Possession Letter and Occupancy Certificate: Know the Difference

Aditya Pratap is a lawyer practicing in the Bombay High Court. He can be reached at aditya@adityapratap.com

Introduction

A newly wedded couple wanted to buy a house and turn it into a home. They bought a flat in one of the newly formed sectors of Greater Noida West, Uttar Pradesh. Little did they know about the trouble they are going to face, as they were not provided with the Occupancy Certificate by the builder, the family thus faced many issues in getting access to civic amenities.

There are several documents, which are required during the purchase of a property and obtaining them could prove to be a herculean task. The Occupancy Certificate (OC) is an important document, which must be sought and buyers have the right to take legal action against the developer if the same is not given to them. Homebuyers, particularly first-timers are not aware of the occupancy certificate and often mistake it to be the same as the possession letter.

Definition

Possession letter; The Possession Letter is issued by the developer in favor of the buyer, stating the date of possession of the property. The original copy of this document needs to be produced for securing a home loan. A Possession Letter alone would not suffice for legal possession of the property unless the OC has been obtained.

Occupancy Certificate (OC); Certificate of Occupancy is a document which is issued at the end of the construction, by a local government agency or planning authority. The document is a proof of the building’s compliance with applicable building codes and other laws. It indicates that the property is in a suitable condition for occupancy. The developer is responsible for obtaining the Occupancy Certificate and it is issued only once the building has been completed in all respects and is ready to be occupied.

Importance of occupancy certificate

At the time of seeking loans from banks and financial institutions or while applying for water, sanitation, and electricity connections an Occupancy Certificate is mandatory. Legally, a homebuyer cannot move into the property without the document. The certificate is also important in situations when a buyer applies for Khata or when purchasing a resale flat. Without the OC, the sale of the property would not fetch a good price.

Should one make the final payment to the developer without obtaining an OC?

On the basis of the information stated above, it must be clear that it is not a smart idea to make the final payment before receiving the OC. However, a lot depends on the conditions mentioned in the buyer-seller agreement. For example, if the agreement says that the OC would be given three months after the buyer makes the final payment, and if the home buyer has signed this contract, both parties are bound to honour the contract.

Documents required to obtain the Occupancy Certificate

To obtain the Occupancy Certificate, the following documents need to be submitted:

  • Copy of building sanction plan
  • Building Commencement Certificate
  • Copy of Building Completion Certificate
  • The latest property tax receipt
  • Copies of no-objection certificates (NOCs) from pollution board or Airport Authority

Related case laws

M/S Treaty Constructions and another vs. Ruby Tower Co-op Society and another;

It was held that offering informed that the Appellants were to complete development work at the project before handing over provisions of para 6 (i) and (ii) above within the stipulated period the concessions numerated in pan in accordance with the aforementioned condition no. 6 (ii) and as such the concession automatically possession can be offered without obtaining the Completion/ Occupation Certificate.

Welcoming the wave of change

Recently, the then Chief Minister Devendra Fadnavis-led government in Maharashtra decided to go down heavy on developers in capital Mumbai. Over 56,000 buildings in the city do not have an OC which makes matters worse. The move to tackle the mushrooming of such units has been backed by the Brihanmumbai Municipal Corporation (BMC).

In fact, a buyer can file a complaint if the developer refuses to or delays the OC or allows possession before the OC. In the interim, such a buyer can also ask the developer for rent during the delayed period. At this stage, one might be thinking, should one pay the complete amount before taking possession? It is suggested that one should honor the terms and conditions of the sale agreement. If one doesn’t, the developer can terminate their agreement. However, if the developer does not keep his part of the deal, the only option left is to proceed legally against him. This is because every buyer-seller agreement clearly lays down stages and the number of payments owed to the developer. One should be clear on their side.

About the Author – Aditya Pratap

Aditya Pratap is a lawyer practising in Mumbai. He argues cases in the Bombay High Court, Sessions and Magistrate Courts, along with appearances before RERA, NCLT and the Family Court. For further information one may visit his website adityapratap.in or view his YouTube Channel to see his interviews. Questions can be emailed to him at aditya@adityapratap.com.

Cases argued by Aditya Pratap can be viewed here.

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