Transfer Charges by Builder

Builder has No Right to Claim Transfer Charges from the Flat Buyers

There is no legal basis on which a builder can levy transfer charges on the apartment owner. However, numerous complaints have been brought to the forefront related to illegal demand of transfer fee by the builder. According to complainants, the builder succeeds to exert influence as banks and home financing companies demand that the buyer procure a ‘No objection to Mortgage’ certificate from the builder, failing which the loan cannot be availed. Also, the builder takes on the responsibility to form the society or condominium and can manipulate undue influence by leaving out a particular owner’s name as a member of the society.

Why is transfer fee to a builder illegal?

  1. It violates the Transfer of Property Act, 1882; which states that ‘a transfer of property, passes forthwith to the transferee, all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof’. According to the Act, the owner alone holds the full right to property and the builder has no right, title or interest over the property post registration of the property in the name of the owner.
  2. It violates the Indian Contract Act, 1872. It is an extra contractual demand made by the builder on the buyer, which infringes the buyer’s ownership rights.
  3. It cannot be equated with the cooperative society’s share transfer fee. A cooperative housing society is the legal owner of the building and the plot of land and the buyer is only a share holder. A builder has no rights over the ownership of the buyer’s property and hence if the buyer wants to sell the property off to a third party, then no payment can be demanded on the part of the builder.
  4. As per the complaints coming from metros like Mumbai, many builders argue that they are working on behalf of the cooperative housing society (CHS) to be formed in the future, but in reality they obstruct the formation of CHS so that they can continue to collect the transfer fee.
  5. The builders threaten that upon non-payment of transfer charges, the buyer would not be able to sell off the flat. This is a punishable offense under Section 384 and 385 of Indian Penal Code (IPC).
  6. The undue influence exerted by the builder is prohibited by Competition Act, 2007. Imposition of unlawful transfer fees by builders is deemed ‘abuse of dominant position’ as defined under section 4 of the Act.


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