Lodha Fiorenza – Misleading RERA, Blindfolding Flat Buyers

Mumbai, 16^th September, 2017: If you are a flat-buyer looking for a new home for your family, or an property investor looking for good returns, be warned; Lodha Fiorenza is a trap. If you sign any papers or swipe your credit card at the Lodha Fiorenza sales office, you will be liable to forfeit lakhs of rupees very quickly, or make a regrettable investment from which there are only loss-making exits. The branding message of “interiors by Jade Jagger for Yoo” is a giant façade that hides an ugly mess of unverifiable claims, unfair dealings and badly planned towers that will prove extremely costly to maintain in the long run. 

The advertising claims portray a stylish premium property, which is far from the ground reality. The designer interiors are flashy, mediocre and gimmicky. Half the flats have a view of the greenery of Aarey Colony, Goregaon, but this is marred by the continuous bass droning of day-and-night traffic on the Western Express Highway that permeates through doors, windows and even walls. Smooth-talking sales office staffers lure you to swipe your credit card and sign papers that will suck you into a financial decision that may cause you to forfeit pots of money. How much money can you lose? Over 50 lakh rupees, if you signed up for a modest five crore rupees flat! Many toxic clauses are written in the terms and conditions of a barely-legal document called “Application Form”, which you are expected to fill up and sign at the first or second meeting at the sales office, before negotiating the final price or asking for detailed information about the project.

This Application Form is a top-secret document, not allowed to go out of the office in any form – whether photocopied or electronic. You get to read the Application Form only when you are about to sign it. Customers may sign it in an unwary mood because the sales staffers give them verbal reassurances, such as, “That clause does not apply to you, Sir,” or “Madam, this form is just a formality to show that you are interested”. If you sign, you are expected to pay a token amount of a few lakhs; Rs 8.10 lakhs is the minimum booking amount expected, but they will initially accept far less. 

Did you sign and did you pay? Congratulations, Sir/Madam, you are now like a fish that swallowed the bait; the hook is now lodged firmly in your throat.  

Lodha Group uses the same modus operandi for taking bookings at two dozen registered projects which you can view on the MahaRERA site by typing “Lodha” and hitting the Search button. Lodha Group is an established brand in the property market, and the group’s patriarch, Mangal Prabhat Lodha, is a ruling party MLA with a generally clean reputation. However, its disclosures to the Real Estate Regulatory Authority (RERA) and other public authorities such as the Municipal Corporation and Mumbai Fire Brigade, leave much to be desired. The dirty work of misleading customers is done by the staff sitting in the plush sales office; higher-ups stay out of sight, and customers are routinely misled without leaving any documentary evidence that can be used in a court of law.  

Buying a flat in Fiorenza and such other Lodha properties typically means making an investment decision of amount ranging between about Rs 2.5 to 25 crores. Such investments should be made after careful consideration and proper legal paperwork. But, instead of providing reliable information, Lodha Group deprives the potential customer of all information, and makes him cough up some money in exchange for even small bits of information. 

The Lodha customer is typically a wealthy person with surplus investable income but deficit of time and mindspace; he/she is too busy making money to be careful about how he spends it. Quite often, NRIs on a short visit to India or young couples having huge corporate salaries and equally high responsibilities land up at Lodha Fiorenza looking for investment opportunities. The plush corporate environment at the sales office confuses customers, and they make the mistake of thinking that rule-bound behaviour is law-abiding behaviour.

Open Space and Fire Norms Violations

Hidden behind the plush, five-star façade of Lodha Fiorenza are numerous false and misleading declarations to RERA and MCGM, brazen open space violations and rampant fire safety norms violations. Lodha Fiorenza consists of four residential towers of about 40 storeys on top of a massive seven-storeyed parking podium, of which 50% is a municipal parking lot. Towers Roma and Milano are mentioned in detail in the RERA declaration, but two other towers – Venezia and Sienna – are not mentioned; as far is RERA has been informed, only two residential towers exist on top of the parking podium! The gigantic structure of Lodha Fiorenza stands squarely on a service road of Western Express Highway, towering over the popular Hub mall. It offers no access to fire-fighting vehicles on three sides, and limited access on one side only – the service road in front. There are no open spaces around the parking podium for a fire-brigade vehicle to circumnavigate the structure. There is no way for the fire-brigade vehicles to climb up to the amenities level on the seventh floor of the podium – the only part of this residential complex that offers a tiny bit of open green unrestricted space to the 500-odd households. Access to fire exits is restricted by doors kept permanently locked. Even the residents of this complex are given restricted access; the swipe card of a resident gives him access only to his own tower, but not to the neighbouring towers. The security guards exist to safeguard Lodha’s property and restrict the residents.

Investors who bought exorbitantly-priced flats in Venezia and Sienna towers some years ago are now struggling offload it, even at a loss. They are facing fierce competition from Lodha’s sales office, which readily enters into a price-cutting war with them. Security guards give estate agents and investors and owners a hard time, posing obstacles and restricting them for showing flats to prospective purchasers. 

You won’t get Conveyance of Land

The flat buyers are told that Lodha Fiorenza stands on “freehold land” which will be readily conveyed to them after the cooperative societies and federation of societies are formed. That is untrue. The Title Verification document uploaded on RERA website may give investors sleepless nights. It says:

• “… there are no material changes taken place with regards to the title of Nirlon as an Owner and Lodha Pranik Landmark Developers Private Limited as a developer of the said property subject to always mortgage referred therein.”

• “Suit no. 2496 has been filed by the Hub Mall Premises Cooperative Society Limited (Plaintiff) against the Company and Others before the City Civil Court, Dindoshi. In the said suit, the plaintiff has sought to allege inter alia that the development of the Lodha Fiorenza Project by Company is contrary to the provisions of law and that the defendants be statutorily prohibited from carrying on development of the Lodha Fiorenza project contrary to the sanctioned layout plan in as much as no consent of the purchasers of the units of Hub Mall was obtained for the development of the Lodha Fiorenza project and that the loading of TDR on the project to be declared illegal.” This matter is currently stuck in appeal before Bombay High Court.

The RERA declaration cryptically mentions four litigations pending in the city civil court and Bombay High Court. Details and documents of these are withheld from RERA and from home buyers.

Club & gym are bones of contention

There is inherent discrimination in the distribution of recreational facilities, which is not only unlawful, but will also lead to quarrels between the separate cooperative societies that will be formed for the maintenance of the towers. There is one common club, gymnasium and swimming pool for about 460 residents of Venezia, Sienna and Roma towers, and there is a separate equal-sized special club, gym and swimming pool exclusively for the 45 residents of Milano tower. Both the clubs and gymnasiums are located within Milano tower. The cost-sharing ratio for sharing the maintenance costs between the towers will inevitably be a huge bone of contention for years and decades to come.

Even outsiders may be allowed to use the club, swimming pool etc, according to Lodha Group. The draft registered agreement defines club very cleverly. Clause 1.15 says, “”Club” shall mean any recreation facility constructed for the use of the purchasers of units in the Project or the Larger Property.” Clause 1.32 of the draft registered agreement states, ““Larger Property” means the land with details as described in Annexure 1 (Description of Larger Property). For clarity, there may be other building(s) and / or project(s) which will be constructed on the Larger Property.” Larger Property means the land plot occupied by Lodha Fiorenza plus Raheja Sherwood plus Hub Mall, and other land owned by Nirlon.

The term Common Areas and Amenities is usually understood as meaning Common Areas as defined in the Real Estate Regulatory Act section 2(n), including staircase, terrace, club, recreational open spaces, etc. However, Lodha’s draft registered agreement robs this term of its meaning by defining Common Areas and Amenities in Annexure 7 as things that are provided within the flats, such as “iPad controlled homes with lighting and AC control; ‘Digital Hollywood’ in each residence with access to central database with 1000’s of movies, shows and games; Italian marble flooring in living/dining, puja, passage and master bedroom,” etc. etc.

Common parking for outsiders’ vehicles and Fiorenza residents

The bottom three floors of the six-storey parking podium are a public parking facility built for MCGM. The upper three floors are for the 1000-odd cars belonging to the 500-odd residents. The two share a common entry and exit ramp. When fully occupied by 2000 vehicles, there will be a traffic jam every morning and evening!

A further cause of disputes and unhappiness will be the building maintenance. The bottom three floors will presumably be maintained by the Municipal Corporation, while the upper ramps will have to be maintained by the federation of cooperative societies. Deficiencies in maintenance quality will impact the condition and life of the entire six-story podium structure, and the four towers built on it.

Super-Built-Up Area is being sold

Real Estate Regulatory Authority’s efforts to compel builders to sell only on carpet area basis have been reduced to nought. Lodha Group is openly charging for “super-built-up”, now termed as “EBVT”, standing for Exclusive Balcony, Verandah and Terrace. 

Lodha does not accept RERA as Authority

Clause 1.5 of the draft registered agreement defines “Authority” as “(i) any nation or government or any province, state or any other political subdivision thereof; (ii) any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any governmental authority, agency, department, board, commission or instrumentality; or (iii) any court, tribunal or arbitrator.” Clause 1.43 defines RERA as “Real Estate (Regulation and Development) Act 2016 and the rules framed by the relevant State Government thereto and any amendments to the Act or the rules.” Both definitions omit to mention the Real Estate Regulatory Authority appointed by the State Government.

The draft registered agreement and other documents uploaded (or omitted to be uploaded) by Lodha Group are a complete basket of monkeys. They merit a separate article. So, let us now focus on the Application Form for the remainder this article.

Web of deceitful clauses in Application Letter

1. The customer fills up the dimensions of the flat without any proofs, and undertakes to be bound by the details that he fills up. At the outset of this form, the Lodha Group customer is required to state, "I hereby apply for the allotment of the abovementioned units. I confirm that all the details have been filled up by me or at my instance, and I have thereafter signed the Application Form. I confirm that the details provided by me are true and correct. I have read the terms and conditions and agree to be bound by the same." And this statement will be signed by the customer and his co-applicant, if any. Not only the details of applicant and co-applicant are to be filled up by the customer, but the Carpet Area in Square Ft. and Sq. Metres, and the dimensions of the Exclusive Verandah / Balcony / Open Terrace ("EVBT") of the flat are also to be filled up by the customer in his own handwriting. One may ask, based on what does the customer fill out these details about the flat? The answer is, based on a simple computer printout on a plain white paper without a letterhead or signature, which is given to the customer. How can you know that these dimensions are correctly mentioned in the laser printout? And the answer is, blind faith. Even after persistent and written requests, Lodha Group flatly refuses to provide any certificate or drawing signed by a civil engineer or architect etc. stating the dimensions of a particular flat. The sales staffers insist that even they are not authorized to part with any document, or send an email stating anything at all. 

2. The customer fills up the "Date of Offer of Possession". The sales staff verbally inform you of the “tentative” date, but don’t give you anything in writing. 

3. The customer effectively undertakes not to deduct TDS on his payments to Lodha Group, and “authorizes the Company to deduct applicable TDS and make the necessary payments to the relevant authorities on behalf of the Applicant." Income Tax law casts a duty on the flat-buyer to deduct TDS and remit the deducted amount to the department. Does signing the Allotment Letter of Lodha Group free the customer from his statutory obligation to deduct TDS on large property transactions? NO. But Lodha Group will not delete this misleading clause.

5. Detailed payment schedule or "Milestones" enables customer-relation staff to tighten the screws. Annexure A of the Application Form has a detailed schedule stating that the customer will be required to pay Rs 8.10 lakhs upon booking and 9.9% less booking amount within 21 days of booking. In subsequent points, the milestones specify payment of 10.10% within 42 days of booking, 20% within 90 days of booking, 20% within 144 days of booking, and the remaining 40% "on initiation of possession". (The sales team verbally assures you that this schedule is “not applicable to you”, but insists nevertheless that you must sign on that page also, “because it is just a formality” and “we are not authorized to change the draft of Application Letter” and also, “we follow this format for all Lodha projects”.) The customer is required to stake large amounts in the region of Rs 25 lakhs to 2.5 cr, or even higher, on the basis of zero information about Lodha Fiorenza and its individual towers. Sales office personnel tell you that “you have to give us something to show your seriousness”, but they refuse send you an email about mundane project details! 

On a separate page, under the heading "Booking Amounts", the Terms & Conditions state that “I, the applicant, undertake to make payments in accordance with the Schedule of Payments, time being of essence”. The term Booking Amounts means the amount that the applicant pays prior to the registration of Agreement to Sell (i.e. the two initial payments totalling 9.9% of the total consideration amount). The terms & conditions mention that if there is non-receipt of Booking Amounts or any part of the payment, or if there is any breach of the terms and conditions by the applicant, Booking Amount 1 and 2 (or 10% of total consideration, whichever is higher) shall be forfeited. This means, if the customer pays any money to show his seriousness in buying a flat, it will never be refunded under any circumstances, and if he happens to pay a larger amount, even exceeding 10%, prior to registration of Agreement, the entire amount can be forfeited for a wide variety of reasons!

6. The consideration amount can be unilaterally increased! Under the heading "Schedule of Payments", point no. 7.5 of the Terms & Conditions says, "The Consideration Value shall remain fixed as stated in the Application form, save and except for proportionate share (in ration of Carpet Area) of any increase in costs/charges levied by any statutory authority... and on account of any increase in the cost of construction due to depreciation of the Rupee by more than 5% beyond the prevailing exchange rate with US Dollar as on the date of construction of the building. The applicant shall pay such proportionate share as demanded." Why? Why does the rupee-dollar exchange rate have anything to do with the price of Lodha Fiorenza? In what way does the dollar exchange rate affect the construction or maintenance costs of Lodha Fiorenza in Mumbai? Is the raw material or labour sourced from the USA? The sales office reassures you that this clause is not applicable currently (“unless war breaks out with Pakistan or China”) but they and their higher-ups bluntly refuse to delete it! They insist on you accepting and signing the Application Form in its entirety, and reassure you that none of those “standard clauses” will be misused to your detriment. Can you trust them?

7. Not all building approvals have been obtained, and the customer waives his right to raise any objection. Under the heading, "Plans & Specifications", the Terms & Conditions say, "The Applicant is aware that while the Company has obtained some of the approvals, certain other approvals (or amendments to current approvals) may be received from time to time. Having regard to the above position, the Applicant has applied for the unit, and agrees to abide by the terms without any objection of demur, and waives his right to raise any objection in that regard." The question is: Exactly which approvals are referred to in this clause? Lodha Group has not uploaded Commencement Certificate on the RERA website; could it be that the all-important CC was not received by this project? Doesn’t it lend credence to the allegations that development of the Lodha Fiorenza Project by Company is contrary to the provisions of law and contrary to the sanctioned layout plan?

8. Builder is allowed to make all sorts of amendments to the plans and layouts, and customer gives consent! The terms & conditions say, "The applicant hereby confirms that the Company may make amendments to the plans or layouts of the Project, the Building or Unit as required... This may include any change wherein the Company, if permitted by the relevant authorities, tranferring the construction permissible on the property on which the Project is being developed (Property) to any other property or transferring to the Property the construction permissible on any other property at any time prior to conveyance of the Property to the Federation / Ultimate Organization... The applicant gives his consent for such changes." What one understands from this is that Lodha Group may intend to either take the FSI from the land plot on which Lodha Fiorenza is built and exploit this FSI to construct somewhere else (i.e. Transfer of Development Right i.e. TDR of Lodha Fiorenza being used on some other Lodha project), OR alternatively, utilize the FSI or TDR taken from some other project site and use it at Lodha Fiorenza project. Lodha Group insists that you sign this waiver!

It must be stressed that Real Estate Regulatory Act does not allow allow unilateral forfeiting of booking amounts, etc., nor does it allow builders to keep the customers in the dark and bind their hands and feet with discriminatory clauses. This method of dealing with customers amounts to unfair trade practices, punishable not only under RERA but also under the Competition Act 2002, which defines such acts as “abuse of dominant position”.

More articles will follow, focusing on issues in Lodha Fiorenza’s RERA declarations, Allotment Letter and Registered Agreement format, etc. 

ISSUED IN PUBLIC INTEREST BY
Krishnaraj Rao
9821588114
krish.kkphoto@gmail.com

REBUTTAL: Lodha Group was approached for their say on various points of this article on two separate occasions. They have not reverted with any rebuttal so far.