Builder not giving occupancy certificate for your house? Here's what to do

You can be evicted from your own house if you haven't obtained the OC; the authority could also impose a stiff penalty and cut off your water and power supplies

Amit Kumar booked a flat in an upcoming project in Noida Extension. Now, the builder is asking him to take possession of the property without producing an occupancy certificate (OC) for the apartment. Kumar, on his part, has already paid the full amount outstanding to the developer within 30 days from the date of issue of the letter of possession. 

In fact, he had little choice in the matter. Failure to settle the outstanding amount would have meant that the builder would have charged a hefty interest on the same. He is also paying the maintenance fee charged by the builder. However, he is adamant that he will not take possession of the flat until an OC is provided to him, despite the fact that the builder has threatened to 'cancel' his flat if he delays taking possession beyond a certain period. Kumar is in the right, as far as the law is concerned.

Kumar's story isn't unique. Similar cases can be found across Noida and in other cities. In fact, he says that around three families have already taken possession of their flats in the same project without obtaining the OC -- which could lead to hard times ahead for them. 

What is an Occupancy Certificate?

"Under the Real Estate (Regulation and Development) Act, 2016 (RERA), a building is considered to be complete only after the occupancy certificate is obtained by the developer for that particular building," explains Ankur Dhawan, chief investment officer at PropTiger.com. "The OC is the final documentation that certifies that a house is ready to move in. Without the OC, though the house might be structurally ready, it is not certified by the authority as being fit for occupation," he adds. In essence, an OC is a document that serves as the 'final pass certificate' for a building. 

Why should homebuyers insist on OC? 

Here's the part, as explained by Sudip Mullick, partner, Khaitan & Co, that homebuyers should pay careful attention to: "It is against the law of the land to reside in buildings without OC. Therefore, the act of residing in premises without OC is an offence." He adds, "Developers are obligated to obtain OC." 

And this is why taking possession of a property in the absence of the OC is fraught with risk. In such cases, the authorities can ask the homebuyers to vacate the house and even hit them with a monetary penalty, say real estate and legal experts. That's not all, according to Dhawan, municipalities typically do not give water and electricity connections to houses where the OC has not been obtained.

Buyers also need to understand the role an OC plays when it comes to getting the property ownership title. "In property registration, OC is not a mandatory document and has no linkage to the process -- which, ironically, prompts buyers to consider OC to be of lower significance. However, post registration, when buyers apply for khata (which legally gives the property ownership title to a buyer), OC is legally mandatory," explains Anuj Puri, chairman of ANAROCK Property Consultants. 

Not having an OC can also place a large financial burden on the buyer. "That said, there are several instances when OC is not available (often because the builder has severely deviated from the approved plans) and the buyer has no choice but to resort to illegal ways to get the khata. In such instances, the concerned authorities are known to take hefty bribes," adds Puri.

A buyer who has got his property registered but does not have the OC can also be evicted. In worst-case scenarios, buyers without OC available for their property can be evicted, especially if the project has seriously defaulted on environmental rules, explains Puri. "He may have got his property registered, but without OC, he will not be able to get the khata, which basically entitles him to be the legal owner of the concerned property," he adds.    

So, why are homebuyers still taking possession without OC?  

Abhay Upadhyay, president of the Forum For People's Collective Efforts, a pan-India homebuyers' association, and a member of the Central Advisory Council, RERA, Ministry of Housing, provides an example of the trouble homebuyers face. For instance, there are developers who want to get their hands on the last installment from the homebuyer sooner than would be possible, had they followed the due process. They apply for an OC for projects that are not yet 100 per cent complete, which is not legal. (While developers must apply for the OC only after the project is completed, many cities do allow partial OCs, says Dhawan). Subsequently, they send a letter of possession to the homebuyers, asking them to move into the property without an OC, which they promise will be available at a later date. If the homebuyer does not comply, the developer demands interest on the amount -- last installment, maintenance, and security deposit, etc -- that the homebuyer is supposed to shell out at the time of possession, along with holding charges. Facing such circumstances and financial compulsions, homebuyers often take possession of the property and "get stuck with a house with no OC".  

However, Upadhyay's example concerns developers engaged in shady practices. All developers cannot be categorised as such. Besides, there can be other reasons a developer fails to produce an OC. 

"Homebuyers, whose life-long savings are stuck with the builder, are left with little choice but to take possession as they are saved from paying the rentals," explains Piyush Singh, partner at PSP Legal, Advocates and Solicitors. "The problem is grave and quite common," he adds. At present, Singh's firm is handling cases for around 18,000 homebuyers.

"Typically, builders offer homes for fittings and interiors before obtaining OC. When the OC gets delayed, some customers move in to avoid incurring dual costs of rent and EMI. Typically, in this process, builders do not insist on signing any paper, as legally, the customers themselves are at risk if something untoward happens in the building without OC," explains Dhawan. He adds that this problem is acute in Noida, where developers had to make land payments in installments to the authority and but ended up defaulting. "These developers are not in a position to obtain OCs but have ready-to-move-in buildings. In such buildings, most of the buyers have moved in and have also signed papers stating that they are taking possession willingly," he says.  

What should homebuyers do if developer doesn't give OC? 

Follow Kumar's example. "The buyer should not accept the possession letter and should request the developer to first and foremost obtain OC, and only then accept possession," advises Mullick.  

What action can the buyer take? 

Under RERA, developers who give possession to buyers without OC are in breach. "RERA makes it mandatory for the developer to obtain OC and only then offer possession to buyers. If the developer fails to obtain OC, the flat purchasers can approach RERA for redressing their complaints," says Mullick. 

You may also be entitled to compensation. "RERA also stipulates that in such scenarios, the builder will adequately compensate the buyer for the delay in getting the OC and till such time the registered sale deed is done in favour of the buyer," explains Singh. 

"Legally, buyers of properties without OC can exercise their legal rights and drag the builder to court. They can issue a notice to the builder and/or approach consumer forums if the property registration is complete and buyers see their names on the Encumbrance Certificate," says Puri.  

Can developers claim 100 per cent payment from buyers without OC? 

"The provisions of the model agreement under RERA Act provides milestone-based payments. Certain quantum of monies from and out of the total consideration is to be paid on the developer handing over possession with OC. A developer cannot claim 100 per cent consideration from a flat purchaser without obtaining OC," explains Mullick.

Can not having an OC obstruct you from selling your property?

According to Puri, the OC is a mandatory document for buyers applying for a home loan. Therefore, he explains, owners selling their ready properties without an OC can't proceed if their prospective buyer is applying for a home loan, as banks require this document.  

How does Occupancy Certificate apply to ready-to-move-in projects? 

In such cases, says Singh, the OC should already be there with the builder. 

How does OC apply to under-construction projects?  

Singh explains that the OC can be given to one complete tower in an incomplete project. He adds that the OC can be applied for phase wise.

Step by step guide 

1) You should ask the builder to give you OC

2) You can file a RERA complaint

3) You can file a right to information (RTI) request to find out why the OC has not been issued for your property/project

4) You can issue a legal notice directing the builder to obtain an OC

5) You can go to the consumer court to claim compensation for delay by the developer

Names of affected homebuyers have been changed on request