Decoded: Flat buyers can't be penalized for builder's failures, rules HC
New Delhi, Nov 28, 2024
The housing society's application for "deemed conveyance" should not be rejected due to the builder's mistakes.
The Bombay High Court has ruled that flat buyers cannot be treated unfairly when builders default on obligations. The ruling ensures that builders cannot disadvantage buyers in terms of legal or financial obligations if the builder fails to meet their responsibilities in property transactions. The decision reinforces the rights of flat buyers, ensuring they are not placed at a disadvantage in such circumstances.
On Tuesday the Bombay HC made an important decision regarding housing societies with unauthorized buildings. It ruled that a housing society cannot be denied "unilateral deemed conveyance" just because its building is partly illegal or unauthorized.
What this means: The builder of the building did not obtain the necessary Occupancy Certificate (OC) for the property. This certificate is an important document that confirms the building is safe to occupy and meets all legal requirements.
The court emphasized that the failure of a builder to meet legal requirements should not prevent flat buyers from obtaining the property rights they are entitled to.
The judgment came after the ALJ Residency Co-operative Housing Society Ltd., located in Pali Naka, Bandra West, challenged an order from the District Deputy Registrar (DDR) that had rejected its request for a “deemed conveyance” in 2017. Deemed conveyance is a legal process that allows a housing society to take ownership of a building when the builder or landowner has failed to transfer the title.
To break it down simply:
What is "unilateral deemed conveyance"?
It’s a legal process where a housing society can claim ownership of the land and building from the original landowners or developers, without needing their cooperation. It's a way for the society to get legal rights over the property they live in, especially when the developer has not transferred ownership.
What was the issue in this case?
ALJ Residency Co-operative Housing Society in Bandra West had applied for unilateral deemed conveyance in 2015 because the original developer had not transferred the property to the society. However, the application was rejected in 2017 because:
The building lacked an occupancy certificate, which is an official document saying the building is safe and ready to be occupied.
Two floors (the sixth and seventh floors) were found to be unauthorized, meaning they were built without proper permissions.
The Brihanmumbai Municipal Corporation (BMC) had issued demolition notices for those two floors in 2008.
What did the Bombay High Court rule?
The court said that the housing society should not be denied the right to unilateral deemed conveyance simply because parts of the building were unauthorized. It ruled that the Competent Authority (the government body overseeing such matters) was wrong to reject the society’s application just because some floors were illegal. The court stated that the authority must approve the society’s request for unilateral deemed conveyance.
The high court said the "flat purchasers cannot be put to a disadvantage" because the builder defaulted in getting the OC. It would "amount to putting the premium on the default" committed by the builder."
“The default of promoters in obtaining the necessary permissions and approvals cannot impinge the right of the flat purchasers to seek conveyance of the land and structure, even if the structure is unauthorised,” the bench said.
The court added that the grant of deemed conveyance does not have the effect of regularising the unauthorised structure. “All that the Competent Authority does is that it steps in the shoes of the promoter and conveys right, title and interest of the promoters to the flat purchasers. The grant of deemed conveyance will not bar the planning authorities from taking action against the illegal structure.”
As regards lack of certain documents, the court said the Maharashtra Ownership Flat Act (MOFA) rules require the Authority to issue a notice to the housing society if it finds any defects in the application for unilateral deemed conveyance, calling for rectification of the defects, and since no such notice was issued to the Bandra West society, the application must be deemed to be complete in all senses.
Key Points of the Ruling
No OC, No Problem: The court ruled that the absence of an Occupancy Certificate (OC) should not be an obstacle for flat buyers to obtain deemed conveyance. While an OC is required for certain purposes, it is not mandatory for the transfer of property rights under the law.
Deemed Conveyance Does Not Legalize Illegal Structures: The court clarified that granting deemed conveyance does not make unauthorized parts of the building legal. It simply allows the society to take ownership of the land and building. The society can then decide how to handle any illegal structures, such as demolishing or redeveloping them, in accordance with the law.
Protecting Flat Buyers' Rights: The court emphasized that flat buyers should not suffer because of the builder's failure to comply with legal requirements.
The Role of the Competent Authority: The court also found that the Competent Authority, which oversees these matters, failed to follow the proper procedure when rejecting the application. They should have issued a notice to the society if any documents were missing or incorrect. Since no such notice was issued, the court deemed the society’s application as complete.
What this means: Bombay High Court said that flat buyers should not suffer because the builder failed to get the necessary approvals, like the Occupancy Certificate. The housing society’s application for "deemed conveyance" should not be rejected due to the builder’s mistakes. Even though the building has some illegal parts, the society still has the right to claim ownership, but this won’t make those illegal parts legal. The court also pointed out that the authorities didn’t follow proper procedures by notifying the society about missing documents, so the application should be accepted.
What’s Next for ALJ Residency?
With the court's ruling, ALJ Residency Co-operative Housing Society is now allowed to proceed with its application for deemed conveyance. The society will need to file a self-declaration under the 2018 government resolution, but the court has ordered the Competent Authority to issue the deemed conveyance certificate. The society can also move forward with plans for redevelopment once it receives the certificate.
Why is this ruling significant?
This decision benefits housing societies in similar situations, where buildings have illegal floors or lack certain documents. It gives them a chance to secure legal ownership of the property even if there are some issues with the building’s legality. It also signals that the focus should be on the housing society’s right to ownership, not just the technical issues with the building’s construction.
[The Business Standard]
