In some cases, the builders of the property lend out the property to the buyer before obtaining the occupancy certificate. The occupancy certificates are a mandatory requirement for occupying the property and it is important to note that occupying the property without the occupancy certificate is illegal. In such circumstances, the builders transfer the possession of the property on fit-outs.
A letter of fit-out is an offer made by the builder or developer to the buyer wherein the buyer is permitted to carry out interior activities in the building. However, the occupancy is not granted to the buyer. The buyers may face trouble in the future as the developers continue to delay the process of acquiring the occupancy certificate as there are chances that the occupancy certificate is not granted due to gross violations or deviations from the approved building layout plan.
However, in most cases, the builders end up making excuses that the owner is responsible for the delay in carrying out interior works. They transfer the onus and later on abandon the project without rectifying the deficiencies caused by them. Thus leaving the homeowner who has put in his hard-earned money in an unsafe building and also in a circumstance wherein the regulatory authorities may take action for illegally occupying the property.
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Is the fit-out possession offered by the developers legal?
This question becomes more relevant in cases wherein the property purchased does not fall under the ambit of the Real Estate (Regulation and Development) Act, 2016. In such cases, the property becomes subject to the state laws and some of the state laws explicitly ban such occupancies.
For example, Section 3 (2) (i) of the Maharashtra Ownership Flats Act, 1963, expressly states that the possession of the property without the occupancy certificate is illegal and that the certificate is an important document to take over the possession of the property as the flat owner is prohibited from occupying the property without the same. The section also holds the builder liable with a fine, imprisonment, or both.
The National Commission has addressed various cases in this regard. The commission in the case Varun Rawat v. Orbit Corporation Limited & Anr. held that if the possession of the property is delayed, then the home buyer is entitled to claim compensation against the builder. The main issue that arises to this case is whether the delay is calculated based on the date on which the property is ready to be given out as fit-out or is it till the time the occupancy certificate is issued.
The commission held that since during the fit-out time, the owner is not permitted to reside or occupy the property, the consumer becomes entitled to compensation till the occupancy certificate is granted and the property has been legally occupied.
The National Commission in the case of Chaya Pradeep Bavadekar & Ors. v. Kamla Ankur Developers held that transferring the possession of the property on fit-out and without the occupancy certificate is against the builder’s legal as well as contractual obligations. In this case, the commission also struck down the builders claim that the flat was let out on fit-out since the application has been pending before the Mumbai Municipal Corporation (BMC) to correct the deviations that have been made in the sanctioned plan because the buyer need not be concerned with issues between the builder and the municipal corporation.
The commission also held that it is the responsibility of the builder to clear all the objections and to obtain the certificate at their cost. Some states prohibit the homebuyers from occupying the property without an occupancy certificate as the home buyers are refused various benefits such as interest granted on delay in delivering the property if they occupy the property on the fit-out.
Even though the consumer courts have passed various judgments to protect the flat owner from unscrupulous builders. However, it is recommended that the government also introduces various policies to protect the desperate home buyers that have invested their hard-earned money in the transaction. Some of the recommendations are:
- Conducting regular inspections to ensure and correct deviations from the sanctioned plan and chances of encroachment, etc. will help in correcting the errors right in the beginning.
- The buyers should ensure that the builder has applied for the occupancy certificate with the statutory body authorized to do so within the prescribed period. The government authorities should take penal punishments against those that fail to do so and also hold him liable to pay the buyer compensation for the delay.
- In this era of digitalization, the government should make the process online enabling the buyer of the property to track the status of their occupancy certificate. This will help in bringing in transparency in the procedure and help avoid unnecessary issues.
- Strict action needs to be taken against those developers that are transferring possession without the occupancy certificate, needs to be taken.
- The registration of flats and other essential services like water, electricity, etc. should only be provided after the occupancy certificate has been issued.
By taking necessary measures such as imposing punishments and penalties for those builders that delay the transfer of occupancy and possession legally, pressure can be exerted on them to function quickly and avoid inordinate delays. Summing up it is to be stated that the process of handing over the possession of the property without occupancy certificate, as Fit-out is not permissible under the law.
It is mandatory to obtain the occupancy certificate to make the occupancy legally valid. The national consumer forum has addressed the issue of letting out the house on fit-out and stated that it is against the builder’s legal and contractual obligation to do so. Thus the government should take necessary precautions to avoid exploitation of buyers by the builders by imposing punishments against such practices.