In a landmark ruling emphasizing developer accountability, the Karnataka Real Estate Regulatory Authority (K-Rera) has issued a stern directive to builders: secure comprehensive insurance for all common areas in residential projects or face the financial burden of repairing disaster-related damages. This decisive stance emerged from a case involving a fire at a Bengaluru apartment complex, setting a crucial precedent for resident rights.
The Clubhouse Fire That Sparked the Dispute
The case originated from an incident on January 30, 2024, at an apartment complex on Kanakapura Road. Resident Dhananjaya noticed smoke billowing from the clubhouse in Block 4. The ensuing blaze caused significant damage, destroying the ladies' washroom and the sauna facility. Frustrated by the lack of action, Dhananjaya stated that despite repeated requests, the promoter undertook no repair or restoration work.
He escalated the matter by filing a formal complaint with K-Rera on May 4, 2024. His plea sought two primary directives: the restoration of the damaged clubhouse and the handover of all insurance-related documents to the residents' association. A critical concern raised was the promoter's alleged failure to form the mandatory association of allottees and transfer common areas as per RERA rules, coupled with a complete lack of transparency regarding insurance coverage under Section 16 of the Act.
Builder's Defense and the Tribunal's Scrutiny
The builders contested the claims vigorously. Their defense rested on two key arguments. First, they asserted that the clubhouse and shared amenities had been formally handed over to the Apartment Owners' Association on November 2, 2019. Following this transfer, they argued, the responsibility for safety, maintenance, and repairs shifted entirely to the association.
Secondly, they presented an inquiry report commissioned by the association itself, which concluded that the fire was caused by the overheating of a sauna heater and not due to any structural or electrical defect in the building. The builders also pointed out a procedural gap, noting that the complainant had not made the association a party to the case, despite it being responsible for day-to-day upkeep.
After examining all submissions, the K-Rera tribunal, chaired by Rakesh Singh with member Gurijala Ravindranadha Reddy, partially agreed with the builder on the repair issue. It accepted the inquiry report's findings and held that the promoter could not be forced to carry out repairs for an incident that occurred years after the handover of the property.
The Unambiguous Verdict on Insurance Mandate
However, the tribunal drew a firm and unambiguous line on the issue of insurance. It noted a serious lapse: the promoter had failed to submit any insurance policies, premium payment receipts, or records proving the transfer of insurance benefits to the association. The bench underscored that these actions are not optional but mandatory under Section 16 of RERA.
The order, passed on November 29, contained a powerful observation: "insurance for common areas is mandatory under Rera", and residents cannot be left to bear losses that should have been insured against by the promoter. Consequently, the tribunal directed the builders to submit all insurance policies, premium payment proofs, and endorsements for the entire project, including the clubhouse and other shared amenities, within 30 days.
A Clear Message for the Real Estate Sector
This ruling serves as a clear and strong statement of accountability for the entire real estate sector in Karnataka. For residents, it reinforces a vital safeguard. As complainant Dhananjaya summarized, "Rera confirms that promoters are expected to get insurance done for the common areas, and if not, then if any disaster happens, promoters will be held responsible for repair."
The K-Rera order effectively shifts the risk back to developers, ensuring they cannot evade their statutory duty to insure common areas. This precedent empowers resident welfare associations and highlights the regulatory authority's role in enforcing compliance, ultimately aiming to protect homebuyers from unforeseen financial shocks due to damage to shared spaces.
