Controversy Surrounds Apartment Complex

by Nirmala Kannangara

One of the invoices that shows the re-sell and The sales agreement

The alleged frauds involving apartment constructions are reaching higher levels where there are instances how certain developers not only deceive the government departments but also the clients at large.

One such company, HRL Homes Lanka Private Limited, a duly incorporated limited liability company, has been accused of failing to execute the issuing of deeds of transfer to some of those who have purchased apartments from their Chelsea Manor and Peninsula Residencies. Further, unknown to the original buyers, the company is also accused of re-selling apartments the Company had already sold earlier to bona fide buyers.

Shocking revelations have come to the fore as to how HRL Homes have duped more than twenty five clients by not issuing deeds of transfer over the years but having possession of the properties. The Managing Director of HRL Homes confirmed this to the newspaper that out of the 54 units, deeds have been given only to 22 buyers.

One of the clients meanwhile accused the Management by failing to  handover the apartment he purchased (apartment 6F now referred to by HRL Homes as 6/2 of Peninsula Residencies in Colombo 3) over the past decade although the purchaser had made the full payment as per the sales agreement.

The Developer now claims that the said purchaser had not paid the full payment as per the letter of offer dated February 27, 2006 signed by both parties agreeing to sell/ purchase the aforesaid apartment for Rs. 16.5 million although the sales agreement that was signed subsequently three days later states that the sale price of Unit 6F at Peninsula Residencies is Rs. 11 million.

A legal luminary, on condition of anonymity, confirmed to this newspaper, that the Sales Agreement is legally binding and supersedes the first ‘agreement’ both parties have entered into. “There cannot be two legal documents. The legal document should be the last one which is the sales agreement which has been duly registered with the Land Registry and had been attested by a Notary. The Developer now attempts to explain saying that he had to give a lower price in the sales agreement in order to safeguard the purchaser from paying high stamp duty. The Developer had thus defrauded the State by doing so. The relevant departments have to look into the affairs of this Company to find out by which way they are duping the state institution,” sources claimed.

The purchaser of the said apartment alleges that he had been deceived by HRL Homes – the Developer of Peninsula Residencies, Colombo although he had paid nearly one million more than the actual price within eleven months – from February 2006 to January 2007.

The purchaser entered into the sales agreement with HRL Homes Lanka Private Limited on March 2, 2006 to purchase Unit 6F apartment for Rs. 11 million and had settled the payment in full with seven installments. The first installment had been paid on February 28, 2006 for Rs. 2 million (invoice No. 356) while the second and third installments had been paid by Sterling Pounds (GBP). The second and third installments had been paid on March 31, 2006, for Rs. 4.058 million (GBP 22,738.07) and Rs. 935,892 (GBP 5,300) respectively which had been confirmed by HRL Homes through e-mails. The fourth and fifth installments had been paid on December 6, 2006 for Rs. 1.6 million and 1.25 million respectively (invoice No. 535 and 536). Sixth installment of Rs. 1.65 million had been paid on December 19 (invoice No. 540) and the final payment of Rs. 1 million on January 6, 2007 (invoice No. 547), according to the copies of invoices this newspaper is in possession.

According to Clause 4 of the aforesaid sales agreement, the developer has the authority to cancel this agreement by giving notice in writing if the purchaser fails to pay the money thirty days after the expiration of payment period and re-sell the property and refund the payments made by the client. According to sales agreement, this newspaper is in possession, the final installment has to be paid on or before the transfer of deed or occupation of the apartment, whichever should occur first.

Although the developer had promised to handover the apartment by end March 2007, purchaser had abided by the agreement conditions but not the developer.

However, since the developer failed to hand over the apartment even by end 2008 giving various reasons, according to the purchaser, he had no other option but to file a legal case in District Court of Colombo seeking redress to his long standing issue.

Managing Director HRL Homes constantly assured the purchaser that the apartment would be transferred as soon as the construction work of the apartment complex was completed.

According to the purchaser, although the developer now claims that he has no authority to claim for the ownership to unit 6F of Peninsula Residencies as he had not paid the full amount, to his letter dated July 11, 2008 to HRL Homes, they have accepted the fact that the purchaser is entitled to the apartment.

The developer constantly had assured the purchaser that the delay in transferring possession was entirely due to construction issues and that once the issues are solved the possession would be granted to the owners.

“I was asked to pay few more millions by the developer to which I did not agree. That was why I was deprived of the property ownership but those who have danced to the tunes of HRL Homes have been given the title deeds,” the purchaser claimed.

The Developer in April 2011 had told the purchaser that he will not hand over the apartment. Since there were no other options to get the possession of the said unit, the purchaser had filed a legal suit in the District Court of Colombo on May 26, 2011. A few days after filing this case, Managing Director HRL Homes, obviously upon receipt of knowledge of the forthcoming case, sent the purchaser a letter dated May 31, 2011, claiming that he has cancelled the sales agreement due to his (purchaser’s) failure to make the full payment and that he would refund the progress payments made by the purchaser amounting to Rs. 7.5 million after the said apartment is re-sold.

The purchaser alleges the developer is defrauding him by stating that he has paid only Rs. 7.5 million when all documents show that he had paid Rs. 12.494 million an excess of Rs. 994,728.

“Whilst the District Court was pending, HRL Homes had re-sold the apartment unlawfully,” the purchaser alleges. During the course of cross examination, Managing Director HRL Homes on March 20, 2014 told courts that he will refund the money upon resale of the apartment but failed to disclose in court that he had already sold it out in 2013. It is obvious HRL Homes deliberately misled the Judge. The Judgment was delivered on June 26, 2015 in favour of the purchaser for which the Developer appealed.

Although HRL Homes did not tell court that they resold the apartment, when the lawyers appearing for the purchaser made a Writ pending appeal to give the possession of the apartment to their client as per the District Court judgment till the Court of Appeal Judgment is given, Managing Director HRL Homes had no other options but to reveal the truth to the court that he cannot give the possession to the purchaser as he had already sold it.

According to the HRL Homes invoices, which this newspaper is in possession, the Developer had obtained Rs. 18.5 million from R. Raheem between September 20, 2013 and November 29, 2013.

From receipt number 2879 dated September 2013, HRL Homes had obtained Rs. 2 million, receipt No: 2882 dated September 27, 2013, Rs. 500, 000, receipt No: 2909 and 2912 dated October 9, 2013, Rs. 2 million and Rs. 1 million respectively, receipt No: 2916 dated October 10, 2013, Rs. 1 million, receipt No: 2930 dated October 21, 2013, Rs. 1 million, receipt No: 2951 dated October 29, Rs. 2 million, receipt No: 2957 dated November 4, 2013, Rs.2.5 million, receipt No: 3010 dated November 6, 2013, Rs. 4 million, receipt No: 3004 dated November 21, 2013, Rs. 1 million and receipt No: 3014 dated November 29, 2013, Rs. 1.5 million. According to the receipts, all these payments had been paid by cash.

“Now it is up to the Developer to introduce the new purchaser – R. Raheem to the purchaser’s lawyers so they can get a court order and check his bank accounts and find out whether he had withdrawn money on the dates the payments have been made since the payments have been made by cash. If the developer says that he had not signed a sales agreement although the new purchaser had paid Rs. 18. 5 million, it is unlikely that a person by this name exists. If the developer fails to provide details of the new buyer, there are possibilities that this is a fraudulent sale and that the receipts had been issued merely to show the courts that this apartment was re-sold. Hence it is time for the government to blacklist such developers to safeguard prospective buyers from undergoing hassles after investing their hard earned money,” the legal luminary said.

However, refuting allegations, Managing Director HRL Homes, said that it was on the request of the purchaser that he stated in the sales agreement that the selling price of Unit 6F of Peninsula Residencies was Rs. 11 million but the actual cost of the said apartment was Rs. 16.5 million.

“In order to evade stamp duties, I was requested to state the sale price as Rs. 11 million in the sales agreement. Not only this purchaser but also most of our customers want us to put a smaller price in their sales agreements. But he promised to pay me the actual cost of Rs. 16.5 million. In the offer letter he had signed on February 27, 2006, the purchaser in question had agreed to pay Rs. 16.5 million. Having said that he is now going on what is written in the sales agreement,” the MD said.

When asked as to why the company had so far failed to transfer the deeds unto purchasers who have made the full payment, the Managing Director (MD) said that it is up to the buyers to get the deeds ready and to bring them for the seller’s signature. “Even some don’t want to get the deeds transferred to their names as they have to pay stamp duties and other taxes. Out of the 54 units at Peninsula Residencies, only 22 had got the deeds transferred unto their names but not the others. Let them come with the documents ready so there is no issue we can put our signatures,” the MD said.

When he was inquired whether the sales document content, which was signed on March 2, 2006, supersedes the contents in the offer letter, he said that the offer letter is still valid since the sales agreement is yet another document that has not been registered with the Land Registry.

“When HRL Homes faced a difficult situation in completing the apartment complex, I personally met our customers and appointed a committee to look into how we could carry on the construction work without coming to a standstill. Jayampathy Bandaranayake, Dr. David Ponnaih and Dr. Vajira Tennakoon came forward and took an initiative to work on this project until an alternative arrangement is developed. They worked with us and renegotiated bank facilities and suggested that those who have advanced monies towards this project to contribute immediately 50% of the balance payable. The money received was placed in an account operated by this Investor Representative Committee. That was how we overcame the hurdle and when we informed the purchaser in question to pay the balance he neither declined nor replied to our letters. As we noticed that he was evading paying the balance we had to cancel his agreement as per Clause 4 of the sales agreement,” the MD said.     When asked as to when he re-sold the apartment and why he failed to return the money back to the purchaser if he had violated the agreement, the MD said that he sold the apartment in 2013 but his client did not want to accept the money that was paid.

“I sold the apartment for Rs. 18.5 million to R. Raheem and the money went to the Investor Representative Committee account at Seylan Bank. When I was cross examined in 2014, I knew that there was a buyer and few payments have been made but did not know that we have received the payment in full. That was why I told courts that I will repay the money once it is sold out. This purchaser paid me only Rs. 7.5 million to which I have given invoices but the payments made by GBP was set against the actual cost of Rs. 16.5 million. Although I wanted to pay him back Rs. 7.5 million he is not willing to accept that amount,” the MD added.

When asked to show the sales agreement he had entered into with R. Raheem, the MD said that he did not enter into a sales agreement with Raheem as a letter of offer had been given to him. “He is a known customer and he did not want to sign a sales agreement. Our understanding is as such the letter of offer is more than enough to prove this ownership to the apartment,” he claimed.

Although R. Raheem’s contact details were sought by this newspaper from HRL Homes on several occasions, the latter did not wish to give any contact number for Raheem claiming that they cannot provide contact details without getting the approval from them. “When I called Raheem it was his son who answered the call. I told him that an article about the apartment will be published in a newspaper and the reporter concerned wanted his father’s contact details to which he said that neither he nor his father is willing to talk to the media and wanted me not to give their contact details,” the MD said.

1 Comment for “Controversy Surrounds Apartment Complex”

  1. Do not buy any apartment now, the price will come down in the near future.

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