Allottee Cannot Claim Corpus Fund Refund After Handover To Residents' Association: Tamil Nadu RERA

The Tamil Nadu Real Estate Regulatory Authority (TNRERA) on 7 August held that an individual allottee cannot seek a refund of the corpus fund from a promoter after the promoter has handed over the corpus fund and maintenance accounts to the registered residents' association.

A Coram comprising Chairperson K. Phanindra Reddy and Members A. Nazir Ahamed and Reeta Harish Thakkar rejected a homebuyer's claim for an individual refund from K.G. Foundations (P) Ltd. in relation to the KG Chandra Vista project, while imposing a Rs. 10 lakh penalty on the developer for selling apartments without registering the project under the Real Estate (Regulation and Development) Act, 2016 (RERA). The Authority observed:

“As per the handing over letter dated 05.01.2021 the maintenance and corpus fund account of KG Chandravista Blocks A & B are handed over to the 2nd Respondent along with the enclosure of detailed statement of accounts and common area maintenance expenses. Therefore, the Complainant as the individual allottee cannot claim the refund of corpus fund from the Respondents. If any discrepancies in the statement of accounts relating to the corpus fund produced by the 1st Respondent, it is for the 2nd Respondent to raise the issue."

The dispute concerned the KG Chandra Vista residential project at Semmancherry, Chennai, developed by K.G. Foundations (P) Ltd.

A homebuyer purchased a flat in the project on 11 January 2021 for Rs. 77.99 lakh, including Rs. 40,000 towards the corpus fund and Rs. 47,820 as advance maintenance charges. She later alleged that the developer collected another Rs. 20,000 from each apartment owner after residents were informed that the earlier corpus fund had been exhausted.

Following a fire in the building on 11 April 2024, residents sought details of maintenance expenditure and utilisation of the funds. The homebuyer alleged discrepancies in the financial records and approached TNRERA under RERA, seeking a refund of the corpus fund, disclosure of accounts and registration of the project.

K.G. Foundations denied any misuse of the funds and said it had handed over the maintenance, administration and reconciled accounts to the KG Chandravista Owners Residents Association on 5 January 2021. The developer also claimed that maintenance expenditure had exceeded collections from flat purchasers by Rs. 2.27 lakh.

The Authority examined the builder-buyer agreement and noted that the corpus fund was intended for long-term and major maintenance requirements and had to be transferred to the owners' association after its formation. Since the developer had already handed over the corpus and maintenance accounts for Blocks A and B to the Association, along with detailed statements of accounts and common-area maintenance expenses, the Authority held that the Association had to raise any discrepancy in those accounts.

It clarified that an individual allottee could not seek a refund of the corpus fund from the promoter on the basis of such discrepancies. However, as a member of the Association, the allottee could access its accounts and pursue any grievance before the appropriate forum.

Separately, it found that the KG Chandra Vista project was required to be registered under RERA as its completion certificate was issued only on 26 March 2019, after the Act had come into force.

Accordingly, the TNRERA imposed a Rs. 10 lakh penalty on K.G. Foundations under Section 59(1) of RERA for failing to register the project and directed the developer to register it by 21 August 2026.

For the Complainant (homebuyer): Advocate M/s. J. Ibrahim Ahamed.

For the Respondents (K.G. Foundations (P) Ltd.): Advocate M/s. B. Deepak Narayanan