The Supreme Court of India has ruled that real estate developers must obtain both a completion certificate and a fire safety clearance before offering possession of a flat, deeming it illegal to do otherwise. This landmark decision reinforces homebuyers’ rights by ensuring developers are accountable for securing all necessary approvals.
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NEW DELHI: The Supreme Court of India has made it clear that any offer of possession of a flat by a real estate developer, without obtaining both the completion certificate and fire safety clearance certificate, is illegal and constitutes a deficiency in service under the Consumer Protection Act. The court emphasized that buyers cannot be forced to accept possession in the absence of these crucial certificates, which guarantee the safety and legality of the property.
This landmark judgment, according to legal experts, strengthens the position of homebuyers by holding developers accountable and responsible for securing all necessary approvals before offering possession. The ruling mandates that developers must obtain critical certificates such as the occupancy or completion certificate and the fire safety clearance certificate before handing over flats to purchasers.
Protection for Homebuyers Against Incomplete or Unsafe Properties
The Supreme Court’s ruling offers vital protection to homebuyers, safeguarding them from being coerced into taking possession of incomplete or unsafe properties. The decision ensures that developers adhere to strict legal and safety standards before transferring ownership to buyers. In several areas like Noida and Greater Noida, numerous buyers had taken possession after signing a “fit-out possession” agreement, which permitted them to take possession for interior work even without an occupancy certificate.
In response to such practices, the Greater Noida Industrial Development Authority (GNIDA) issued a directive in September 2023, ordering builders to begin the flat registry process within 15 days. Failure to comply would lead to serious repercussions, including project cancellations and referral of cases to the Economic Offences Wing (EOW).
Case: Dharmendra Sharma v. Agra Development Authority
The recent ruling came in the case of Dharmendra Sharma v. Agra Development Authority. The court ruled that the offer of possession made by a developer without securing a completion certificate and a firefighting clearance certificate is invalid. The absence of these essential documents was considered a “deficiency in service” under the law.
The bench of Justices Vikram Nath and Prasanna Bhalachandra Varale ordered the Agra Development Authority to compensate Dharmendra Sharma with Rs.15 lakh for failing to provide these certificates when the flat was offered in 2014 and during subsequent legal proceedings. The court noted that the failure to secure these certificates contravened Section 4(5) of the UP Apartment (Promotion of Construction, Ownership & Maintenance) Act, 2010, and Section 19(10) of the RERA Act, 2016. These laws require developers to obtain the necessary certificates before offering possession of any property.
The ruling also highlighted that although the buyer had paid a tentative price of Rs.56.54 lakh in 2012, the delay in remitting an additional Rs.3,43,178 as demanded by the developer did not excuse the developer’s failure to provide the necessary legal clearances.
The court stated-
“Despite the appellant’s repeated requests, the Agra Development Authority (ADA) failed to provide these certificates, making its offer of possession incomplete and legally invalid.”
This ruling has far-reaching implications for real estate developers across the country. The court made it clear that-
“These certificates are essential for the legitimate delivery of a housing unit. Builders frequently attempt to avoid this responsibility, thereby shifting the burden onto buyers.”
Legal experts, such as Aditya Parolia of PSP Legal, have pointed out that the courts are rightly placing the responsibility of obtaining these certificates squarely on the developers.
Soumya Banerjee, Partner at AQUILAW, also weighed in on the ruling, stating that this decision is consistent with earlier Supreme Court judgments such as Debashis Sinha v. R.N.R. Enterprise (2023) and Treaty Construction vs. Ruby Tower Cooperative Housing Society Ltd (2019). In these cases, it was affirmed that the failure to secure essential certificates before offering possession constitutes a deficiency in service under the Consumer Protection Act of 1986.
RERA Obligations and the Supreme Court’s Role in Pre-RERA Projects
Under the Real Estate (Regulation and Development) Act (RERA) 2016, developers are required to obtain the necessary completion or occupancy certificates before offering possession. This obligation is spelled out in Section 11(4)(b) in conjunction with Section 19(10) of the RERA Act, which mandates compliance with local laws and regulations.
Banerjee emphasized that the recent Supreme Court order will also provide relief to homebuyers involved in projects that commenced before the implementation of the RERA regime.
“For pending matters in various consumer forums regarding projects initiated before RERA, this ruling will assist in resolving issues in favor of the homebuyer by making developers fully responsible and obligated to obtain the necessary certificates.”
– Banerjee stated.
Avnish Sharma, Partner at Khaitan & Co, remarked that the judgment aligns with previous rulings, such as the Debashis Sinha Vs RNR Enterprise (2023) case. Sharma noted that these rulings have invalidated the practice of offering possession of flats without first procuring the necessary certificates.
“The judgments not only mandate that developers provide possession only after obtaining completion/occupation certificates (which usually require prior fire department clearance), but also emphasize that buyers have the right to refuse possession in these circumstances.”
-Sharma said.
Safeguarding Homebuyers and Ensuring Compliance
Gauri Jagtap, Associate Partner at King Stubb & Kasiva, Advocates, and Attorneys, affirmed that this ruling will protect homebuyers from accepting properties that are either unsafe or incomplete. The decision compels builders to adhere to the required legal safety standards before offering possession to buyers.
“Buyers have every right to demand a valid Completion Certificate and Fire Safety Certificate before taking possession of a flat or property in a building,”
-Jagtap explained.
She added that under both the UP Apartment Act and RERA, these certificates serve as “crucial safeguards, assuring buyers that the property they have invested in is safe for occupation.”
Jagtap also encouraged homebuyers to insist on these certifications to ensure compliance with building regulations and fire safety standards.
“Although obtaining these certificates may involve time and expense for builders, they are crucial for ensuring the building’s structural integrity and safety. Buyers should not hesitate to request these documents as part of their due diligence before moving into the property.”
-she advised.
This judgment not only alleviates the concerns of homebuyers but also encourages a safer and more transparent property market. As Jagtap noted-
“By adhering to these legal requirements, developers not only meet their obligations but also help create a safe living environment for residents.”
This ruling is a “welcome relief to harrowed purchasers” and will deter developers from shirking their responsibilities in the future.