LAW RELATING TO PARKING SPACES

In a 2010 judgment,?Nahalchand Laloochand Pvt. Ltd. v. Panchali Co-operative Housing Society Ltd[1].,? the Hon’ble Supreme Court rejected the argument of a??real estate?development company that they are entitled to sell garages or stilt parking areas as separate flats to owners who intend to use it as parking facilities. A bench of Justices A K Patnaik and R M Lodha, ruled that builders or promoters cannot sell parking areas as independent units or flats as these areas are to be extended as “common areas and facilities” for the owners. Also, the Court said that the developer is only entitled to charge price for the common areas and facilities from each flat purchaser in proportion to the carpet area of the flat.

BACKGROUND - GENERAL PRACTICE

As per the general practice in the market, the developer, by the agreement of sale, sells only the ‘flat’ and the purchaser has rights in respect of only the flat and no other portion of the building. This is exactly what had been agreed to between the developer Nahalchand Laloochand Private Limited[2] and the flat purchasers of Panchali Co-operative Housing Society Ltd. Each flat purchaser had executed a declaration to the effect that stilt parking spaces/open parking spaces shown in the plan exclusively belong to the promoter and that the Society has no objection to the sale of such spaces by it. However, this was later argued by the Society as being contrary to law and hence, not binding. When the dispute arose, the developer approached the Bombay Civil Court seeking “permanent injunction restraining the Society from encroaching upon, trespassing and/or in any manner disturbing, obstructing or interfering with its possession in respect of 25 parking spaces in the stilt portion of the building”.

The City Civil Court dismissed the suit. The developer preferred first appeal before the High Court which was also dismissed. The Developer then filed an appeal with the Supreme Court.

WHAT IS A FLAT?

The Court examined the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 ("MOFA") to determine whether open or stilt parking spaces can be sold to purchasers separately, because the answer to the question would lie in the basic interpretation of what is a flat. As per Section 2(a-1)[3] of MOFA, "Flat" is defined to mean a separate and self-contained set of premises used or intended to be used for residence, or office, show-room or shop or go down or for carrying on any industry or business (and includes a garage), the premises forming part of a building and includes an apartment.

Apart from the statutory definition, flat means a set of rooms comprising an individual place of residence within a larger building or a self-contained set of rooms, structurally divided and separately owned or let from the rest of a building, which for the most part consists of other flats separated in like manner. Also, In Stroud's Judicial Dictionary, a reference has been made to the observations of Somervell L.J, in Murgatroyd v. Tresarden[4] and it is stated; the natural meaning of the word `flat' is a separate self-contained dwelling.

Therefore, for a flat' to be within the meaning of the definition in Sec. 2 (a-1)[5], it must be a separate unit conforming to the description capable of being used for one of the purposes given in the definition. Separateness of one premises from another premises physically and also in use or intended use for one of the uses specified in the definition clause containing the necessary facilities for self-contained accommodation is sine qua non for a unit being covered by the definition of flat' occurring in Section 2(a-1)[6].

Also, the Court has categorically stated that the meaning and significance of the bracketed portion "(and includes a garage)" should be seen in the context given to the word flat' which is true indication of intent of the legislature. The phrase and includes a garage' in the bracket does not bring in garage' by itself within the meaning of word flat'. If stand alone garage' was intended by the legislature to be a flat' within the meaning of Section 2(a-1)[7], that could have been conveyed by use of the expression or garage' after the word business' in the same breath as preceding uses. The bracketed phrase is indicative of the legislative intention to include a `garage' as appurtenant or attachment to a flat which satisfies the ingredients of Section 2(a-1)[8].

Whether stilt parking area is a garage

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It needed to be determined whether stilt parking areas would be counted as garage. The definition of garage is not provided in the MOFA. Hence, English language definitions needed to be looked into. The Oxford English Dictionary explains garage' as a building for housing a motor??vehicle?or??vehicles?or an establishment which sells fuel or which repairs and sells motor vehicles. The Webster Comprehensive Dictionary explains the word garage' as a building in which motor vehicles are stored and cared for. The Development Control Regulations for Greater Bombay, 1991 define two expressions, ‘garage-private' and garage-public' in Regulations 2(47) and 2(48) respectively. According to these Regulations, garage-private' means a building or a portion thereof designed and used for the parking of vehicles and `garage-public' means a building or portion thereof designed other than as a private garage, operated for gain, designed and/or used for repairing, serving, hiring, selling or storing or parking motor-driven or other vehicles.

The developer had argued that open parking space amounts to a garage' within the meaning of Section 2(a-1)[9]. However, the Court disagreed with this argument and said that a person buying a flat for residence or one of the uses mentioned in Section 2(a-1)[10] will not really think that open to the sky or open space for parking motor vehicles is a garage. “The word garage' may not have uniform connotation but definitely every space for parking motor vehicles is not a garage. A roofless erection could not be described a garage. What is contemplated by a garage' in Section 2(a-1)[11] is a place having a roof and walls on three sides. It does not include an unenclosed or uncovered parking space.” Hence, the Court stated that while stilt area may be usable as a parking space but for the purposes of MOFA, such portion could not be treated as garage. For the purposes of MOFA, the term garage' must be considered as would be understood by a flat purchaser and such person would contemplate garage which has a roof and wall on three sides. Whether stilt parking spaces are part of common areas and facilities

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The MOFA does not define common areas and facilities. However, the Maharashtra Apartment Ownership Act, 1970 does define common areas and facilities' in Section 3(f)[12]. The Court, while referring to it, said that just like it is unreasonable that a developer cannot take common passage/ lobbies or staircases out of the purview of common areas and facilities', it is unreasonable to say that parking spaces do not fall under common areas and facilities'. It is not necessary that all flat purchasers must actually use common areas and facilities' in its entirety. The relevant test is whether such part of the building is normally in common use.

Therefore, it was held that MOFA mandates the promoter to describe common areas and facilities in the advertisement as well as the `agreement' with the flat purchaser and if a promoter does not fully disclose the common areas and facilities, he does so at his own peril. Stilt parking spaces would not cease to be part of common areas and facilities merely because the promoter has not described the same as such in the advertisement and agreement with the flat purchaser.

Also, expressly stating the rights of the developer/promoter, the court said that, “insofar as the promoter is concerned, he is not put to any prejudice financially by treating open parking space/stilt parking space as part of common areas' since he is entitled to charge price for the common areas and facilities from each flat purchaser in proportion to the carpet area of the flat.” MOFA mandates the promoter to describe common areas and facilities' in the advertisement as well as the agreement' with the flat purchaser and the promoter is also required to indicate the price of the flat including the proportionate price of the common areas and facilities'.

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RERA

Maha RERA issued a?Circular[13] Dated July 30, 2021, which restricts the sale of open parking by promoters while permitting the sale of covered parking. Covered parking space cannot be sold by the builder/promoter and The Maharashtra Real Estate Regulatory Authority (in short ‘Authority) cannot permit the same in the form of clarification.

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The Authority has recently published its?Order dated July 28, 2021?requiring promoters to submit a quarterly progress report on the status of booking of garages and covered parking’s amongst other details enlisted under the Order. Simultaneously the Authority has also issued a Circular No. 36 / 2021 dated July 30, 2021 (in short ‘Circular’) which states that –

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QUOTE

“Promoters are not entitled to sell/allot open parking areas for monetary consideration”

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UNQUOTE

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The Circular also refers to the following definitions and reasoning :

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?“Garage – under section 2(y)[14] of?The Real Estate(Regulation and Development)Act.2016?(in short RERA)

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?‘covered parking space’ ?–?under the Maharashtra Real Estate ( Regulation and Development) (Registration of real estate projects, Registration of real estate agents, rates of interest, and disclosures?on?website) Rules 2017?(In short ‘Maha.Rules)

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?and ‘common areas’ under section 2(n)[15] sub-clauses (i) to (viii) of RERA, and that ‘open parking areas’ is more specifically included in the definition of ‘common areas’ under sub-clause (iii) of sub-section (n) of section 2 of the Act, and forms a part of common areas of the real estate project ”.

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Based on the above reasoning the Authority justifies its stand in the Circular that Promoters are not entitled to sell/allot open parking areas for monetary consideration.

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The Authority has further clarified its stand on open parking areas at

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(i)???????????? “open parking areas are provides free of FSI &

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(ii)?????????? “promoters are not entitled to sell /allot open parking areas for monetory consideration” under its list of clarifications in the Circular.

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However, while clarifying the status of open parking the Authority seems to have opened the gates for the sale of covered parking spaces, which is certainly not in line with the provisions of the Real Estate (Regulation and Development) Act, 2016 (in short RERA), which do not under any of its provision prescribe sale of covered parking spaces apart from sale of a garage as defined under the act.

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CONFUSION CREATED BY THE CIRCULAR –

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The Authority after clarifying that the promoters are not entitled to sell/allot open parking areas for monetary consideration has further made the clarification at serial no.(iv) in the Circular which can be briefly reproduced as –

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QUOTE

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garage/covered parking space when sold/allotted for monetary consideration the details of the same should be mentioned in the agreement for sale.

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UNQUOTE

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So presumably RERA Authority does not object/restrict the sale of covered parking when it uses the words “garage or covered parking space when sold or allotted for monetary consideration …”??in the Circular. Rather the Authority conveys through the Circular that covered parking can be sold without expressly saying so which is exactly opposite to the law on the point i.e. except for ‘Garage’ no other space can be sold for parking either under the Maharashtra Ownership of Flats Act (MOFA) or RERA or the Maha.Rules.

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The only place where we can find some reference to the sale of covered parking space is in the Model Sale Agreement at Annexure ‘A’ of the Maha. Rules of RERA under Clause 1(a)(iii). The Model Sale Agreement is preceded with an explanatory note ending with?“Any clause in this agreement found contrary or inconsistent with any provisions of the Act, Rules and Regulations would be void-ab-initio”.? Accordingly, the provision referring to the sale of covered parking in the model sale agreement is invalid for being contrary to or inconsistent with substantive provisions of RERA or the provisions of Maha. Rules. Further, any Sale Agreement between the promoter and allottees which incorporates this clause will be void-ab-initio for being contrary or inconsistent with the provisions of the Act & Rules.

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In case the Authority relies on clause 1(a)(iii) referring to the sale of covered parking as a Rule permitting the sale of Covered parking in Maharashtra, for issuing the Circular, then it has ignored the detailed Explanatory Note to the Model Agreement under the Maha. Rules. It would be worth pointing out that on a plain reading of the Explanatory Note one can understand it as clarifying that the Model Sale Agreement is a ‘general guide’ for drafting a Sale Agreement ‘which may be modified and adapted in each case depending upon the facts and circumstances of the respective case, but the clauses in the Model Agreement which are in accordance with the statue and mandatory according to the provisions of the Act. have to be retained’. Clause 1(a)(iii) in the Model agreement, cannot be interpreted as permitting the sale of covered parking space as the clause is not in accordance with and contrary to the provisions of RERA or Maha. Rules.

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Contradiction in the Circular of Maha RERA dated July 30, 2021?– If we pause and look at the Circular for a moment, the Authority contradicts its own statement in the Circular by restricting the sale of open parking with the justification that the said space is a part of common areas. If that be the case, then why has the Authority acknowledged the sale of ‘covered parking space’ at sr.no. (iv) of the Circular? The point is the definition of ‘covered parking space’ in Maha. Rules include basement parking space which is in the common basement which is one of the common areas listed under the definition of ‘common areas’ at section 2(n)(iii)[16] of RERA. Therefore, the question is what prevented the Authority from restricting the sale of Basement parking spaces which, also happens to be a covered parking space by definition. As a matter of fact, all the covered parking spaces are common areas which are discussed below.?To put it in plain language there is a direct conflict between the state rules of Maharashtra and the central enactment.

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The Circular permits the sale of basement parking, stilt parking, podium parking, and other kinds of “covered parking space” as these spaces are covered under the definition of ‘covered parking space’ under the Maha. Rules. Thus almost the entire parking area except for the #openparking area can be sold as per the Circular. Well, the Allottees are also confused on whether covered parking spaces erected on metal poles with PVC roof sheets fall within open parking spaces or covered parking spaces, as in most cases these spaces are being sold as covered parking spaces.? This is certainly not the outcome that was intended by defining ‘common areas’ while permitting the sale of ‘garage’ only, in RERA and Maha. Rules. Also, the law on the point very much leads us into accepting covered parking areas as ‘common areas’. To understand this let us dig deeper into the question.

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Law on parking after RERA came into force?– Can builders sell covered parking after RERA coming into force

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RERA became enforceable from 1st May 2017. One of the changes that were introduced in respect of parking by RERA was the introduction of the definition of ‘Garage’ at section 2(y) and RERA also defined ‘common areas’ at section 2(n)[17]. The definitions of ‘garage’ and ‘common areas’ in RERA are more or less identical to what the Supreme Court interpreted as ‘garage’ and ‘common areas’ in Nahalchand Laloochand[18]. Prior to RERA coming into force, only a garage could be sold to allottees along with a flat based on the Supreme Court’s ruling. However, promoters were already selling common areas like covered parking spaces as garages. It was therefore found necessary to define a ‘garage’ and ‘common areas’ in order to safeguard the interest of the allottees and prevent the promoters from selling such parking spaces as garages which were in fact common areas. Accordingly, a ‘garage’ is defined in RERA as –

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QUOTE

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garage means a place within a project having a roof and walls on three sides for parking any vehicle, but does not include an unenclosed or uncovered parking space such as open parking areas

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UNQUOTE

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‘Covered parking space’?as defined in the Maha. Rules mainly cover and include basement parking, stilt parking, podium parking spaces which are being discussed in this article. Covered parking space is defined under the Maha Rules as –

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QUOTE

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Covered parking means an enclosed or covered area as approved by the competent authority as per the applicable development control regulations for parking of vehicles of the allottees which may be in the basement and/or stilt and/or podium and/or space provided by mechanised parking arrangements but shall not include a garage and/or open parking

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UNQUOTE

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Further covered parking spaces are not “separate and self-contained parts of an immovable property in a building or plot of land” used for any of the purposes as stipulated in the definition of ‘Apartment’ in RERA which a promoter is authorised to sell as an ‘apartment’ and neither are they garages and therefore they qualify as ‘common areas’.

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‘Common Areas’?–?Common areas are listed in the definition of common areas in RERA under section 2(n)[19], which are non-saleable and are to be transferred to the housing society when the conveyance deed is executed. Open parking has been spelt out in the definition of common areas in RERA. However, covered parking spaces (stilt, podium including basement parking areas) are not specifically listed in common areas and therefore there might be a presumption that these parking spaces do not qualify as common areas. But merely because the legislature has not explicitly spelled out any ‘covered parking space’ under the list of ‘common areas’ it need not be construed that the legislature has intentionally excluded covered parking area from the definition of ‘common areas’.

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Basement, Stilt & Podium parking spaces are spaces that are community facilities provided in the real estate project refer sub. section 2(n)(vii)[20] and/or portion of the project in common use refer sub. section 2(n)(viii)[21]. The definition of common areas in RERA under Section 2(n)[22] is not an exhaustive one spelling out all common areas, provide the necessary scope, and it is purposely done so by the legislators to bring all covered parking spaces like basement, stilt & podium parking spaces and other areas in common use (which are not explicitly stated in the definition) within the meaning of the definition of common areas. Therefore, these covered parking spaces are not saleable.

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The fact that ‘covered parking spaces’ are common areas is also supported by the DCR and UDCPR framed under the Maharashtra Regional Town Planning act, which lay down mandatory rules for promoters to provide covered parking spaces while at the same time specifying these spaces to be ‘free of FSI’ they incentivize the promoters for raising the necessary infrastructure for such parking space. As per the DCR as applicable to different regions of Maharashtra and now as per the Unified Development Control and Promotion Regulations 2020 (UDCPR) for Maharashtra :

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(i)???????????? Parking space shall be provided as per the scale laid down. It is a mandatory requirement

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(ii)?????????? The DCR commonly requires that parking space may be provided underneath the building, in the basements within its stilted portion, or on upper floors.

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(iii)???????? The UDCPR provide that parking spaces include spaces in a basement or on a floor supported by stilts, podium or upper floors, covered or uncovered spaces…

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UDCPR – space to be left out for parking shall be in addition to marginal open space left out for lighting and ventilation purpose as given in the regulations.

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UDCPR Regulation 6.8.(ii) – Stilt/ Multi storied floors, podium and basement if used for parking are excluded for FSI calculation(congested areas).

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UDCPR Regulation 9.9.1 – area of garages shall be including FSI.

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UDCPR Regulation 9.11.1 – Parking spaces in Basement shall be permissible free of FSI

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UDCPR Podium – The definition of the podium in the regulations clarify the purpose for which it is meant?“Podium means a floor of a building extending beyond building lines and used for?parking, recreation open space, recreation,?fire and building services / utilities and incidental purposes, as specified in these regulations”.

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It is also pertinent to note as observed above that parking areas are excluded from the computation of FSI or Free of FSI as per DCR & UDCPR except garages. This in ordinary parlance means the promoter by providing such space for parking does not incur a loss of FSI or loss of area from their sale component, as he is incentivized to use FSI in proportion to the space lost in providing the parking space, for developing additional area which he can sell. The very purpose of the incentive is for the promoter to provide necessary infrastructure as required by the regulations which include providing necessary parking space.

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MOFA and RERA are beneficial legislations with the benevolent purpose of safeguarding the interest of allottees and regulating the development activities in housing projects so as to protect the consumers/allottees from malpractices of the builders/ promoters /developers. The DCR and DCPR further regulate the development activities in the interest of the consumer/allottee right from the commencement stage of the project till its completion of the project. Therefore all the provisions of MOFA and RERA are required to be read harmoniously with the DCR and DCPR in the interest of the consumer/allottee and when so read it cannot be said that it was the intention of the legislatures/rule-makers to exclude covered parking space from the definition of common areas.

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In fact, the Authority in the guise of a Circular has introduced the new rule permitting the sale of ‘covered parking’ bypassing the legislative procedures and adding something new which was never intended by the legislators.

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It is unfortunate that the Circular is issued in utter disregard to the provisions of RERA permitting the sale of covered parking space while at the same time reducing the scope of the definition of common areas. RERA and Mah. Rules do not in any way permit the sale of covered parking space and it is worth reiterating that it was never the intention of the legislature to exclude covered parking space from the definition of common areas.

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[1] AIR 2010 SC 3607

[2] AIR 2010 SC 3607

[3] "Flat" means a separate and self-contained set of premises used or intended to be used for residence, or office, show-room or shop or godown 7[or for carrying on any industry or business] (and includes a garage), the premises forming part of a building 8[and includes an apartment.]

Explanation.- Notwithstanding that provisions is made for sanitary, washing, bathing or other convenience as common to two or more sets of premises, the premises shall be deemed to be separate and self-contained;

[4] 63 T.L.R. 62

[5] Supra N 3

[6] Supra N 3

[7] Supra N 3

[8] Supra N 3

[9] Supra N 3

[10] Supra N 3

[11] Supra N 3

[12]"common areas and facilities", unless otherwise provided in the Declaration or lawful amendments thereto, means-

(1)?????????? the land on which the building is located;

(2)?????????? the foundations, columns, girders, beams, supports, main walls, roofs, halls, corridors, lobbies, stairs, stairways, fire-escapes and entrances and exits of the buildings;

(3)?????????? the basements, cellars, yards, gardens, parking areas and storage spaces;

(4)?????????? the premises for the lodging of janitors or persons employed for the management of the property;

(5)?????????? installations of central services, such as power, light, gas, hot and cold water, heating, refrigeration, air-conditioning and incinerating;

(6)?????????? the elevators, tanks, pumps, motors, fans, compressors, ducts and in general all apparatus and installations existing for common use;

(7)?????????? such community and commercial facilities as may be provided in the Declaration; and

(8)?????????? all other parts of the property necessary or convenient to its existence, maintenance and safety, or normally in common use;

[13] Circular No. 36 / 2021

[14] "garage" means a place within a project having a roof and walls on three sides for parking any vehicle, but does not include an unenclosed or uncovered parking space such as open parking areas;

[15] "common areas" mean—

(i)???????????? the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase;

(ii)??????????? the stair cases, lifts, staircase and lift lobbies, fir escapes, and common entrances and exits of buildings;

(iii)????????? the common basements, terraces, parks, play areas, open parking areas and common storage spaces;

(iv)????????? the premises for the lodging of persons employed for the management of the property including accommodation for watch and ward staffs or for the lodging of community service personnel;

(v)??????????? installations of central services such as electricity, gas, water and sanitation, air-conditioning and incinerating, system for water conservation and renewable energy;

(vi)????????? the water tanks, sumps, motors, fans, compressors, ducts and all apparatus connected with installations for common use;

(vii)??????? all community and commercial facilities as provided in the real estate project;

(viii)?????? all other portion of the project necessary or convenient for its maintenance, safety, etc., and in common use;

[16] Supra N 15

[17] Supra N 15

[18] AIR 2010 SC 3607

[19] Supra N 15

[20] Supra N 15

[21] Supra N 15

[22] Supra N 15