Can a Builder Sell Open Parking Separately?

Nahalchand Laloochand Private Limited was a builder. It developed properties in Anand Nagar, Dahisar (East), Mumbai, and sold flats to buyers who became members of the Panchali Co-operative Housing Society. Then it turned to the stilt portion of the building.

The builder filed a suit in the Bombay City Civil Court for a permanent injunction. It wanted the society stopped from "encroaching upon, trespassing and/or in any manner disturbing" its possession of 25 parking spaces in the stilt portion. Its argument was simple. Each buyer had bought a flat and nothing else.

The builder's second argument rested on paperwork. According to its plaint, each flat buyer had signed a declaration saying the stilt and open parking spaces shown in the plan belonged exclusively to the builder. The buyers also said they had no objection to the builder selling those spaces.

The society refused to accept this. It said the builder had no right to sell or dispose of spaces in the stilt portion. It also said the undertakings were contrary to law and could not give the builder any right to sell.

The City Civil Court dismissed the builder's suit with costs on April 4, 2007. The Bombay High Court dismissed the builder's appeal on April 25, 2008. The High Court had found that the stilt parking space is a common parking area and not a separate premises available for sale. It also held that undertakings contrary to the rules would not bind the flat buyers or the society. The builder then took the fight to the Supreme Court.

This Supreme Court judgment on car parking in flats turned on the definition of "flat" in Section 2(a-1) of MOFA. The section describes a separate, self-contained set of premises used for residence, office, showroom, shop, godown, industry or business. Then, in brackets, it adds "and includes a garage".

The builder's side argued that these bracketed words made even a stand-alone garage a flat. Some of the builders' lawyers went further and said that even an open parking space is a garage. They leaned on Form V of the 1964 Rules, which uses the words "covered/open garage".

The Supreme Court rejected both arguments. It held that the bracketed words bring in a garage as an appurtenance or attachment to a flat, not as a unit by itself. If the legislature had wanted a stand-alone garage to be a flat, it could simply have written "or garage" after the word "business". The Court also disapproved the Bombay High Court's decision in Dr. K.R. Agarwal v. Balkrishna to the extent it read "or garage" after the word "godown".

The second question was whether stilt parking is a garage at all. The Court said the word must be understood the way an ordinary flat buyer would understand it. A roofless space cannot be a garage. A stilt area, the Court said, is a space above the ground and below the first floor having columns that support the first floor and the building. It may be usable as a parking space, but the Court refused to treat it as a garage for MOFA.

The third question was whether such parking is a "common area". MOFA does not define that phrase. The Court looked at Section 3(f) of the Maharashtra Apartment Ownership Act, 1970, which lists parking areas among common areas. It found no reason to leave parking areas out under MOFA.

The Court dismissed the builder's appeal. Its reasoning ran in a straight line. Stilt or open parking is not a flat. It is not a garage. It is therefore a common area of the building.

The Court also pointed to the purpose of MOFA. It was enacted because builders were found to be indulging in malpractices in the sale and transfer of flats, and flat buyers were being exploited. If builders could still sell parking spaces on the strength of contract and undertakings, that mischief "would remain unabated". The promoter has no right to sell any portion of the building that is not a flat, and the entire land and building has to be conveyed to the society. The promoter's remaining right is to sell unsold flats.

Two loopholes were closed:

• The "garage" loophole. The words "and includes a garage" cover a garage attached to a flat. They do not turn a parking slot, stilt or open, into a separate flat.
• The "we never called it common" loophole. A builder cannot take parking out of the common areas by leaving it out of the advertisement or the sale agreement. The Court said the test is whether the part of the building is normally in common use. A builder who does not fully disclose the common areas does so at his own peril.

These scenarios also answer whether a builder can sell parking after society formation under MOFA.

Only a true garage bought as an attachment to a flat passes the test. Open-to-sky and stilt parking do not.

• Gather the paperwork first. Collect the registered agreement for sale, the floor plan attached to it, the advertisement (if you have it), the society's registration papers, the occupation certificate and any conveyance or documents of title. MOFA requires the builder to describe the common areas and facilities in the advertisement and the agreement. Check whether he did, but remember that silence does not remove parking from the common areas.
• Know the route for conveyance. If the builder has not conveyed the land and building to the society, Section 11(3) of MOFA lets the society apply in writing to the competent authority. The application must carry true copies of the registered agreements and the other relevant documents, including the occupation certificate. It is made to obtain a certificate that the society is entitled to a unilateral deemed conveyance.
• Know where this fight was decided. Here, the builder sued the society in the Bombay City Civil Court. The society defended the claim and won there, and again in the High Court and the Supreme Court.
• Avoid the biggest mistake. Do not treat a buyer's signed declaration or undertaking as proof that stilt or open parking belongs to the builder. The Supreme Court upheld the finding that such undertakings do not bind the flat purchasers or the society.