H-RERA: Commercial lease disputes fall outside RERA's jurisdiction

In a significant reaffirmation of statutory boundaries, the Haryana Real Estate Regulatory Authority (H-RERA), Gurugram, has clarified that disputes arising out of commercial leasing arrangements fall outside the regulatory scope of the Real Estate (Regulation and Development) Act, 2016. Dismissing a complaint concerning a unit in the commercial project "AIPL Joy Street" at Sector 66, Gurugram, the Authority held that any dispute pertaining to the leasing of a unit cannot be adjudicated under RERA, as the Act does not confer jurisdiction upon the Authority to examine matters relating to lease arrangements.

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Specifics of the Dismissed Complaint

The matter concerned a commercial unit booked as a restaurant space on the second floor of the project. An Agreement for Sale was executed in August 2019, and the Occupation Certificate was obtained on September 28, 2020. Thereafter, an offer of constructive possession was issued on October 3, 2020. The unit was subsequently leased to a Gym and Fitness Centre, and the lease was later terminated. It was noted during proceedings that the allottee had agreed not to claim rental for the period during which the gym operated. However, differences later arose regarding rental expectations and related commercial aspects, leading to a complaint seeking inquiry and penal action under the Act.

Understanding Constructive Possession

While adjudicating the matter, the Authority elaborated on the concept of constructive possession, a model frequently adopted in commercial real estate projects. In such arrangements, the builder and allottee agree that upon completion of the project and receipt of the Occupation Certificate, possession is deemed handed over, though physical possession may not be taken by the allottee. Instead, the developer may retain leasing rights in accordance with agreed terms and lease the unit to a tenant of its choosing, with the allottee receiving rental benefits as contractually agreed. The Authority observed that constructive possession in the present case was offered only after the Occupation Certificate was obtained and in terms of the Agreement for Sale.

Jurisdictional Boundaries of RERA

Examining the contractual provisions and documents on record, H-RERA noted that the Agreement governed the rights and obligations of the parties and permitted leasing arrangements as per agreed modalities. The grievance raised was essentially linked to leasing terms, rental value expectations, and commercial considerations.

The Authority emphasised that RERA is intended to regulate obligations relating to development, delivery, and compliance under the Act, and does not extend to adjudicating purely commercial lease transactions negotiated between parties.

Leasing vs. Consumer Protection

The order draws a clear boundary in the commercial real estate segment, where lease transactions are often the dominant mode of occupation. The Authority observed that commercial leasing operates on negotiated commercial terms rather than on the premise of consumer vulnerability, which underpins the enactment of RERA. In view of this distinction, invoking RERA in disputes concerning lease arrangements was held to be legally untenable.

Finding no violation of statutory obligations under Section 11(4)(a) of the Act and no ground for penal action, the Authority dismissed the complaint, reiterating that remedies for leasing disputes lie outside the regulatory framework of the Real Estate (Regulation and Development) Act, 2016. (ANI)