Habitat New Flower lost its appeal to the Cassation Bench that ordered it not only to hand over documents but also to carry through the process of transferring title deeds for the homes for six buyers who brought their case to court.
The real estate company made the appeal objecting to the decision of an Execution Bench that set out to execute the decision of the Supreme Court made a year ago. Habitat, angered with the execution’s order, took the case higher, only to lose again.
The Cassation Bench of the Supreme Court upheld the order.
The six homebuyers therefore will be expecting Habitat New Flower S.C. and Estegenet Abate, the title deed holder with percentage share in the company to not only hand them over relevant documents but also to finalize the process through thick and thin, ensuring that the names are changed.
Such meticulous order is not just imposed on the two in a vacuum, but references were made to a tripartite agreement between the parties to the case, homebuyers, Habitat and Estegent.
The tripartite agreement mentioned in the case, was made in 2010, after significant delay of the original date of delivery. Modifying the original agreement, a win-win consensual agreement was reached. The agreement called on Habitat/Etsegenet to hand-over the houses in the unfinished or skeleton state, as they were, and for Habitat to refund the signatory homebuyers a specified amount based on the amount paid, which varies from one to the other depending on the kind of design and model bought , as well as the status of the construction.
Article five of the same agreement specifically obliges Habitat/Etsegenet to ensure the smooth transfer of title deeds for the legal transfer of ownership.
The present case arose from incongruity of interpretation and implementation of the tripartite agreement and delay of returned payment.
The homebuyers had brought a case against the company and the title deed holder asking the court to order proper enforcement of the contract. The request was granted.
But Habitat and Estegenet challenged the execution on two grounds.
“The agreement and the court order both refer to handing over documents, but does not say about transferring title deed and ownership,” the written objection reads.
It further called for the Execution Bench to suspend the case until the dedicated arbitration tribunal, appointed to examine the complex situation reached a decision, particularly on the issue of value added tax (VAT).
The VAT scheme was never part of the original home sale agreement, as it was not then the law of the land. Due to the delay however, the transaction fell under the scope of the law, which demands that any transaction, pending or new, should be subject to VAT.
Since the parties could not resolve the case, Habitat appealed to the high Court asking for appointment of an arbitration tribunal. The tribunal is still examining the case of 85 homebuyers.
The six homebuyers, parties to the cassation’s case are also among the 84 homebuyers, who refused to pay the VAT.
“Since it caught up with us due to the company’s failure, it should be off our shoulders,” they argued in their response to the request.
The judge at the Federal First Instance Fifth Commercial Bench, Sitayehu Zeleke, accepted the amended charge by Habitat New Flower Homes Plc against 85 homebuyers claiming over 50 million Br in unpaid taxes.
“Since the six people who brought their case to the execution bench on title deed transfer controversy are also subjects of the tax controversy, the final order to the way forward should wait until the arbitrators decide on the case,” Belete Tassew, legal representative of the company, argued orally.
He failed to convince the Bench only to be reprimanded that he was unjustifiably obstructing justice.
The Cassation Bench however, found the case admissible to be seen, framing the issue as a means of verifying congruence in the decision between the court that ordered and the Execution Bench, in the spirit of the law.
The real estate developer first filed the suit to the First Instance Civil Court at Lideta division on April 14, 2014, requesting that the court assign arbitrators to resolve the disagreement of the two parties, claiming that 84 homebuyers had refused to pay taxes.
Habitat’s charge claimed that all of the homebuyers refused to pay the tax, though the company asked them orally and in writing several times to make the total payment. Additionally, some of the homebuyers built the houses not in accordance with the designs they were provided by the real estate developer; that led to further disagreement, read the charge.
“Homebuyers are exposed to many unforeseen inconveniences and unforeseen expenses,” Manahlush Alemu, an expert in property management, with wider exposure to the real estate industry commented. “Delay has a cost and at times, like the case at hand, it can as well be equivalent to the original amount.”
“Though this episode is over, the entanglement is yet unpacked,” said Habitat’s lawyer. “We will do as ordered, but homebuyers will not be able to transfer the homes and the respective title deeds to any third party – we have already secured an injunction for that until the arbitration is finalized.”
Habitat New Flower Homes is a owned by nine shareholders, including the Abate siblings -Berehane, Etsegenet, Manyhaleshale and Kifle Abate. It was established in 1999 with capital of 1.2 million Br.
Berta Construction Company, owned by Berehane Abate, is a contractor of Habitat.
“All costs involving the transfer of title deeds, including all government taxes, relevant administrative charges, etc. shall be to the client’s account,” reads another sub-article of the agreement.
Habitat has two construction sites: one in Kality and the other in the Kotebe area, in front of CMC Housing Development. The latter site has 114 houses built on a plot leased from the city government, while the homes at Kality are built on a plot that belonged to Estegent Abate. The kality site, which is the subject of the case brought to court by the six buyers, was initially acquired for farming purposes. Later the land use purpose was changed to fit the real estate industry, and crafted into thirty different title deeds.
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