Fit out Possession –Gimmick by builders to delay project & avoid penalties?

Stuti's picBy Stuti Galiya, Solicitor & Advocate

It has been common for builders to allow purchasers to occupy flats without obtaining occupation certificate (“OC”), which is mandatorily required for occupying flats. In such cases, to protect themselves from any liabilities, builders offer possession for fit outs. The flat owners who have already waited long enough for their flats and in their hurry to move into the apartments become easy prey of these tactics of the builder.


A letter of fit-out is an offer from the developer which allow flat owners to carry out fit-out/furnishing, whilst they are not allowed to occupy the flats. The developers do not procure OC and give out fit out possession, which causes lot of practical difficulties for the home buyers. In such cases, there are high chances that the OC is not granted on account ofpossiblegross violations/deviations from the approved building lay out plan on the part of the builder.

However, in such cases, it is typical for builders to provide an excuse that because of the fit out/interior work carried out by the flat owners, the OC for the project has not been obtained. The builder then puts the entire blame/onus on the flat owners for not having received the OC. All this gives the builder full opportunity to wash off hands and abandon the project without remedying the violations/deficiencies on his part. The flat owners after paying all their hard-earned money are left with the risk of staying in an unsafe building and alsobear the brunt of the regulatory authorities, who may possibly take action for having illegally occupied premises without OC.


In these circumstances, it is important to understand whether such fit-out possession offered by the developers is legal?


This question become more relevant in case of projects which are not covered under the Real Estate (Regulation and Development) Act, 2016. In such cases, the provisions of Maharashtra Ownership Flats Act, 1963 (“MOFA”) will become applicable. The builder is statutorily obliged to obtain the OC before delivering possession. Under Section 3(2)(i) of the MOFA, there is an express prohibition on handing over possession of a flat in the absence of the OC, and a flat purchaser is also forbidden from occupying it. Builders who violate provisions of these provisions are liable for imprisonment or with fine or with both.


The National Commission has in various cases, including in the case of Orbit Residency Park building, Andheri (in July 2017) held that if the 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. The Commission has held in such cases, that 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.


In the case of Avadhut Co-operative Housing Society (in June 2016), the National Commission had held that possession for fit-outs without the OC would constitute a breach of contractual and legal obligations on the part of the builder. In fact, in this case, the Commission had stuck down the defense of the builder who held that the reason for delay of occupation certificate was because of an application pending before the Mumbai Municipal Corporation (BMC) for regularization of deviations. In this case, the Commission observed that the flat purchasers are not concerned with any issue between the builder and the BMC. It is the duty of a builder to obtain the OC at his cost, after clearing and removing all the objections raised by the BMC.


Whilst there are court judgments which come to the rescue of the flat owners, it would be useful if the Government could introduce few policy changes (as set out below) to ensure that buyers are protected from unscrupulous builders and officials:


(a)           Ensure that periodic inspection of the property is carried out by the BMC so that issues relating to deviations from approved building lay out plan, encroachments, etc are caught right in the beginning.


(b)          Ensure that when a builder applies for OC, the statutory authority completes its inspection and issues a reply within the prescribed time frame, failing which penal action should be taken against the officials, and the builder/ buyers should be compensated for the delay.


(c)           The status of the OC and reservations issued by the BMC should be available online, so that buyers know the reason for rejection/non-issue of OC and do not have to rely on lame excuses of the builders.


(d)          OC should be made mandatory for the registration of flats and essential services, such as, electricity connection, water connection, etc.


(e)          Take strict action against builders who hand over possession of the flats without receipt of occupation certificate.


With this, the Government can ensure that pressure is put on the builders to deliver projects on time and fit out possession is not used as an opportunity by builders for giving an excuse that occupation certificate is not being received for the project solely on account of alterations done by flat owners.

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