HPRERA - Builder Cannot Demand Full Payment from Homebuyer If Project's Occupancy Certificate Has Not Been Obtained

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.

Background Facts

On 10.06.2016, Homebuyer applied for Apartment No. 402, measuring 1575 sq. ft in the builder's group housing project named Himachal One.

The agreement for sale was executed between the builder and the homebuyer on 14.06.2016, for a total sale consideration of Rs. 25,00,000 plus service tax, of which Rs. 3,96,168/- was paid by the complainant for the purpose of booking flat on 10.06.2016.

According to Clause 14 of the agreement for sale, the builder was obligated to deliver possession of the apartment by 30.09.2016, upon obtaining the occupancy certificate from the competent authority.

However, despite paying a total of Rs. 17,99,692 out of Rs. 25,00,000, the builder failed to deliver possession of the flat within the promised timeline. Despite assurances from the builder that the project would be completed soon, and the homebuyer would be compensated for the delayed possession, no resolution was achieved.

Aggrieved by the delay in possession even after 7 years, the homebuyers decided to withdraw from the project. Consequently, the Homebuyer filed a complaint before HPRERA, seeking either a refund of the paid amount or compensation for the prolonged delay in possession.

Contention of the Builder

The builder contended that the homebuyer had failed to make timely payments of the sale consideration amount as agreed between the parties. Therefore, the Homebuyer cannot demand the offer of possession until and unless they have paid the entire dues as per the agreement for sale.

Furthermore, the builder contended that the homebuyer is in default of payment of Rs 7,00,308. Therefore, the homebuyer cannot avail themselves of the benefit of possession as per Clause 14 of the agreement for sale, which specifies how and when possession was to be given.

HPRERA Order

HPRERA, while directing the builder to refund the entire amount paid by the homebuyer with interest, held that the builder cannot demand full payment from the homebuyer if the Project's Occupancy Certificate has not been obtained and the construction of the flat is not complete within the agreed time for delivery of possession, as it amounts to a deficiency in service.

Furthermore, HPRERA referred to the case of Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P. and Ors, in which the Supreme Court observed that – “A conjoint reading of Sub-sections (1), (2), and (3) of Section 18 of the RERA 2016 reveals different contingencies. These include: (A) the allottee's right to seek a refund and withdraw from the project; (B) the possibility of such a refund being made with prescribed interest; (C) the allottee's entitlement to compensation under Sections 18(2) and 18(3) of the Act; and (D) the allottee's right to receive interest for every month's delay in possession, if they choose not to withdraw from the project, at rates as prescribed.”

HPRERA observed that real estate agreements are often one-sided, drafted to protect the interests of the builder. Therefore, builder cannot be allowed to override the legitimate expectations and rights of homebuyers. Thus, a builder cannot claim that possession was not offered due to incomplete payment by the homebuyer when the construction of the building remains unfinished.

Therefore, HPRERA directed the builder to refund the total amount paid by the homebuyer to purchase the flat, along with a 10.85% interest rate.

Case: Amit Rana Versus Ahlawat Developers and Promoters & others

Citation: Complaint no.HPRERA2023025/C

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