Letter of Fitout – a disaster waiting to happen

You have waited enough and you are in a hurry to move in to your apartment. To save some extra bucks you sideline the basics and sign bunch of documents that were presented to you by builder. Did you read those documents?

Update[20/10]: Now that NGT issues is over, Letter of Fitout is completely illegal. 

Because of NGT stay on occupancy certificates in Noida, builders can not offer legal possession to home buyers. This is applicable to all the projects that are in the range of 10 kms from “Okhla Bird Sanctuary”. In a workaround, builder came up with a new terminology usually referred as  Offer of fit-out or Letter of Fitout.

Offer of fit-out / Letter of Fitout: Basically letter of fit-out is an offer from developer to carry out fitouts/furnishing but you are not allowed to move in to your apartment. You end up paying the full amount to the builder but you are not the lawful owner of the property. This is what letter of fitout offer asks you to submit application with wordings like this:

To save our precious time, I/we hereby request the Company to permit me/us to carry out fit-out/furnishing in the Unit and for that purposes offer temporary possession of the above said unit.I/We hereby agree / undertake to adhere to the terms of the said Allotment Letter/ Agreement in execution of the requisite work.

That I/we hereby agree to use the permission granted herein by the company specifically for the limited purpose of carrying Fit-outs/ interior designing in the said unit and I/we further agree and undertakes to comply with the terms of allotment/ Agreement and not to use the said unit for any other purpose before getting the Sub-Lease Deed for said unit registered in its favour, failing which I/we hereby undertake to bear and pay any penalty, cost, fine etc., as imposed by concerned competent Authority/Company in this regard.

Why should you be worried? 

By offering possession of not fully ready apartments, builder is washing his hands off. If you read above mentioned clauses carefully, you would notice that he is putting the onus on you. Builders are offering letter of fitout without obtaining necessary approvals such a fire safety certificate, electricity connect, water connection, land payments dues eyc.  So what is the risk if you accept offer of fitouts:

In case of any eventuality/disaster, the onus would come on the residents. An incident like Fire etc and authorities would be swift in throwing the residents out and may seal the complex itself. Why? because you have been residing in a building that does not have a Occupancy Certificate. In such scenarios you end up loosing insurance claim damages from unforeseen events and theft/burglary etc.

Most of these building where people have take offer of fitouts are reporting frequent lift breakdown. Inadequate security measures are more worrying.

So why did builder give such options at first place? Well, there are two reasons for that:

  1. Genuine Reasons: Due to the National Green Tribunal (NGT) order, the Noida Development Authority cannot issue completion certificates to any real estate project which falls in the 10 km radius of the Okhla Bird Sanctuary. In the absence of a completion certificate, no developer can legally give possession. This is a genuine problem with some developers who have completed their projects but are unable to offer possession.
  2. Illegal means: Builder is resorting to illegal means as he is unable to obtain occupancy certificate because he is unable to meet statutory requirements. For example, no fire clearance, electricity connection etc.  Developers with delayed projects are offering this to wash their hands of their responsibilities. When pressurized by home buyers, developers offer possession just for fitouts in under-construction towers which could pose a serious risk to residents because of construction activity and lack of safety measures. Also, the moment builder offers these pre-mature letter of fitout , penalty meters stops and maintenance meter starts.

Is there any way out?: “The Logical Buyer” understands that we all have been under the burden of RENT + EMI and want to move in to our apartments at earliest. However, one should be careful and think about the safety of their families. While some of the genuine builders have offered such letters in good spirit, NCR is full of notorious and greedy builder who doesn’t think twice before putting your life at risk. We suggest that you double check following documents in case you have already decided to move in:

  1. Check Fire safety certificate.
  2. Ask for lift fitness certificate and maintenance agreement. To save money builder have not taken AMC yet.
  3. Cross check structural safety certificate.
  4. Ask for no dues certificate for land/plot. If builder defaults on the payments, you shall not be able to get sub-lease done.
  5. Ensure state electricity connection is in place. Builder have not paid one time charges to state electricity broad and societies are running on Diesel electricity generators 24 x 7.
  6. Ensure builder has applied for water connection etc.

One must know that offer/letter of fitout is optional and one can refuse to accept it.

Below is the objection letter of Noida Authority raised against a builder prematurely applying for OC and putting residents life at risk.

 

Objection on OC by Noida
Objection on OC by Noida

We have not been able to establish the fact if Noida Authority is allowing such fit out offers. If you have any document that proves that Noida is allowing this, please let us know.

8 thoughts on “Letter of Fitout – a disaster waiting to happen

  • August 11, 2015 at 3:32 pm
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    Victory Crossroad, sec 143B, Noida. Builder sent permissive possession (fit out) Letter to buyers and asking for final payment within 30 days. Failing to which will start penalty and maintenance charges onto buyers. Please suggest the best practical way to deal with this builder.

  • August 11, 2015 at 5:16 pm
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    Hi logical buyer,

    Allow me to just present the case as both the buyer as well as the provider as I have donned both these hats in Noida….currently I have my apartment for which the possession is due and not known to me whether I would receive possesion and if yes, when. Also, I have worked in a developer firm in Noida and used to handle sales as well as the possession for apartments in Noida.

    Developers perspective : In case a developer has completed the project / apartment building or is near completion, only then would the developer be allowed to file for an O.C. My take is that instead of checking for all the documents as suggested by you, the customer should only check whether the developer has applied for an O.C. According to my knowledge, developers cannot apply for an O.C. after the NGT issue has come in.

    Buyer: If its a choice, you are taking a calculated risk of mot paying for the rentals…..emi’s and shifting into your apartment.

    Who’s fault is it?….I blame it completely on Noida authority. Why cant they take a simple call which is logical and finish the matter once and for all.

    Way out….Guys, if you think you are bleeding with the emis and the rentals so are the developers in Noida. Please join hands with them and decide on a day to take a procession along with the developers to Noida Authority and put pressure on them….let this be presented in the Media that the developers and buyers both are bleeding because of some issue which can be resolved by Noida Authority’s intervention….In case you feel that you would like to take this procession without the developers…then so be it…take it without them, but knock on the right door and we might be able to resolve this….a buyer who is eagerly awaiting his own house in Noida and cannot get it as there is no work happening in his own tower…..

  • August 12, 2015 at 12:51 am
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    Dear Kunal,

    As we pointed out not all builders are equal. For example the example posted at the end suggest that builder filed for OC way before things were in place. For example, OC was applied in Nov 2014, this is when ngt stay is in place, so, builder can apply for OC even when ngt is in force, however, he won’t get it.

    Now, as per objections raised by Noida, not having fire clearance is serious issue. In current situation, Noida won’t issue a OC because of NGT. It is duty of buyer to check such documents it doesn’t have rti reply of the kind attached.

    Also, we have also experienced Noida issues OC even if not everything is in place.

  • August 12, 2015 at 12:53 am
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    This project doesn’t fall under NGT stay on Okhla bird sanctuary. Builder should apply for OC and than offer lawful possession. He is offering totally illegal possession letter.

    Also, temporary possession cant be forced and its mandatory for builder to obtain OC under U P Apartment Act 2010.

  • August 12, 2015 at 1:21 am
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    Dear Kunal and Logical Buyer

    Speaking purely from a customers perspective … Why can’t it be a simple transaction between buyer and seller ? Builder builds what he is suppose to … Buyer pays what he is suppose to … Simple .

    What happens viz. illogical govt. orders stays between the govt and its aam Aadmi.

    As long as buyer is ready to pay as pay as per stages completed .. Why can’t the builder build ? Because the NGT order (strangely though) is not asking for the building activity to stop.

  • August 12, 2015 at 9:49 am
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    Now that’s what we call eye opener.

  • October 20, 2015 at 10:43 am
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    Please understand the nexus between Builder and Noida Authority.
    In our case, the builder has applied for CC/OC and Noida Authority is about to grant the same.
    Deficiencies which we have pointed out to Noida Authority:
    1. No permanent Power connection. Builder is supplying project connection power for last 1 year, and not giving receipt.
    2. No Fire NOC. No work done at all on ground.
    3. No Pollution control measures/ No NOC from UPPCB.
    4. No lifts operation crtificate. Only some lifts installed.
    5. Not even boundary wall is completed.
    6. Backup power is through rented DG sets. No chimney installed.
    7. Shafts totally broken/ plaster peeling off/ steel bars exposed.
    8. Basement parking not ready, no allotment done. filled with rain water. No sump pumps.
    9. Security for namesake. they are not paid till they strike every month.

  • October 20, 2015 at 10:57 am
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    Neeraj,

    Indeed it is nexus between authorities and developers. Buyers would realize it when it’s too late.

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