News: Builder Liable To Pay For Delays In Getting Occupancy Certificate-24.07.2017

Builder liable to pay for delays in getting occupancy certificate

It is common for builders to allow purchasers to occupy flats without obtaining the occupancy certificate, but they protect themselves by obtaining a declaration that possession is for fit-out.

This is illegal. If possession is delayed, the flat purchaser is entitled to compensation. The question is whether delay is to be considered till the date when possession is given for fit-out, or till the time the occupancy certificate is obtained.

Case Study: Narayan Shivaji Redkar and other flat purchasers had bought flats in Orbit Residency Park building, which was to be constructed by Orbit Corporation and Anisha Build Tech at Andheri. The price of the flats ranged from Rs 90 lakhs to over Rs 1 crore.

The builders were to hand over possession within 36 months for the purpose of interiors and fit-outs. As possession was not given within the stipulated time, several flat purchasers filed individual complaints before the National Commission.

The builders contested the complaint. They challenged the pecuniary jurisdiction of the National Commission in respect of flats which were to be sold at less than Rs 1 crore. They claimed that there was no deficiency in their service and that the complaints were premature. The delay was attributed to stalling of the project as LIC Housing Finance had taken possession of the property due to a dispute with Orbit Corporation to whom a loan had been advanced. Besides this, delay has also occurred while obtaining environmental clearance as per revised government policy, as permission which was sought in February 2012 was granted in September 2015.

The National Commission observed that the aggregate value of the goods and services together with the claim for interest and compensation claimed would determine its pecuniary jurisdiction. In addition, the tax payable on the price of the flat would also have to be added for the purpose of valuation of the claim. As the aggregate amount of the flat, taxes, interest and compensation exceeded Rs.1 crore, the Commission concluded that it would have the jurisdiction to adjudicate the complaint.

On merits, regarding the environmental clearance, the Commission observed that there was no change in the law. In view of this, the Commission ruled that the excuse regarding delay to the environmental clearance was not acceptable.

The Commission observed even though environmental clearance had been obtained, the builders were even now unable to state when construction would be completed. So, the Commission would have to fix a time frame. Accordingly, by its order of July 17 delivered by Justice V K Jain, the National Commission directed the builders to complete construction hand over possession for fit-outs by December 31, 2018. For the period of delay, it awarded interest at 9% per annum.

The Commission further ordered that occupancy certificate must be obtained by March 31, 2019 so as to be able to hand over legal possession for occupying and residing in the flat. It awarded further interest of 9% till the date of legal possession. Additionally, litigation costs of Rs 10,000 were also granted.

Conclusion: Since possession for fit-outs does not entitle a flat purchaser to reside in the flat, the consumer is entitled to compensation till the time when the flat becomes legally available for occupation.