In the absence of Completion/Occupancy Certificate, developers are offering letter of fitouts that are completely illegal. We had earlier discussed the the issues with letter of fitouts here:- Letter of Fitout – a disaster waiting to happen. Did you ever ask your developer about the reasons for offering fitouts letters? We are sure they would have give vague answers like delay from Authority etc. However, there lies a bigger problem in the Lease Deed between developer and the development authority.
As long as the builder does not clear the land dues to Authorities, he shall not get the permission to sublease the apartments to the Homebuyers. Let us explain this in detail.
Lease Deed between the Developer and Authority
A lease deed is an agreement between the developer and authority for carrying out construction of the plot. In Noida and Greater Noida area, Group Housing and Commercial plots are allotted to developers on 10 years payment plan. Builders are only required to pay 10% of the land cost upfront and rest can be paid in installments over a period of 10 years. While the developer is required to pay only the interest part for first 24 months, he shall be liable to pay rest of the plot premium in next 8 years. He is required to pay equal half yearly installment @11% per annum.
The crux of the issue is that most of the developers have defaulted on making these payments to authorities. Interest is piling up and builders are not ready to make the payments towards interest penalties along with principal dues.
Important clause from Lease Deed
These are some of the important points that we picked from Lease Deed:
- The permission of part transfer / sub-lease shall not be granted under any circumstances before making payments according to the schedule specified in the lease deed.
- After payment of of premium of the plot as per schedule, permission shall be granted.
- Transfer of flat be allowed only after obtaining occupancy certificate for respective phase by developer.
- Lease deed clearly says, in case of violation of above terms, allotment of the plot shall be cancelled.
The permission to transfer and sub-lease can only be allowed on the fulfillment of following conditions:
- The dues of Authority towards cost of land are paid in accordance with payment schedule before executing the sub-lease deed of the flat.
- Every apartment shall have to be registered before physical possession of property is handed over.
- Developer has obtained Occupancy Certificate from Authority.
- The developer has obtained Completion Certificate from building cell, Noida Authority.
Why are builder offering Offer for Fit-Outs?
Among many other reasons, one of the reason for offering Fit-Out Possession is the non payment of land dues by the developer. As long as the developer does not clear the dues to the Authority, they shall not be given Completion Certificate. No Completion Certificate means your apartment shall not be registered and you remain an illegal occupant of the property.
The worst that may happen is that the authority might cancel the allotment of the plot if these dues are not paid soon. In such scenarios, homebuyers may unnecessarily be stuck between developer and authorities.
What should Homebuyers do?
We have always advised that Homebuyer should not take the possession on offer of fitouts. Instead, the buyers should push the developer to clear the dues and obtain Occupancy Certificate from relevant authorities. Instead of listening to the developer’s excuses, file RTI ( File an RTI with NOIDA / GREATER NOIDA Authority, a step by step Guide) with authorities and find out the actual reason for No OC. Ask following question from Authority.
- Copy of lease deed for Plot No. xxxx, Sector yyyy.
- Payment schedule for the said plot.
- Payments made so far and the pending dues.
- Rescheduled payment plan if any.
We would like to remind you once again that along with developer, you are not just violating the lease deed conditions but also violating U.P. Apartment Act 2010.
Sample Payment Plan
Attached is the payment plan for a city developer. In case they fail to clear land dues, project shall never get Completion Certificate.