What is a Possession Certificate? How important is it?

Several real estate buyers often get into the real estate transactions without full knowledge of the required documents and laws applicable. For cropping up the real estate sector, it is imperative that the buyers and the owners are aware of the necessary documents needed to complete the transaction.

The knowledge of the same ensures that all interests in the property are enjoyed without any hindrance by the owner of the property. The Possession certificate is a key ingredient while buying a house. It ensures that the possession of the property has transferred positively and the buyer now holds all the rights to the property. 

Possession Certificate:

Possession Certificate is a document that transfers the possession of the property from the first owner/developer to the buyer; signifying that the property, as well as the interest in the property, has now been transferred to the buyer on payment of certain sum consideration. In simpler terms, a possession certificate is a document which states that the property has been possessed without any illegal means.

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The laws applicable differ from state to state in this respect. It is therefore essential to check the local laws before moving into a new house. “Possession certificate is mandatory to move in the property or make use of the property as it signifies that the possession of the property has shifted from one place to another. The letter is an indication that the home is now in possession of the buyer as the buyer has fulfilled all the terms and conditions mentioned in the contract for sale,” says Advocate Koonal Tanwar.

Table of Contents:

1. What are the ingredients of The Possession Certificate?

2. What is the Occupancy Certificate and Conditional Possession Letter?

3. What are the repercussions of not having a Possession Certificate?

4. How do Section 44 and 53A of TPA affect it?

5. Is registration mandatory for obtaining?

6. What rights are conferred under the certificate?

Content of the Possession Certificate

A Possession Certificate is issued by the buyer indicating the change in possession. The Possession certificate must clearly state that the possession of the property at hand is being transferred to the buyer. This ensures that the buyer has full interest in the property now. Both the parties must sign up on the same i.e. the builder must sign overstating that the possession does not lie with him any longer and the buyer must sign to taking over the possession of the property. The Certificate must also have a description of the property and the required add-ons like parking space, garage, etc. as agreed upon in the contract of sale. The Possession certificate shall be written and be authentic. It shall also mention the date of possession of the property. 

Occupancy Certificate:

The Occupancy Certificate is a document that is issued by the local authority to the builder after the completion of the project. It needs to be obtained by the builder before he grants the possession of the property. This particular document ensures that the project has been completed and is ready to provide basic amenities to the inmates. A possession letter alone would not suffice for legal possession of the property unless the Occupancy Certificate has been issued.

Documents Required for the Occupancy Certificate:

• 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

During the construction of a building, there are certain rules and regulations set by the town planning committee which need to be followed in order to construct the building. If the project is completed according to the guidelines, the same local authority issues the certificate to the builder otherwise the local town authority will not certify the project.

Conditional Possession Letter

Under some circumstances, the buyers accept the possession of the property but are not satisfied with it on account of any one or more aspects like faulty construction, pending repair work, poor construction quality, usage of different building materials as promised or the pending delivery of the Occupancy certificate or the Possession Certificate. The buyers accept a Conditional Possession Letter on which all the conditions that need to be fulfilled by the builder for accepting a conditional possession letter is fully mentioned.

Also, the buyer can mention the compensation due to the builder’s end in case of any delay in the project and take the legal route in extreme cases if needed.

Repercussions for not having a Possession Certificate

Without the proper certification, the interests in the property cannot be exercised by the buyer as there has been no proper transfer of possession and the buyer has no right to reside or use the property for any purpose. Lack of possession certificate ensures that the property is still legally in possession of the builder and the buyer is not residing there legally and can be asked to vacate the property by the local civil authorities.

Legal Aspects – Section 44, Section 53A of the Transfer of Property Act

• The applicable law in the current scenario would be The Real Estate (Regulation and Development) Act, 2016 with respect to the compliance of the builders and time limits.
• For the transaction, the applicable law which will govern the same is that of Transfer of Property Act, 1882.
• In cases where the builder has failed to provide completion certificates, the buyers can complain to the necessary authorities as mentioned in RERA. The transfer done should be in accordance with the Transfer of Property Act which shall govern the sale of the property. 
• Under Section 44 of the Transfer of Property Act the person who is transferring his part of the share cannot provide possession if they are not members of the family which is currently dwelling in the house at that particular time.
• In other scenarios, where two people co-own property and further transfer it, one of the buyers can ask for possession until and unless the seller is a member of the family which is dwelling in the house, else they can only transfer the title but the possession cannot take place. 
• Section 53A of the Transfer of Property Act talks about part performance. In such a scenario, the buyer who has already taken possession as part performance and is ready to enforce the other half of the contract then the builder cannot go back on his word. Possession has already been taken. In this case, the buyer can apply for the possession certificate.

  Also, due to the same, the buyer is entitled to demand each and every document after the completion has been done and the contract has been fully performed. It is the buyer's right to dwell in the property subject to certain terms and conditions of the society. The buyer can demand the required certificates from the builder.

• If the builder is not ready to provide the certificates or documents, the buyer can complain against him to the competent authorities under RERA.
• In certain instances, the builders don't comply and provide the necessary certificates because of the changes in the plan or other reasons, the buyers are required to pay extra attention to the details for the same. 
• It is to be noted that under the provisions of RERA, a buyer can demand a penalty from the builder if the project has been delayed. However, the builders are given one more chance to set a reasonable timeline for the delivery. If the promoter fails to comply yet again, then he will have to pay the penalties, as specified in the law.

Registration of Possession - Is it mandatory?

Possession certificate is required to obtain certain benefits of the Government Subsidies like Tax Subsidy and more. To ensure such benefits, the possession certificate needs to show that the possession of the house lies with the buyer. If the possession certificate is not provided by the builder, the buyer himself or herself can apply for it online.

• The Possession Certificate is obtained by the state authorities, therefore, for different states, there are different websites to obtain the possession certificate.
• The Possession Certificate can be received within 30 days if the building has been constructed as per the approved plans, building standards, and the fire safety standards, and it also has the Completion Certificate.
• However, the law states that, if the building has been constructed without any plans, it cannot be regularised which can lead to certain problems in obtaining the Possession Certificate. Therefore, registration of the whole plan/project is necessary to obtain the Possession Certificate.
• In order to obtain the possession certificate, the buyer might have to submit certain documents like an occupancy certificate, commencement certificate, etc. which clearly indicate the registered plan as required by the authority.
• Registration of the same is mandatory because legal possession of the home by the buyer is valid only with the occupancy certificate.
• For more queries or confusion regarding the legal nitty-gritty of a Possession Certificate, ask for expert legal advice from us now!

Rights Conferred under the Possession Certificate

• The buyer is now in full possession of the property and can choose to do whatever he wants, subject to the law. The possession ensures that the buyer can now use the property whichever way they wish subject to the compliance with law and by-laws of the society.
• Possession certificate further allows the buyer to be the absolute owner of the property and ensure that the interests of the property are enjoyed by the dweller.
• Having possession certificate is also helpful in cases of re-sale or further sale of the property as there is no hassle to transfer the possession and title of the property when it is in possession of the individual who is enforcing the transfer.
• After passing ownership of the property from the seller to the buyer, the buyer has the benefit of any improvement or increase in the value of the property, and to the rents and profits from the property. The seller can have no claim on the benefits of the property after the sale.
• Further, unless the seller improperly declines to accept delivery of the property, the buyer has a charge on the property and on the seller for any money paid in anticipation of the delivery of the property.
• Further, in case of failure of the seller to deliver the property, the buyer also has the right to obtain reimbursement for the earnest and for the costs awarded to him in a court to compel the specific performance of the contract.
• It is the right of the buyer to obtain information pertaining to sanctioned plans, the timeline for the same, layout plans of the whole structure along with certain necessary documents as discussed above, which are duly approved by the competent authority.   

Frequently Asked Questions:

What is the difference between Possession Certificate and Occupation Certificate?

Many homebuyers who are not fully aware are sometimes mistaken between possession certificate and occupancy certificate. They are very different in reality. Therefore, along with a possession certificate, the buyer has to ensure that an occupancy certificate/ completion certificate has been issued by the competent authority with respect to the immovable property at hand.

A Possession Certificate states the completion date of the property, but it doesn’t give the rights of the property to the buyer. Occupancy Certificate, on the other hand, states that the project has been completed and the building is fit to be occupied. It is issued by the local authorities and gives the rights of the property to the buyer. 

What is a Fit-Out Letter?

Fit-Out Letter is an offer from the builder allowing the buyer to take possession of the home before the delivery of the Occupancy Certificate. This is not acceptable under developer bodies and creates difficulties for the home buyers.

There could be reasons like unapproved building layout plans or other violations/ deviations on the part of the builder because of which the Occupancy Certificate is not granted. In such a case, with the Fit Out possession, the builder puts blames on home buyers for not having received the Occupancy Certificate. Also, the home buyers occupying the home against fit-out letters are not entitled to any relief like interest for every month of delay in completion of the project.

"The builder carrying out fit-outs for the home buyers before the Occupancy Certification is not giving complete possession. The possession for fit-outs without the OC would create a breach of contractual and legal obligations on the part of the builder," says Advocate Koonal Tanwar.

How the Possession Certificate and Occupancy Certificate affect the home loan?

Most of the financial institutions insist on Possession Certificate in order to sanction loans as part of security. The original copy of the possession certificate has to be produced if a buyer wishes to secure a home loan.

The Occupancy Certificate is also very essential to undertake the possession of the property and also if it has not been obtained by the builder, the buyer cannot obtain a home loan. 

4. What is a Partial Occupancy Certificate?

In the large scale development projects, when there are lots of phases or blocks or building and the date of completion of each is different, then the concerned authority can grant a Partial Occupancy Certificate for the completed blocks/ buildings. Though the validity of the Partial Occupancy Certificate expires as soon as the project is completed then it is replaced by a consolidated Occupancy Certificate.

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