by THO
In a move that would help homebuyers, the Supreme Court has said that if a real estate developer offers possession of a flat to a buyer without completion and firefighting clearance certificates, it would not only be illegal but would amount to deficiency in service under the Consumer Protection Act. It also said that a purchaser cannot be compelled to take possession in such circumstances.
The SC order, said legal experts, will help settle the issue in favour of the home buyer by making the developer responsible and duty bound to obtain necessary certificates such as occupancy and/or completion certificate and firefighting clearance certificate before offering possession of a flat to a home buyer.
It highlights that allottees also have the right to refuse to accept possession in such cases and protects homebuyers from taking possession of unsafe or incomplete properties and compels builders to adhere to legal safety standards before offering handover of the flats, they said.
It should be noted here that in Noida and Greater Noida, several buyers had taken possession after signing a fit-out possession agreement without the occupancy certificate. The fit-out possession letter typically says that the builder has applied for an occupation certificate and that the buyers can take possession for interior work or fit-outs as they are called.
The Greater Noida Industrial Development Authority (GNIDA) has on September 8 issued a stern directive to builders to initiate the flat registry process for buyers within 15 days, warning that non-compliance will result in severe consequences, including project cancellations and possible referral of cases to the Economic Offences Wing (EOW).
Here’s what the order states
The Supreme Court in its recent order in the case of Dharmendra Sharma v. Agra Development Authority, has categorically held that, an offer made by a real estate developer to a home buyer to take possession of a flat without obtaining completion certificate and firefighting clearance certificate would not be considered to be valid.
Absence of these certificates was found to constitute a deficiency in service, the apex court said.
“Despite the appellant’s repeated requests, ADA (Agra Development Authority) failed to produce these certificates, rendering its offer of possession incomplete and legally invalid,” the order said.
A bench of Justices Vikram Nath and Prasanna Bhalachandra Varale directed Agra Development Authority to pay ₹15 lakh compensation to Dharmendra Sharma due to its inability to provide certificates for completion and firefighting clearance, when it offered the flat in 2014, and even during the proceedings before the consumer commission.
The order noted that Section 4(5) of the UP Apartment (Promotion of Construction, Ownership & Maintenance) Act, 2010 and Section 19(10) of the RERA Act, 2016 mandates that a developer must obtain these certificates before offering possession.
The Supreme Court said that the buyer, despite having paid the tentative price of ₹56.54 lakh in 2012, failed to remit the additional amount of ₹3,43,178, as demanded by the ADA, even after being repeatedly reminded. Instead, the buyer persistently sought a waiver of the penal interest on the delayed payment, eventually settling the amount only on June 4, 2019, a significant delay that cannot be overlooked and that too without the interest component which had further accrued over a period of about five years, the bench said.
On the other hand, the ADA, despite making an offer of possession in 2014, did not fulfill its statutory obligations by providing the completion certificate and firefighting clearance certificate, both of which are essential for a valid and lawful offer of possession. The absence of these documents, which were also not furnished before the NCDRC, unquestionably vitiates the offer of possession made by the ADA, the bench said.
Also Read: SC upholds order for refund of amount to homebuyers by builder for delayed possession of flat
Legal experts welcome the order
“These certificates are sine qua non for any legitimate delivery of a housing unit. Builders often try to evade this responsibility in order to shift the onus to buyers. However, courts have correctly put the responsibility and necessity of obtaining these documents on the developers,” said Aditya Parolia, PSP Legal.
Soumya Banerjee, Partner, AQUILAW said this is a welcome move and that the order reiterates the stand taken by the Supreme Court in earlier cases such as Debashis Sinha v. R.N.R. Enterprise (2023) and Treaty Construction vs. Ruby Tower Cooperative Housing Society Ltd (2019) wherein it had been held that failure on the part of the developer to obtain the aforesaid certificates constitutes a deficiency in service under the Consumer Protection Act, 1986.
Real estate developers bound under RERA to obtain completion certificate or occupancy certificate
It may be noted that, in terms of S 11(4)(b) read with S 19(10) of the Real Estate (Regulation and Development) Act, 2016, a developer is anyway under an obligation to obtain the completion certificate or occupancy certificate or both from the relevant competent authority as per local laws or other laws for the time being in force and only after obtainment of such certificate(s), the possession of the flat can be handed over to an allottee or home buyer, said Banerjee.
Supreme Court order to help buyers of projects that commenced before RERA
However, for matters which are pending in various consumer forums in respect of projects which commenced and completed before the advent of the RERA regime, the recent order of the Supreme Court along with its earlier decisions as mentioned above, will help settle the issue in favour of the home buyer by making the developer squarely responsible and duty bound to obtain necessary certificates such as occupancy and/or completion certificate and firefighting clearance certificate before offering possession of a flat to a home buyer, said Banerjee.
Avnish Sharma, Partner, Khaitan & Co, observed that the Supreme Court in its 2023 judgment of Debashis Sinha Vs RNR Enterprise has held that the practice of offering possession of flats by some developers/development authorities, prior to procurement of completion certificate or occupation certificate, as invalid.
These judgments not only require the developers/development authorities to offer possession after obtaining completion/occupation certificates (which typically require a prior clearance from fire department) but more importantly highlight that allottees also have the right to refuse to accept possession in such cases. These judgments are in a positive way going to help align state specific RERA rules or relevant Apartment Ownership Act or Municipal corporation Acts, he added.
Gauri Jagtap, Associate Partner, King Stubb & Kasiva, Advocates and Attorneys, said that the Supreme Court order protects homebuyers from taking possession of unsafe or incomplete properties and compels builders to adhere to legal safety standards before offering handover of the flats.
Buyers have every right to demand a valid Completion Certificate and Fire Safety Certificate before taking possession of a flat or property in a building. Section 4(5) of the UP Apartment (Promotion of Construction, Ownership & Maintenance) Act, 2010 and Section 19(10) of the RERA Act, 2016 mandate that a developer must obtain these certificates before offering possession, these certificates serve as crucial safeguards, assuring buyers that the property they have invested in is safe for occupation, said Jagtap.
Here’s what home buyers should do
Homebuyers should insist on these certifications to ensure compliance with building regulations and fire safety standards. While obtaining these certificates may entail time and costs for builders, they are essential for guaranteeing the structural integrity and safety of the building. Buyers should not hesitate to request these documents as part of their due diligence process before moving into the property.
By complying with these legal requirements, developers not only fulfill their obligations but also contribute to creating a secure living environment for residents. The judgment comes as welcome relief to harrowed purchasers and dissuades the builders from avoiding and neglecting their obligations, added Jagtap.
Also Read: SC calls for uniformity in builder-buyer agreements to protect home buyers
