Handover and Takeover of Common Areas in Apartment Projects under RERA

The process of handing over and taking over common areas in apartment or group housing projects involves transferring amenities, facilities, and associated documents from the promoter to the apartment owners’ association, as mandated by the Real Estate (Regulation and Development) Act (RERA), 2016. Section 17 of RERA stipulates that promoters must hand over these areas within 30 days of obtaining the occupancy certificate if local laws are absent. The definition of common areas under Section 2(n) includes staircases, basements, open spaces, and utility installations. Promoters are obligated under Section 11(4)(e) to facilitate the formation of an association within three months of most units being booked. Allottees, too, must actively participate in forming the association. The handover process should involve a formal document detailing transferred areas, facilities, title deeds, sanctioned plans, and maintenance-related records. Associations must conduct thorough technical, legal, and financial due diligence to ensure compliance with statutory requirements and the proper condition of amenities. Any defects identified during this process can be addressed through RERA. Additionally, promoters must transfer the collected corpus fund, maintenance charges, and other related financials. If the promoter retains management of common areas for the first year post-handover, they remain responsible for maintenance under the association’s supervision. This process safeguards the interests of all stakeholders while ensuring compliance with RERA regulations.

Handover & Takeover of Common Areas in an Apartment Project by Apartment Owners Association

1. The handover and take over process of common areas, amenities and facilities in an Apartment/group housing project is a process which is more often than completed properly due to various reasons and more so because of lack of knowledge and understanding of the legal requirements and the process to be followed both by the Promoter/Developer and the Association.

2. The requirement of handing over of the common areas along with all the amenities and facilities in an apartment or a group housing project is contemplated under Section 17 of the Real Estate (Regulation and Development) Act. It is stipulated that in the absence of any local law, the Promoter shall hand over the common areas to the Association within a period of 30 days after obtaining the Completion Certificate.

3. In the light of the aforesaid requirement, it is necessary to understand the requirement of handing over of the common areas by the Promoter and what are the responsibilities of the Allottees in seeking for handing over of the common areas from the Promoter.

4. The following provisions of The Real Estate ( Regulation and Development ) Act 2016 (RERA) would be necessary in order to further substantiate the requirement of hand over of the common areas as well as the obligation of both the Promoter and the Allottees in this regard.

Section 2(n) – Definition of common areas: 

“Common areas” mean:

(i) The entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase.

(ii) The stair cases, lifts, staircase and lift lobbies, fires escapes, and common entrances and exits of buildings.

(iii) The common basements, terraces, parks, play areas, open parking areas and common storage spaces.

(iv) The premises for the lodging of persons employed for the management of the property including accommodation for watch and ward staffs or for the lodging of community service personnel.

(v) Installations of central services such as electricity, gas, water and sanitation, air-conditioning and incinerating, system for water conservation and renewable energy.

(vi) The water tanks, sumps, motors, fans, compressors, ducts and all apparatus connected with installations for common use.

(vii) All community and commercial facilities as provided in the real estate project.

(viii all other portion of the project necessary or convenient for its maintenance, safety, etc., and in common use.” 

Section 11(4)(e) with proviso – Definition and duties of a Promoter:

enable the formation of an association or society or co-operative society, as the case may be, of the allottees, or a federation of the same, under the laws applicable

Provided that in the absence of local laws, the association of allottees, by whatever name called, shall be formed within a period of three months of the majority of allottees having booked their plot or apartment or building, as the case may be, in the project.

Section 17(2): 

“After obtaining the occupancy certificate and handing over physical possession to the allottees in terms of sub-section (1), it shall be the responsibility of the promoter to hand- over the necessary documents and plans, including common areas, to the association of the allottees or the competent authority, as the case may be, as per the local laws.

Provided that, in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, the association of the allottees or the competent authority, as the case may be, within thirty days after obtaining the occupancy certificate.”

Section 19(9): 

“Every allottee of the apartment, plot or building as the case may be, shall participate towards the formation of an association or society or cooperative society of the allottees, or a federation of the same.”

5. From the definition of the common areas under the Act, it can be said that the entire project land along with all the other common areas of the Project including the amenities and facilities, etc., are brought under the definition of Common Areas except covered car parking areas. The open parking areas which can otherwise said to be visitors’ car parking areas are not brought within the definition of the common areas which was the case in the Karnataka Apartment Ownership Act 1972. Under section 11(4)(e), a Promoter is cast with the obligation of enabling formation of an Association under the laws applicable within a period of 3 months from the date of majority of the Allottees having booked the apartments.

6. Section 17 mandates that the physical possession of the common areas to be handed over to the Association within 30 days of obtaining the Completion Certificate and the Allottees have a duty to participate in formation of the Association.

7. For a Promoter, it is essential to understand that enabling the formation of an Association as per the provisions of RERA, is a requirement that has to be fulfilled and what RERA requires is for the Promoter to enable formation of an Association which would, upon interpretation, mean that the Promoter should bring the Allottees together and assist them in formation of an Association under the applicable laws.

8. In order to better understand the formation of an Association, the Article published by me for formation of Association in Karnataka on Taxguru may be referred to- https://taxguru.in/corporate-law/apartment-owners-association-formation-karnataka-laws-process.html

9. In the event if the Promoter is proposing to manage the project for the first 12 months before handing over the same to the Association, it is necessary for the Promoter to understand that THE handover of common areas as per the provisions of RERA to the Association should essentially be done immediately upon the Occupancy Certificate being obtained and the Association is simultaneously formed, in order to meet the requirements of RERA and also to ensure that the defect liability period as contemplated under Section 14(3) in respect of the common areas commences immediately upon the Occupancy Certificate being obtained. Any delay in the formal handover of the physical possession of the common areas to the Association would result in the defect liability period not kicking in, viz., even if the physical possession of the common areas is handed over but not formally and is done subsequently, the defect liability period would commence from the date of such formal hand over of the common areas to the Association. In case of delay by the Promoter in formally handing over the Common Areas, the Allottees will get the benefit of the defect liability standing extended proportionately.

10. Along with handing over of the physical possession of the common areas, it is necessary that the Promoter to also make over the money collected as corpus, if any, from the Allottees along with the balance standing in the maintenance account, if advance maintenance charges are collected, along with all the documents in relation to the entire project including the common areas, to the Association. This again is not a mere requirement, but also a mandate under RERA. Hence, it is advisable for a Promoter to initiate formation of an Association under the applicable laws at the earliest point of time during the life cycle of the project which can also be before obtaining the Occupancy Certificate and immediately upon the Occupancy Certificate being obtained and the Association having been formed, the formal handover of the possession of all the common areas can be completed and if advance maintenance charges are collected, then continue to maintain the common areas for the said period under the supervision of the Association.   Upon completion of the first 12 months period, the Association may be asked to take full control of the common areas.

11. At the time of handover of commons areas, a formal written handover and takeover document should be executed between the Promoter and the Association by detailing the common areas, amenities and facilities that are being handed over along with the original title documents, all sanctioned plans, NOC’S, licenses, etc., along with MEP drawings and also all the plumbing, electrical and other diagrams which are necessary to carry out the maintenance works in the project, are handed over the Association. On completion of this process, the process of handover of the common areas by the Promoter to the Association would stand completed.

12. When it comes to the duties of the Allottees, when the Promoter calls upon the Allottees to come forward to form an Association, it is essential that the Allottees/Purchasers of the apartments to come forward and participate in such formation. The Apartment Owners Association under RERA is also referred to as Association of Allottees which can be formed under the applicable laws and only one Association in a project can be formed and the Allottees cannot form multiple Associations in a single project.

13. While the Promoter is offering to hand over all the common areas, it is essential that the Association carries out a proper technical and legal due diligence of the common areas, amenities and facilities and the documents that are proposed to be handed over to ensure that the amenities and facilities that are being handed over are firstly in proper condition and there are no defects and most importantly, they meet all the statutory requirements and are installed/erected as per the permissions, sanctions and NOCs obtained by the Promoter in respect of the same.

14. The documents that need to be received by the Association would include all the documents of title including revenue, municipal, survey, conversion related documents along with copies of all the sanctioned plans obtained in respect of the project including documents like CFO for STP, certificate from the Lift Inspectorate for operation of lifts, documents relating to electricity, water and sewage connections along with deposit receipts, etc.

15. The Association has to primarily take care to ensure that the Association is formed under the applicable laws and that at the time of takeover of the common areas, proper due diligence is done. As stated above and in addition thereto, it is also essential that a financial due diligence of the corpus fund being handed over along with details of account submitted by the Promoter if the advance maintenance charges has been collected, to ensure that is any amount in excess of what is handed over can be ascertained and received from the Promoter by the Association.

16. The Promoter should ensure that there is due acknowledgement of the hand over of physical possession of the common areas and the Association should also ensure that while receiving possession, it verifies that everything is in order and if not received the possession of such common areas, amenities and facilities which are not in order, receive the same under protest to ensure that in the event the defect is not rectified by the Promoter, the Association can then agitate by filing a complaint in RERA.

17. The following is a list of documents that the Association should receive from the Promoter, (this is only the basic list and the documents will differ from project to project);

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Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal advice. It is essential to consult with a qualified legal professional to ensure that all necessary documents are accurately prepared and to address any legal issues that may arise during the handover process. Relying solely on general information without seeking personalized legal counsel may lead to unintended consequences. Always consult with a legal expert to protect your interests and ensure compliance with all applicable laws.