Haryana Real Estate Regulatory Authority (Authority) comprising Justice Vijay Kumar Goyal (Member), has held that the offer of possession made by the builder before obtaining the Occupation Certificate from local authorities is invalid and contrary to the law. Accordingly, the authority directed the builder to pay interest to the homebuyer for the delayed possession.

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For knowledge, an Occupation Certificate is a document issued by the local municipal authority, which serves as proof that a building has been constructed according to sanctioned plans and complies with all necessary safety norms and regulations. The occupation certificate is issued after the completion of the construction process and indicates that the building is ready for occupancy.

Background Fact

In 2011, the Builder advertised its upcoming real estate project Sovereign Floors at Alba Esencia, located in Sector-67, Gurugram. Relying on the advertisement, the Homebuyer booked a flat in the Builder’s project by paying the booking amount of Rs.9,02,660.

On 14.5.2011, the Builder issued an allotment letter to the Homebuyer, assigning a Flat on the Ground Floor. Furthermore, a Flat Buyers Agreement (FBA) was signed between the Builder and the Homebuyer on 23.08.2011.

As per clause 5.1 of the FBA, the Builder promised to provide possession within a period of 30 Months with a grace period of 6 Months from the date of receiving the approval of the building plans by local authorities. Thus, the due date of possession was 31.12.15.

Despite paying the total consideration amount for the Flat, amounting to Rs.1,07,69,1,40, the Builder failed to deliver the possession of the flat on time. However, on 05.06.2016, the Homebuyer received the offer of possession from the Builder. At that time, the Builder had not obtained an occupation certificate for the project, thus, the Homebuyer rejected the possession offer of the Builder. Aggrieved by the delayed possession, the Homebuyer filed a complaint in Haryana RERA seeking interest from the builder.

Contention of the Builder

The builder contended that the complaint filed by the Homebuyer is not maintainable before the Authority, as the occupation certificate of the unit was received on 04.01.2017 before the enforcement of the RERA 2016. The builder argued that according to settled legal principles, where the occupancy certificate of the unit is obtained before the enactment of the RERA Act, no complaint is considered maintainable before the Authority. Furthermore, the builder contended that they invited the Homebuyer to take possession of the unit through a letter dated 05.06.2016. However, the Homebuyer, acting with malicious intent, failed to come forward to take possession of the unit.

RERA Order

The Authority held that the offer of possession made by the builder before obtaining the Occupation Certificate from local authorities is invalid and directed the builder to pay interest on the amount paid by the homebuyer at the interest rate of 10.85% p.a. for every month of delay from the due date of possession until obtaining the occupation certificate, plus two months as per the proviso Section 18(1) of RERA, 2016.

The Authority established the prescribed rate of interest at 10.85% per annum, in accordance with Rule 15 of the Haryana Real Estate (Regulation and Development) Rules, 2017, which is read below:

Rule 15: Interest Payable by Promoter and Allottee

An allottee shall be compensated by the promoter for loss or damage sustained due to incorrect or false statement in the notice, advertisement, prospectus or brochure in the terms of section 12. In case, allottee wishes to withdraw from the project due to discontinuance of promoter’s business as developers on account of suspension or revocation of the registration or any other reason(s) in terms of clause (b) sub-section (I) of Section 18 or the promoter fails to give possession of the apartment/ plot in accordance with terms and conditions of agreement for sale in terms of sub-section (4) of section 19. The promoter shall return the entire amount with interest as well as the compensation payable. The rate of interest payable by the promoter to the allottee or by the allottee to the promoter, as the case may be, shall be the State Bank of India highest marginal cost of lending rate plus two percent. In case, the allottee fails to pay to the promoter as per agreed terms and conditions, then in such case, the allottee shall also be liable to pay in terms of sub-section (7) of section 19:

Provided that in case the State Bank of India marginal cost of lending rate (MCLR) is not in use, it shall be replaced by such benchmark lending rates which the State Bank of India may fix from time to time for lending to the general public.

The Authority rejected the contention of the builder that the complaint is not maintainable before the authority and held that even after obtaining the occupation certificate, the project will be considered an Ongoing project as it has yet to receive the completion certificate.

In conclusion, Haryana RERA directed the builder to pay interest to the homebuyer for the delayed possession and deemed the possession offer made by the builder before obtaining the Occupation Certificate from local authorities as legally invalid.

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