Key RERA Definitions: Chairperson, Commencement Certificate, Common Areas & Company

Definitions under RERA- Sec 2(l)- Chairperson, 2(m) – Commencement certificate, 2(n) –Common areas & Section 2(o)-Company

This article unfolds the critical definitions under the Real Estate (Regulation and Development) Act, 2016 (RERA), focusing on Chairperson , Commencement Certificate, Common Areas, and Company. As we step into the promising year of 2024, the exploration delves into the leadership role, initiation processes, shared spaces, and entity definitions within the real estate regulatory framework. Vital for stakeholders, professionals, and enthusiasts, this comprehensive analysis illuminates the intricacies of RERA, offering insights crucial for compliance and informed decision-making in the dynamic real estate sector.

RERA – Important Definitions and References in all other Statutes

Since we started reading, learning, most of the statutes have defined the words or phrases. Earlier, definitions were called as interpretation clause eg., in Indian Contract Act 1872 it is mentioned as interpretation clause instead of definitions. importance of definitions is can be stated as follows-

• Clarity and precision: Definitions eliminate ambiguity and ensure terms are interpreted consistently, preventing confusion and misapplication.
• Legislative intent: They act as a window into the lawmaker’s vision, making it easier to apply the statute in accordance with their purpose.
• Mitigating disputes: By reducing ambiguity, definitions minimize the risk of legal challenges and costly litigation.
• Consistency and effectiveness: Clear definitions ensure the statute operates predictably and consistently, achieving its intended outcomes.
• Fair enforcement: Everyone involved in the legal system operates on the same understanding, promoting equal and just application of the law.
• Predictability: Knowing the established meaning of key terms fosters confidence and facilitates efficient legal transactions.
• Rule of law: Definitions strengthen the foundation of the legal system by ensuring clarity and transparency in legislative pronouncements.

We have eloquently conveyed the significance of definitions in statutes. They are indeed the building blocks of legal certainty, shaping how the law is understood, applied, and ultimately upheld.

The Real Estate (Regulation and Development) Act, 2016 (RERA) is a comprehensive regulatory statute that governs the real estate sector in India. It provides unambiguous definitions for various terms related to real estate, ensuring consistency and clarity in the interpretation and application of the law.

The importance of RERA’s definitions is further emphasized by the fact that other statutes, such as the Income Tax Act, GST, FEMA, and PMLA, rely on RERA for any definitions related to real estate. This ensures that there is a uniform understanding of these terms across different legal frameworks, which is crucial for harmonium and effective enforcement.

Below are the definitions defined in Section 2 of the Real Estate (Regulation & Development) Act 2016 –

Section 2(l)” Chairperson ” means the Chairperson of the Real Estate Regulatory Authority appointed under section 21;

The Chairperson is the head of the Authority (Real Estate Regulatory Authority). Appointment, qualification, term of office, salary and allowances, powers, removal, post-retirement are detailed from Section 21 to Section 27.

The Authority shall consist of a Chairperson and not less than two whole time Members to be appointed by the appropriate Government (Section 21)

Appointment, Qualification of Chairperson (Section 22) –

a. The Chairperson of the Authority shall be appointed by the appropriate Government (State of Karnataka) on the recommendations of a Selection Committee consisting of the Chief Justice of the High Court or his nominee, the Secretary of the Department dealing with Housing and the Law Secretary, in such manner as may be prescribed.

b. He shall have adequate knowledge of and professional experience of at-least twenty years in urban development, housing, real estate development, infrastructure, economics, technical experts from relevant fields, planning, law, commerce, accountancy, industry, management, social service, public affairs or administration

c. Provided that a person who is, or has been, in the service of the State Government shall not be appointed as a Chairperson unless such person has held the post of Additional Secretary to the Central Government or any equivalent post in the Central Government or State Government.

Term of office of Chairperson and Members (Section 23)

a. The Chairperson and Members shall hold office for a term not exceeding five years from the date on which they enter upon their office, or until they attain the age of sixty- five years, whichever is earlier and shall not be eligible for re-appointment.

b. Before appointing any person as a Chairperson or Member, the appropriate Government shall satisfy itself that the person does not have any such financial or other interest as is likely to affect prejudicially his functions as such Member.

Salary and allowances payable to Chairperson and Members – (Section 24)

a. As may be prescribed and shall not be varied during their disadvantage during the tenure.

b. May relinquish his office by giving in writing, to the appropriate Government, notice of not less than three months.

c. may be removed from his office in accordance with the provisions of section 26 of this Act.

d. Any vacancy caused to the office of the Chairperson or any other Member shall be filled-up within a period of three months from the date on which such vacancy occurs.

Administrative powers of Chairperson (Section 25)

The Chairperson shall have powers of general superintendence and directions in the conduct of the affairs of Authority and he shall, in addition to presiding over the meetings of the Authority, exercise and discharge such administrative powers and functions of the Authority as may be prescribed.

Removal of Chairperson and Members from office in certain circumstances. (Section 26)

(1) The appropriate Government may, in accordance with the procedure notified, remove from office the Chairperson or other Members, if the Chairperson or such other Member, as the case may be—

(a) has been adjudged as an insolvent; or

(b) has been convicted of an offence, involving moral turpitude; or

(c) has become physically or mentally incapable of acting as a member or

(d) has acquired such financial or other interest as is likely to affect prejudicially his functions; or

(e) has so abused his position as to render his continuance in office prejudicial to the public interest.

(2) The Chairperson or Member shall not be removed from his office on the ground specified under clause (d) or clause (e) of sub-section (1) except by an order made by the appropriate Government after an inquiry made by a Judge of the High Court in which such Chairperson or Member has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges.

Restrictions on Chairperson or Members on employment after cessation of office (Section 27)

(1) The Chairperson or a Member, ceasing to hold office as such, shall not—

(a) accept any employment in, or connected with, the management or administration of, any person or organisation which has been associated with any work under this Act, from the date on which he ceases to hold office:

Provided that nothing contained in this clause shall apply to any employment under the appropriate Government or a local authority or in any statutory authority or any corporation established by or under any Central, State or provincial Act or a Government Company, as defined under clause (45) of section 2 of the Companies Act, 2013, which is not a promoter as per the provisions of this Act;

(b) act, for or on behalf of any person or organisation in connection with any specific proceeding or transaction or negotiation or a case to which the Authority is a party and with respect to which the Chairperson or such Member had, before cessation of office, acted for or provided advice to, the Authority;

(c) give advice to any person using information which was obtained in his capacity as the Chairperson or a Member and being unavailable to or not being able to be made available to the public;

(d) enter into a contract of service with, or accept an appointment to a board of directors of, or accept an offer of employment with, an entity with which he had direct and significant official dealings during his term of office as such.

(2) The Chairperson and Members shall not communicate or reveal to any person any matter which has been brought under his consideration or known to him while acting as such.

Section 2(m) – “commencement certificate“ means the commencement certificate or the building permit or the construction permit, by whatever name called issued by the competent authority to allow or permit the promoter to begin development works on an immovable property, as per the sanctioned plan.

a. Commencement Certificate is issued by the Authority, who has issued the Building Permit/plan or Layout plan.

b. Each state/planning authority has a different practice of issuing the Commencement Certificate based on the building bye laws.

c. E.g., BBMP issues Commencement Certificate once construction of Plinth of the building is complete and pillars are marked, however the Planning Authorities like BDA, BMRDA, BIAAPA etc., issue the Commencement Certificate along with the building plan sanction.

d. Such commencement certificate shall be issued if only if the promoter constructs the project in accordance with the sanctioned plan.

e. It is mandatory to obtain the commencement certificate in order to obtain the occupancy certificate on completion of the project.

f. Professionals shall advise the promoters to obtain the commencement certificate without fail.

g. Further, following provisions are specifically mentioned in the RERA Act –

h. Section 4 (c) an authenticated copy of the approvals and commencement certificate from the competent authority obtained in accordance with the laws as may be applicable for the real estate project mentioned in the application, and where the project is proposed to be developed in phases, an authenticated copy of the approvals and commencement certificate from the competent authority for each of such phases;

i. Section 11(1)(d) quarterly up-to-date the list of approvals taken and the approvals which are pending subsequent to commencement certificate;

Section 2(n) – “common areas” mean

a. the entire land for the real estate projector where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase;

b. the stair cases, lifts, staircase and lift lobbies, fire escapes, and common entrances and exits of buildings;

c. the common basements, terraces, parks, play areas, open parking areas and common storage spaces;

d. 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;

e. installations of central services such as electricity, gas, water and sanitation, air-conditioning and incinerating, system for water conservation and renewable energy;

f. the water tanks, sumps, motors, fans, compressors, ducts and all apparatus connected with installations for common use;

g. all community and commercial facilities as provided in the real estate project;

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

1. Common Areas in the real estate projects are common to all the allottees in the project. Everyone will have common ownership in the Common Area based on either their undivided share in the land or to the Carpet Area/built up area/super built up area.

2. However, every Allottee gets equal rights in use of these common Areas by the Allottees in the project.

3. The Definition of Common Area includes – the entire land for the real estate project. Further Section 17 of the RERA Act mandates that the Common Areas in the Project shall be conveyed to the Association of Allottees, which requires a Promoter not to transfer any Undivided Share in Land (UDS) to the individual Allottees in the Project but to the Association of Allottees, who in turn will have the right in the Land in common by virtue of becoming a member in the Association of Allottees.

4. This practice brings standardisation in the business and practices, the practice of Association holding the entire project land helps the Allottees in case of redevelopment of the project during later years.

5. To enable transfer of the common area as per Section 17 of the RERA Act 2016, the other allied statutes, including the Stamp Act, Karnataka Apartment Ownership Act 1972, etc., require the amendment.

6. The Reference of common areas in the RERA Act 2016 –

a.  Section 2(zn) “real estate project” means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto

b. Section 11(4)(a) The promoter shall be responsible for all obligations, responsibilities and functions under the provisions of this Act or the rules and regulations made thereunder or to the allottees as per the agreement for sale, or to the association of allottees, as the case may be, till the conveyance of all the apartments, plots or buildings, as the case may be, to the allottees, or the common areas to the association of allottees or the competent authority, as the case may be:

c. Section 11(4)(f) execute a registered conveyance deed of the apartment, plot or building, as the case may be, in favour of the allottee along with the undivided proportionate title in the common areas to the association of allottees or competent authority, as the case may be, as provided under section 17.

d. Section 14(1) The proposed project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans and specifications as approved by the competent authorities.

e. Section 14(2) Notwithstanding anything contained in any law, contract or agreement, after the sanctioned plans, layout plans and specifications and the nature of the fixtures, fittings, amenities and common areas, of the apartment, plot or building, as the case may be, as approved by the competent authority, are disclosed or furnished to the person who agree to take one or more of the said apartment, plot or building, as the case may be

f. Section 14(2)(ii) any other alterations or additions in the sanctioned plans, layout plans and specifications of the buildings or the common areas within the project without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such building.

g.  Section 17-

(1) The promoter shall execute a registered conveyance deed in favour of the allottee along with the undivided proportionate title in the common areas to the association of the allottees or the competent authority, as the case may be, and hand over the physical possession of the plot, apartment of building, as the case may be, to the allottees and the common areas to the association of the allottees or the competent authority, as the case may be, in a real estate project, and the other title documents pertaining thereto within specified period as per sanctioned plans as provided under the local laws:

(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:

i. 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.

h. Section 19- 

a. The allottee shall be entitled to claim the possession of apartment, plot or building, as the case may be, and the association of allottees shall be entitled to claim the possession of the common areas, as per the declaration given by the promoter under sub-clause (C) of clause (I) of sub-section (2) of section 4

b. The allottee shall be entitled to have the necessary documents and plans, including that of common areas, after handing over the physical possession of the apartment or plot or building as the case may be, by the promoter.

To conclude, the appropriate government/authorities shall make necessary amendment in the respective statute and issue clarifications, enable the promoters to comply with section 17 of the RERA Act 2016

Section 2(o) – “Company” means a company incorporated and registered under the Companies Act, 2013 and includes—

i. a corporation established by or under any Central Act or State Act;

ii. a development authority or any public authority established by the Government in this behalf under any law for the time being in force;

Company means –

The Act expands the definition of company by way of including –

1.  Any other corporation of Central or State government

2.  Development authority or any public authority – eg., BDA, MUDA, BUDA etc.,

3. Section 69 (offences by the company’s) of the RERA Act, the company includes Partnership Firm, association of individuals.

To conclude RERA’s definitions is further emphasized by the fact that other statutes, such as the Income Tax Act, GST, FEMA, and PMLA, rely on RERA’s definitions. This will ensure uniform understanding of these words across different legal frameworks, which is decisive for effective enforcement and compliance.

The author is a practicing-chartered accountant, and partner at M/s.Venu & Vinay, Bengaluru. He can be reached at [email protected]