Maharashtra announces step for transparency in real estate brokerage fees

State's real estate regulator says Clause 15A recognises the right of real estate agents to receive payment in the form of fees, charges, commissions, remuneration

The Maharashtra Real Estate Regulatory Authority (MahRERA) has introduced a new clause in the model sale agreement, a document used by builders as a reference when preparing actual sale contracts. Clause 15A recognises the right of real estate agents, or property brokers, to receive payment in the form of fees, charges, commissions, or remuneration for services.

 

"The introduction of Clause 15A in the model format of the available for sale securities (AFS) will ensure clear identification of responsibility of payment of brokerage to the real estate agent, in the AFS being affixed to either the allottee or promoter or both parties (as may be mutually agreed), and result in better accountability and reduction of potential conflicts on this front,” said Jinal Mehta, partner, Cyril Amarchand Mangaldas.

 

 

“Further, the AFS may also set out the consequences in case of delay and/or non-payment of brokerage fees by either party or both (as the case may be)," she said.

 

"As Clause 15A is not mandatory there could be instances where parties opt not to include the same in the AFS. In such cases, it is recommended that a separate written agreement is executed between the broker, allottee, and promoter, clearly outlining payment obligations, milestones, and events of default and/or delay in payment of brokerage fees," Jinal says.

 

What will be the impact on buyers?

 

"It would bring more transparency of all financial obligations related to real estate agents who are mentioned in the sale agreement. This will ensure that the buyers are fully aware of any commissions or fees which are payable to the agent. This gives an advantage to the buyer to avoid any dispute between the seller and agent as all the parties are part of the sale agreement under clause 15," said Alay Razvi, managing partner at Accord Juris.

 

Kunal Sharma, partner at Singhania & Co. said: "It is crucial for buyers to carefully review the agreement to ensure their interests are protected." The agreement should address the following points, he said:

 

A clear reference to the payment terms agreed between the promoter and/or allottees and the real estate agent, including the structure i.e., in lump sum, tranches, or percentage of the sale consideration of the property, timeline and who is responsible for the payment i.e., promoter and/or allottee(s)/homebuyer;

 

Breach of Clause 15A by promoter, has no impact on the Allottee(s) right to seek possession over and ownership of the property.

 

A clear dispute resolution mechanism in the event of failure of a party responsible for making payment to the agent in accordance with Clause 15A.

 

Failure to address these aspects could lead to financial liabilities, delays in possession, and legal complications for buyers. Therefore, it is imperative for buyers to ensure that these provisions are meticulously addressed in the agreement to sale.