Interest charge

Builder cannot collect maintenance fees from apartment buyers without obtaining an occupancy certificate: NCDRC

The National Consumer Dispute Redress Commission (NCDRC) recently ruled that unless a certificate of occupancy is obtained, project maintenance cannot be charged to buyers.

Member President SM Kantikar and Member Binoy Kumar directs builders to pay late payment compensation at the rate of 9% per annum from the date of proposed possession, including the six-month grace period.

Fund

A consumer complaint has been made under section 21(a)(i) read with section 12(1)(c) and section 13(6) of the Consumer Protection Act 1986 read with Ordinance 1, Rule 8 of the Code of Civil Procedure. The consumer represents 11 plaintiffs who were awarded apartments under the opposing party’s project (hereinafter referred to as the “project”). The opposing party is engaged in the construction sector.

The plaintiff’s case had requested the allocation of apartments in the project, which included a total of 70 units. The plaintiffs claimed that they booked their residential apartments and were awarded incomplete possession of the apartments without obtaining a certificate of occupancy and the promised amenities.

Moreover, without the certificate of occupancy, the opposing party began to levy maintenance charges and maintenance advances on the plaintiffs, in violation of the construction contract.

Lawyers Chandrachur Bhattacharyya and Manoj Kumar Dubey, representing the plaintiffs, argued that until the certificate of occupancy is obtained, the maintenance of the project must be undertaken at the cost and expense of the opposing party.

On the other hand, the opposing parties claimed that the project was delayed due to changing market conditions and escalating costs caused by the COVID-19 pandemic. Instead, a late penalty was also paid in February 2020.

Lawyers Prabha Swami with Nikhil Swami and Diva Swami, representing the opposing parties, argued that upon the completion of the unit’s construction, the plaintiffs began pressuring them to sign the bill of sale. Although they were advised against, they took possession of their apartments.

Findings of the Commission

The NCDRC, after reviewing the complaint and written submissions, observed that there had been unreasonable delay on the part of the opposing party in completing the construction. He also noted that the plaintiffs had paid a substantial sum of the total consideration for their respective apartments.

He observed that within the stipulated period of 22 months, plus an additional grace period of six months, the opposing party has not built the project and has not obtained the certificate of occupancy to date. He held,

“Therefore, we are of the view that complainants are entitled to fair compensation for delay. Additionally, not having obtained an occupancy certificate to date constitutes a serious service deficiency.”

The Court referred to the decision of the Supreme Court in Wg. Cdr. Arifur Rahman Khan v DLF Southern Homes Pvt. Ltd., where he stood,

“Apartment buyers suffer agony and harassment due to developer failure. Apartment buyers make legitimate assessments regarding the future course of their lives based on the apartment which has been purchased being available for use and o· These legitimate expectations are contradicted when the contracting authority, as in the present case, is guilty of a delay of several years in the performance of a contractual obligation.

Moreover, in deciding on a reasonable rate of interest at the present time, the Commission relied on the decision of the Supreme Court in Grace Realtech Pvt. ltd. vs. Abhishek Khanna & Anr. This emphasized the balance of competing interests when determining the rate of interest. Subsequently, the Board ordered that late payment of 9% is reasonable and justified in this case.

She decided against the issue of invoicing maintenance charges until receipt of the certificate of occupancy. She noted that the complainants would only be required to pay the maintenance fee after receiving the certificate of occupancy.

Case Title: Madhusudan Reddy R. & Ors v. VDB Whitefield Development Pvt Ltd. & Ors.

Read also – Builder’s failure to obtain a certificate of occupancy is a “deficit of service” under the Consumer Protection Act: Supreme Court

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