When the Brochure Lies: RERA Complaints Over Brochure-to-Site Mismatch
Introduction : A brochure is often the first document on which a homebuyer relies before paying booking money. Renderings of landscaped gardens, promised clubhouses, and the stated carpet area figures are often relied upon by buyers in deciding whether to purchase. When the delivered unit does not match the promised specifications - the swimming pool is gone, the 'sea-facing' view is blocked, or the carpet area is smaller than stated - the promoter is accused of false and misleading advertising. The Real Estate (Regulation and Development) Act, 2016 ("RERA") was enacted to bridge this gap between what a promoter promises and what he actually delivers. This article examines the manner in which brochure-to-reality discrepancies can trigger claims before the Real Estate Regulatory Authorities, the evidence required to prove such claims, the compensation available to buyers, promoter defences, and the manner in which marketing teams can prevent such disputes by exercising document control over their claims.
Legal Provisions
Section 12, RERA is the provision which deals with misleading advertisements. It provides that if a person makes an advance payment or deposit on the basis of a notice, advertisement, prospectus or model apartment and subsequently suffers loss by reason of any untrue statement made therein, he is entitled to compensation from the promoter. The expression 'untrue statement' would include any fraudulent misrepresentation or concealment of material fact, but it is not necessary to prove actual fraudulent intent on the part of the promoter; it is sufficient to prove that a statement made by him was untrue and that the complainant suffered loss by reason of his reliance on it. A buyer who wishes to withdraw is entitled to a refund of the amount paid with interest thereon at the rate prescribed by the Authority, in addition to compensation for his loss.
The term 'advertisement' has been defined in Section 2(b) to include hoardings, prospectus, model flats, and other documents, so as to bring within the scope of Section 12 not merely prospectuses or formal notices inviting applications, but also other modes of invitation to purchase adopted by the promoters. Section 14 requires the promoter to construct the project in accordance with the sanctioned plans and specifications and prohibits him from making any alterations in the layout or other amenities without the approval of not less than two-thirds of the allottees. Section 18 provides that in case of violation of Section 14 or other sections of the Act specifying the terms and conditions on which the allotment of apartments or plots is made, the allottee may withdraw from the agreement and claim for refund of the amount paid with interest thereon, or claim for compensation for loss suffered by him.
In addition, the allottee may continue to possess the apartment or plot allotted to him and claim compensation for the difference between the value of the apartment or plot actually delivered and the value of the apartment or plot which would have been delivered if the promoter had complied with the terms of the agreement. Section 19 of the Act provides that an allottee shall be entitled to the amenities and facilities as disclosed in the brochure and other documents issued by the promoter. Sections 61 and 63 of the Act provide that the Authority may impose a penalty of up to five percent of the cost of the project for contravention of Section 12 of the Act and also penalize promoters for failure to comply with directions issued by it. The Consumer Protection Act, 1986, Section 2(1)(r) (as amended by the Consumer Protection Act, 2019) also provides that false representation is an "unfair trade practice", thereby giving buyers an additional remedy under the Consumer Protection Act.
Analysis: How a Marketing Mismatch Becomes a Claim
Specificity of the representation. Vague puffery ("a lifestyle beyond compare") is generally not actionable, since it amounts to opinion or subjective assertion, as opposed to statements of fact which can be proven true or false. A promoter will be held liable for misrepresentation if it makes specific claims which a buyer can rely upon in deciding to purchase - for example, a specific carpet area, a specific amenity, a specific date of possession, or specific distance to a particular infrastructure. The first issue that needs to be determined in any dispute concerning misleading advertisement is whether the representation made by the promoter is puffery or a misrepresentation.
Reliance and causation
The buyer must prove that he would not have made the purchase or made a lesser purchase (in terms of carpet area) if the misrepresentation had not been made. The timing of the deposit and the Agreement for Sale can be used by the promoter to show that the buyer was not actually relying on the brochure or notice. Thus, the reliance on the brochure and notice is the linchpin in such a dispute.
The "entire agreement" defence. Promoters often take advantage of the fact that buyers have limited recourse against them by including a disclaimer in the Agreement for Sale that the brochure or notice is not an integral part of the agreement. Such a disclaimer is generally unenforceable if the bargaining positions of the parties are unequal.
In Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan, the Supreme Court held that such a disclaimer is an unfair trade practice and is not binding on the purchaser. A contract cannot be said to bind one party unless he has freely and voluntarily agreed to its terms and conditions. The purchaser has no option but to agree to a contract prepared by the promoter, which puts the promoter in a position to dictate terms to the purchaser. This is especially true of unilateral changes to an agreement by the promoter.
Concurrent remedies. In Experion Developers Pvt. Ltd. v. Sushma Ashok Shiroor, the Supreme Court held that the remedies under RERA and the Consumer Protection Act are not mutually exclusive. The Court stated that the two Acts are complementary to each other and that the provisions of the Consumer Protection Act can be applied simultaneously with the provisions of RERA. The Court further held that the consumer forum can direct the refund of the amount paid by the purchaser as a consumer under the Consumer Protection Act. Thus, a buyer who is aggrieved by misrepresentation can pursue remedies under both statutes, which will increase the promoter's liability.
Retrospective reach. The Appellate Tribunal has held that the provisions of Section 12 are applicable even to those who made a booking prior to the commencement of RERA, provided that the promoter has applied to RERA for registration of the project.
Evidence Required
As most disputes are decided on the basis of documents, it is important to gather and preserve all documents which can be used to prove misrepresentation. Thus, the brochure or notice issued by the promoter at the time of booking, along with the payment receipt and the Agreement for Sale, must be obtained. The Agreement for Sale must be compared with the brochure to arrive at a conclusion regarding the specific misrepresentation made by the promoter. It is also necessary to obtain possession of the sanctioned building and layout plans along with photographs of the site at the time of possession as well as all correspondence with the promoter. These documents will help establish the fact of misrepresentation (that the promoter undertook it and the buyer relied on it), and the fact that the promoter has failed to comply with the promise. Measurement by an independent architect/surveyor should be taken to establish carpet area discrepancies. ASCI's ruling on the specific advertisement, if any may also be obtained.
Compensation and Relief
If the Authority arrives at the conclusion that the promoter violated Section 12 of the Act, the buyer can either withdraw from the contract or claim compensation for the loss. In the first case, the buyer is entitled to a refund of the money he has paid with an additional interest according to what the Authority considers appropriate. Another option available to the buyer is seeking compensation from the promoter. The buyer can seek compensation for the loss of amenities that were promised in the brochure, diminution in value of the apartment in case of a smaller carpet area, the cost of an alternate view and mental agony compensation, if any.
The compensation for the loss of amenities would depend on whether the facilities which were promised have been disclosed in the brochure or not. In case the amenities were disclosed, the promoter shall compensate the buyer for the value of the amenities. In case they are not disclosed, the value of the apartment would be calculated considering the diminution in value. The interest at which the compensation will be provided would be determined according to the State RERA Rules, which mostly follow the marginal cost of lending of the State Bank of India. Moreover, the Authority may also penalize the promoter till 5 percent of the total project cost in case of misrepresentation. A promoter who violates the directions of the Authority may also be punished with imprisonment for a term of up to three years or with a fine or with both. For instance, MahaRERA has allowed the buyers of the ‘Ruparel Skygreens I’ in Borivali to withdraw from the contract as it was found that the promoter was providing false information and disclosures at the booking stage.
Promoter Defences
The promoter will usually take the following defences:
The brochure or notice is merely indicative and is not an integral part of the contract, as provided by the Agreement for Sale. This defence is weak because of the ruling in Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan .
The Agreement for Sale is the entire agreement between the parties and supersedes all prior negotiations and representations. This defence is also weak because the Agreement for Sale is prepared by the promoter and he has no option but to accept it.
The representation made by the promoter is merely puffery and not a specific misrepresentation of fact.
The change made by the promoter was necessitated by law or force majeure. This defence is available if the promoter makes a change in accordance with Section 14 of the Act and obtains the consent of not less than two-thirds of the allottees.
The buyer did not rely on the brochure or notice, as he had independently inspected the site and negotiated the terms of the Agreement for Sale. This defence is available if the buyer can show that he did not rely on the brochure or notice. However, he will not be able to establish this if he has accepted the terms of the Agreement for Sale on a bare faith basis.
The buyer waived his rights by accepting possession of the apartment without protesting the alleged misrepresentation or by failing to file a complaint with the Authority in a timely manner.
The representation made by the promoter is not a material one, as the difference between the carpet area shown in the brochure and the carpet area of the apartment delivered is merely de minimis . This defence is available if the difference between the carpet areas is less than 5 percent.
Practical Implications
For developers, the implications of the above discussion are that they may have to refund the amount paid by the buyers, in addition to facing penal action by the Authority. Thus, promoters will have to think twice before making exaggerated claims in the brochure or notice, since the RERA Authority has taken a very strict view of misrepresentation. For marketing teams, the case law on misleading advertisements has created the obligation to treat the brochure as a binding document on the same footing as the Agreement for Sale, since any representation made therein can be used by the buyers to claim compensation. For buyers, the case law is a protection since they can rely on the representations made in the brochure or notice without having to prove that they actually relied on them. For the regulator, the implications are that the overlapping jurisdiction of RERA, the consumer forum, and ASCI will lead to multiple remedies being available to the buyers, which will increase the promoter's liability.
Marketing Teams: Avoiding Overstatements
Make sure that every representation made in the brochure is verifiable, with proof of its accuracy, since all statements in the brochure can be used by buyers to claim compensation. Avoid making any promises or representations in the brochure which are not shown in the sanctioned building plans or which are not approved by RERA. Ensure that the carpet area shown in the brochure matches the carpet area shown in the plans and the carpet area mentioned in the Agreement for Sale, to the decimal point. Obtain legal clearance for all representations before making them public, since every brochure, hoarding, and advertisement is subject to the scrutiny of the courts and the Authority. Keep track of all versions of the brochure, since all versions are subject to scrutiny. Make sure that every salesperson knows that he must not make any representations on his own, without the express authorization of the marketing department, since he will be held responsible for every representation made by him. In case of any changes to the project after the brochure has been issued, make sure that such changes are made in accordance with Section 14 of the Act, so that the promoter does not have to refund the amount paid by the buyers, in addition to facing penal action by the Authority.
Conclusion
The issues raised by brochure vs site disputes are of a promotional and consumer law nature, and Section 12 is a potent tool which can be wielded by the buyers to extract compensation from promoters. It is evident from the judgments delivered in the cases cited above that the courts have taken a very buyer-friendly view while interpreting complaints of misleading information by promoters. This makes it incumbent upon the promoters to be extremely cautious while making any representations in the brochure or notice as all statements can be used against them to claim compensation under Section 12. Additionally, promoters must ensure that the carpet area specified in the brochure corresponds with that in the Agreement for Sale and the sanctioned building plan. The document-control checklist provided below is proposed to address this issue.
Document-Control Checklist
Source-verification log – Every assertion in any literature (area, amenities, timeline, distance etc.) must be cross-referenced to a sanctioned source (plan or RERA filing) before inclusion.
Legal sign-off record – Every version of the brochure, hoarding, digital ad, and model-flat sheet must be dated and signed off by the legal counsel.
Version-control register – Every version of the document must be dated and stored with the applicable booking window (expired ones redacted) and superseded versions archived.
Carpet-area reconciliation – Must reconcile the figures on every page of the brochure to the carpet area as filed with RERA and the Agreement for Sale.
Amenity-status tagging – Every amenity must be tagged “sanctioned/confirmed” or “proposed, subject to approval” – no unapproved amenity may be depicted in any literature.
Sales-script control – Standard verbiage and talking points must be specified by legal counsel – no sales person may make any commitment on his/her own volition on areas, timelines and amenities.
Change-management trigger – All post-launch changes must be routed through Section 14 (buyers’ consent) with collaterals (brochures, websites, hoardings etc.) updated simultaneously.
Buyer acknowledgment trail – Booking documents must specify the brochure version applicable to the booking.
Periodic compliance audit – Collaterals must be audited quarterly for conformity to latest sanctioned plans and RERA filings.
Complaint log – All complainants' objections must be logged against specific brochure versions for corrective action and audit trail.
Author: Shriyaa Zubin in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney
References
The Real Estate (Regulation and Development) Act, No. 16 of 2016, §§ 2(b), 12, 14, 18, 19, 61, 63.
The Consumer Protection Act, No. 35 of 2019, INDIA CODE (2019), § 2(47).
Experion Developers Pvt. Ltd. v. Sushma Ashok Shiroor, (2022) 10 SCC 1.
Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan, (2019) 5 SCC 725.
Jignesh R. Khemani & Anr. v. Shree Siddhivinayak Infrastructure & Realty, MahaRERA Complaint No. CC006000000000000 (MahaRERA Apr. 22, 2022).
Maharashtra Real Estate Regulatory Authority v. Sai Estate Consultant Chembur Pvt. Ltd., Suo Motu Complaint (MahaRERA June 5, 2017).
Advertising Standards Council of India, The Code for Self-Regulation of Advertising Content in India, https://www.ascionline.in/the-asci-code/.
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