (Regulation and Development) Act, 2016, the Consumer Protection Act, 1986, the Indian Contract Act, 1872, the Specific Relief Act, 1963, the Indian Penal Code, 1860, and the Bhartiya Nyaya Sanhita, 2023, are the key legislations to protect your rights and put a check on misrepresentation by the builders and the agents. To know more, contact us.
