Can a Builder Cancel Your Booking? Know Your Rights Under RERA

Booking a flat or plot is a significant financial commitment. But what happens if, after accepting your booking amount, a builder decides to cancel your allotment?
Can a promoter cancel your booking whenever they want? Can they forfeit your money? What remedies are available to you as a homebuyer?
The answer depends on the terms of your Agreement for Sale, the reason for cancellation, and the applicable RERA provisions and state rules.

What Does RERA Say About Cancellation?

Section 11(5) of the Real Estate (Regulation and Development) Act, 2016 provides that a promoter may cancel an allotment only in accordance with the terms of the Agreement for Sale.
The provision also gives an allottee the right to approach the RERA Authority where the cancellation is not in accordance with the Agreement for Sale, is unilateral, or is without sufficient cause.
Therefore, a builder does not have an unrestricted right to cancel a buyer's allotment simply because it chooses to do so.

When Can a Builder Cancel a Booking?

A cancellation may be possible where there is a valid contractual basis under the Agreement for Sale.
Common situations may include:

1. Failure to Make Payments

If the allottee repeatedly fails to make payments according to the agreed payment schedule, the Agreement for Sale may provide a mechanism for cancellation after following the required procedure.
The exact consequences depend on the contractual terms and applicable state rules.

2. Breach of the Agreement

If the buyer violates a material term of the Agreement for Sale, the promoter may have contractual remedies, which can include cancellation where the agreement permits it.
However, the promoter must follow the procedure prescribed by the agreement and applicable law.

3. Other Contractually Permitted Grounds

An Agreement for Sale may contain specific circumstances in which cancellation can take place.
Therefore, buyers should not rely solely on a booking form, allotment letter or verbal communication. The Agreement for Sale and applicable law should be examined carefully.

Can a Builder Cancel Your Booking Without Giving a Proper Reason?

A promoter's cancellation cannot simply disregard the Agreement for Sale.
Section 11(5) specifically provides that cancellation must be in terms of the Agreement for Sale. If an allottee believes the cancellation is not in accordance with the agreement, is unilateral or lacks sufficient cause, the allottee may approach the RERA Authority for relief.

This makes the contractual terms particularly important.

What About Your Money?

The treatment of the amount already paid depends on the reason for cancellation, the Agreement for Sale and applicable state-specific rules.

For example, the model/UP agreement framework contains provisions dealing with cancellation and the treatment of amounts paid by an allottee where the allottee voluntarily withdraws without fault of the promoter. The exact financial consequences can therefore vary by jurisdiction and contractual terms

A buyer should therefore avoid assuming that either “the builder can keep everything” or “the builder must refund everything immediately” without examining the applicable documents and rules.

What If the Builder Cancels Because of Its Own Default?

The legal position can be different when the promoter fails to perform its obligations.

Section 18 of RERA addresses situations where the promoter fails to complete or is unable to give possession in accordance with the Agreement for Sale or by the date specified there. Depending on the circumstances and the allottee's choice, the Act provides for refund with applicable interest and compensation, or interest for delay where the allottee continues with the project.

This is different from a cancellation arising from the allottee's own contractual default.

What Should You Do If Your Booking Is Cancelled?

If you receive a cancellation notice, consider taking the following steps:

1. Read the Agreement for Sale

Identify the clause relied upon for cancellation.

2. Check your payment records

Keep receipts, bank statements, demand letters and payment acknowledgements.

3. Check the cancellation notice

Look at the reason given by the promoter and whether the procedure specified in the agreement has been followed.

4. Preserve all communications

Keep emails, letters, WhatsApp messages and other relevant communications.

5. Check the applicable state RERA rules

RERA is a central law, but state rules and prescribed agreements can affect the procedure and financial consequences.

6. Consider approaching the appropriate authority

Where the cancellation is alleged to violate Section 11(5) or the Agreement for Sale, the allottee may consider the remedies available before the relevant RERA Authority.

Can a Builder Cancel a Booking Before the Agreement for Sale?

This situation requires particular care.

Section 13 of RERA provides that a promoter cannot accept more than 10% of the cost of the apartment, plot or building as an advance payment or application fee without first entering into a written Agreement for Sale and registering it as required by law.

However, whether a particular cancellation is lawful depends on the facts, documents, applicable state rules and the stage of the transaction.

5 Things Buyers Should Check Before Booking

Before paying a substantial booking amount, check:

• RERA registration of the project

• Promoter details

• Booking/allotment terms

• Cancellation and forfeiture clauses

• Proposed Agreement for Sale

Do not focus only on the price or payment plan. The cancellation clause can be just as important as the purchase price.

Frequently Asked Questions

Can a builder cancel my flat booking?

A promoter may cancel an allotment only in accordance with the Agreement for Sale and applicable law. Section 11(5) specifically addresses this issue.

Can the builder forfeit my booking amount?

The answer depends on the contractual terms, reason for cancellation and applicable state rules. The amount cannot be determined in isolation from these documents.

What if I believe the cancellation is unfair?

If the cancellation is not in accordance with the Agreement for Sale, is unilateral or is without sufficient cause, Section 11(5) allows the allottee to approach the RERA Authority for relief.

Does RERA protect buyers against arbitrary cancellation?

Section 11(5) places a statutory requirement that cancellation by the promoter must be in accordance with the Agreement for Sale and provides a remedy where the cancellation does not meet the stated requirements.

Final Takeaway

A builder's cancellation of your booking is not simply a matter of choice.

The key questions are:

What does your Agreement for Sale say?
What is the reason for cancellation?
Was the contractual procedure followed?
What do the applicable RERA rules provide?

Before accepting a cancellation or agreeing to forfeiture of money, carefully review the documents and obtain appropriate professional advice where necessary.