The scope of taking legal action against such fraud in the country is limited. Conventional law in this regard imposes restrictions on direct litigation
- Developers take loans by mortgaging flats from banks
- Banks auctions the flats due to non-payment of loans
- Buyers have to file writ petitions in the High Court to get their flats
- REHAB cannot take any action under the Real Estate Development and Management Act 2010
- Conventional law in this regard imposes restrictions on direct litigation
- Last year, the High Court issued a rule questioning the validity of the relevant sections of the act
- About 1,100 cases against various developers are currently pending
Family Development and Design Limited, a real estate company, started construction of a residential building called Family Khushbu Garden in Sector 10, Uttara, in 2012.
Aminul Islam Talukder, a businessman from Lalbagh, Dhaka, bought a flat on the fifth floor of the building for around Tk60 lakh. Although the flat was supposed to be handed over in 2014, the construction company started procrastinating.
At one stage, Aminul Islam learned that the Shahjalal Islami Bank was going to auction the entire building.
The managing director of the developer company took a loan of around Tk7 crore from the bank against the flats in the building. Since the company did not repay the loan, Shahjalal Bank filed a case in the money loan court and was given the go-ahead to sell the building.
Aminul Islam filed a writ petition in the High Court against the auction and the court imposed a ban on the auction. He also got the possession of the flat by the order of the High Court. But he has still not received the official documents of the flat.
Aminul Islam is just one of hundreds of customers who have been victimized by such scams. Many had to file a writ petition in the High Court to obtain possession of the flats. There are also similar allegations of fraud against many reputable developers of the country.
Real Estate & Housing Association of Bangladesh (REHAB) President Alamgir Shamsul Alamin (Kajal) admitted the existence of these sorts of scams
"We are also looking into the matter. There are allegations that some companies have been doing this for a long time. We have spoken with the organisations in question and I have warned them," he told The Business Standard.
He said real estate businessmen are facing criticism because of some companies.
REHAB currently has about 1,200 members. Although there are more than a hundred complaints of such fraud, REHAB cannot take any action under the Real Estate Development and Management Act 2010.
Alamgir Shamsul Alamin said REHAB's only recourse is to cancel the membership of a guilty developer.
Supreme Court lawyer Amir Hossain bought a flat in 2013 at the Mission Developer project in Kakrail. The flat was supposed to be registered in his name by 2015. But that did not happen.
When he discovered that the Exim Bank was auctioning the project, he filed a writ petition in the High Court against the move and took possession of the flat.
Sanjina Begum from Uttara also took possession of her flat by filing a writ petition in the High Court. She bought the flat in a project of Nagar Homes Limited in Uttara for Tk1 crore 70 lakh.
Buyer's rights are violated
The scope of taking legal action against such fraud in the country is limited. Conventional law in this regard imposes restrictions on direct litigation, and deceived buyers are compelled to file a writ petition in the High Court.
Supreme Court lawyer Barrister Abdul Halim told The Business Standard, "The Real Estate Development and Management Act states that if there is any dispute between the buyer and the developer, the latter cannot be sued directly. The law calls for alternative solutions to such disputes."
Therefore, victimized buyers have no recourse but to file a writ petition in the High Court as per Article 102 of the constitution, which relates to protection of fundamental rights of citizens.
"The relevant section of the Real Estate Development and Management Act is challenged. The writ petition also seeks directions to get possession of the flat," he added.
Barrister Abdul Halim said the real estate development and management law has curtailed the rights of flat buyers to sue. The law states that in the event of a dispute at any stage of a real estate project, an attempt will first be made to settle it amicably between the parties.
If either party refuses to cooperate and the conciliation attempt fails, the other party shall give notice to the respondent, stating his intention to go to the arbitral tribunal under the Arbitration Act, 2001 for disposal of the matter.
Abdul Halim said it took years for such an application to be heard by the arbitral tribunal. In many cases, the banks in question recover their money after completion of the auction.
Former Chief Justice MM Khairul Haque, chairman of the Law Commission, has called for urgent amendments to the Real Estate Development and Management Act. He told The Business Standard that the law was enacted to protect the rights of citizens. But rather than doing so, this law undermines the rights of citizens.
Following a writ petition filed in the High Court against the Act on 7 May last year, the court issued a rule questioning the validity of the relevant sections of the Real Estate Development and Management Act. So far, there has been no rule hearing.
Attorney General AM Amin Uddin said, "We will decide on the final hearing of the rule after the end of the ongoing winter vacation of the Supreme Court."
He also opined in favour of amending the law.
1,100 cases in the money loan courts
About 1,100 cases of banks and financial institutions are currently pending against various developer companies in three money loan courts in Dhaka, many of which include some of the more reputable companies in the country. Banks and financial institutions owe more than Tk2,000 crore in these cases.
Dhaka Public Prosecutor Abdullah Abu said, "Many developer companies take loans from various banks by mortgaging the flats. Banks are suing these companies in the money loan court when they fail to repay the loans on time. Flat buyers suffer because of this."
He said two High Court judges had also fallen into the same trap after buying flats. Though they finally got possession of their flats, they had not received the official paperwork. Until the bank's claim with the companies is settled, it is not possible to obtain the flat documents.
He urged the government to take steps to amend the existing laws, thereby removing the legal hurdles that currently exist to protect the rights of consumers.