Haryana RERA Draws Clear Line on Commercial Lease Disputes
In a significant ruling that reinforces jurisdictional boundaries, the Haryana Real Estate Regulatory Authority (H-RERA) in Gurugram has explicitly stated that disputes arising from commercial leasing arrangements do not fall under the regulatory purview of the Real Estate (Regulation and Development) Act, 2016. This clarification came during the adjudication of a complaint involving a commercial unit initially booked as a restaurant space.
Case Background: From Restaurant to Gym Lease
The case centered on a commercial unit located on the second floor of a project. An Agreement for Sale was executed in August 2019, and the Occupation Certificate was obtained on September 28, 2020. Shortly thereafter, on October 3, 2020, the developer offered constructive possession of the unit. Subsequently, the space was leased to a gym and fitness center, but this lease was later terminated. The allottee had agreed not to claim rent during the gym's operation, yet disagreements later emerged over rental expectations and other commercial aspects, prompting a complaint under the Act.
Understanding Constructive Possession in Commercial Real Estate
During the proceedings, H-RERA elaborated on the concept of constructive possession, a common model in commercial real estate projects. In such arrangements, the builder and allottee agree that possession is deemed handed over upon project completion and receipt of the Occupation Certificate, even if physical possession is not taken by the allottee. Instead, the developer retains leasing rights as per agreed terms, leasing the unit to a tenant of its choice, with the allottee receiving rental benefits as contractually stipulated. The Authority noted that in this instance, constructive possession was offered only after the Occupation Certificate was obtained and in accordance with the Agreement for Sale.
RERA's Limited Scope: Focus on Development, Not Leasing
Upon examining the contractual provisions and documents, H-RERA observed that the Agreement governed the parties' rights and obligations, including leasing arrangements as per agreed modalities. The grievance primarily revolved around leasing terms, rental value expectations, and commercial considerations. The Authority emphasized that RERA is designed to regulate obligations related to development, delivery, and compliance under the Act, and does not extend to adjudicating purely commercial lease transactions negotiated between parties.
Establishing Boundaries in Commercial Real Estate
This order establishes a distinct boundary in the commercial real estate sector, where lease transactions often serve as the primary mode of occupation. H-RERA highlighted that commercial leasing operates on negotiated commercial terms, rather than on the premise of consumer vulnerability that underpins RERA's enactment. Given this distinction, invoking RERA in disputes concerning lease arrangements was deemed legally untenable.
Dismissal of Complaint and Legal Implications
Finding no violation of statutory obligations under Section 11(4)(a) of the Act and no grounds for penal action, the Authority dismissed the complaint. It reiterated that remedies for leasing disputes lie outside the regulatory framework of the Real Estate (Regulation and Development) Act, 2016, reinforcing the need for parties to seek resolution through other legal avenues.
