Maharashtra Real Estate Regulatory Authority (MahaRERA), vide Circular No. 11/2017 dated November 8, 2017, bearing reference no. MahaRERA/Secy/File No.27 / 491 /2017, prescribed procedure for transferring or assigning promoter’s rights and liabilities to a third party. The circular delineated the procedure in accordance with Section 15 of the Real Estate (Regulation and Development) Act, 2016 (“Act”), which states that, “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”.
On June 4, 2019, MahaRERA issued another circular specifying the revised procedure to be followed for transferring majority rights and liabilities of a promoter in a real estate project to a third party. This circular not only provides the procedure to be followed by a promoter for obtaining approvals from MahaRERA and two-thirds of the allottees, but also specifies certain kinds of transfers that are exempted from the requirement of obtaining the aforesaid approvals.
In addition to the above, MahaRERA issued Circular No. 24/A dated July 23, 2021, bearing reference no. MahaRERA/Secy/File No.27/144/2021, which supersedes Circular No. 11/2017.
Following are the steps/ procedure of the circular(s) explained in detail with the revised MahaRERA changes:
- For the purpose of this section, changes in the (internal) shareholding or constituents of a promoter’s organisation, that doesn’t affect obligations and liabilities with respect to the allottee(s) and the rights and liabilities of the promoter’s organisation, shall not require the aforementioned approvals.
- Any conversion of the promotor entity under any statute, of:
- Partnership Firm into LLP/ Private Limited Company or;
- Conversion of Private Limited Company or unlisted Co. to a LLP or otherwise or;
- Proprietorship change by succession to legal heirs, shall not require the aforementioned approvals.
I. Steps/ procedure in cases where transfer is initiated by the promoter.
- The promoter shall have to apply to MahaRERA with the consent of two-third allottees as on the date of application in the project under consideration, to seek permission to transfer its rights and liabilities to a third party. The third party/ the intending purchaser shall also submit the documents mentioned in Annexure B and Declaration prescribed in Annexure C. Thereafter, the promoter shall have to write to the Secretary, MahaRERA on email@example.com.
- On receipt of such application as stated above, the Secretary shall initiate action through the legal wing, which would take necessary steps to obtain approval of MahaRERA, which may include scheduling a hearing.
- MahaRERA shall thereafter pass an order within 1 (one) month of filing of such application, of either granting approval to such transfer application (with or without such conditions as it may prescribe) or rejecting such application for transfer.
- After receipt of the approval for the transfer from MahaRERA, and thereafter within 7 (seven) days of the transfer, the new promoter shall then apply for necessary corrections in the existing registration details. He shall also upload required supporting documents in its name like land title, building plan approval, etc., upon obtaining the same from time to time. While making such application for correction, the new promoter shall upload on the RERA website, a registered undertaking stating that they shall comply with all the obligations under agreement of sale, executed by the erstwhile promoter with respect to the allottee(s) of the project, and assume all the obligations of the erstwhile promoter under the Act.
II. Steps/ procedure in cases of Amalgamation or Merger of the Companies:
Amalgamation or Merger of the Companies, in which the amalgamating company has one or more of the projects registered under RERA, and which is voluntarily initiated by the promoter, after April 30, 2017, shall be regarded as transfer initiated by the Promoter and the Promoter shall have to follow the procedure as stated in Paragraph I hereinabove for obtaining the approval of the allottee(s).
However, it is clarified that, if the amalgamation or merger or demerger of the companies, which is not regarded as transfer under Section 47 of the lncome Tax Act, 1961, or where 75% of the shareholders remain the same in the resultant company, the same shall not require the aforesaid approvals of allottee(s) under Section 15 of the Act.
III. Steps/ procedure in case where the transfer is initiated by a third party like financial institutions/ creditors, etc., by operation of law or by way of enforcing of the security:
- Where secured loan and/ or the charge on the project is disclosed in the registration details of the project on the website of MahaRERA, then in such cases, the promoter shall write to the Secretary, MahaRERA, on firstname.lastname@example.org within 7 (seven) days of being aware of the impending or potential transfer arising out of enforcement of security or mortgage.
- The promoter shall also simultaneously inform each and every allottee of the project of the impeding or potential transfer.
- Within 7 (seven) days of the transfer being effected by the financial institution or creditors, such financial institution or creditor shall intimate to each of the allottee(s) and Secretary MahaRERA on email@example.com of the enforcement of security, which has resulted in the transfer of the ownership of the promoter organisation or transfer of the project.
- The financial institution or creditors (acting as new promoter) or new promoter (appointed by such financial institution or creditors) shall then apply for necessary corrections in the existing registration details.
- The New Promoter shall also upload required supporting documents in its name like land title, building plan approval, etc., upon obtaining the same from time to time. While making such application for correction, the new promoter shall upload on the website of RERA, a registered undertaking stating that they shall comply with all obligations under agreement of sale, executed by the erstwhile promoter with respect to the allottee(s) of the project, and has assumed all the obligations of the erstwhile promoter under the Act.
The revised circular of 2021 records (Paragraph I (1)) that in addition to the promoter applying to MahaRERA with consent of two-third allottees as on the date of application, to seek permission to transfer its rights and liabilities to a third party, the third party/ intending purchaser shall also submit the documents required as stated in the Annexure B along with a Declaration in the format prescribed online to the Authorities.
The new requirement of MahaRERA sets the onus on the intending purchaser/ third party to submit documents such as (i) Annual CA Certificate No. 5 for each year since registration of the project; (ii) brief write up on present status of the project, including financial progress, subsisting encumbrance, receipts/ withdrawals from the designated account, likely amount of finance required to complete balance project, along with photograph of work completed; and (iii) details of sold/ unsold inventory and various activities in works executed in the prescribed format. The details required in points (i) to (iii) are required from the old promoter and from the new promoter the following are required (i) pan card details; (ii) address/contact details; (iii) details of MOU/Development agreement with landowner (if land owner is other than promoter); (iv) new declaration; (v) new architects form; (vi) new engineers certificate; (vii) new CA certificate; (viii) list of new project professionals with contact details; and (ix) revised estimate cost and time schedules for balance works (list and time schedule for each activity).
Further, a joint declaration from the existing promoter and the intending purchaser is required, confirming details of the designated account, amounts withdrawn towards the cost of construction and land cost and the balance amounts supported by banks statements, alongwith CA Form-5 for each year from 2017 to 2021.