Stamp Duty
Stamp Duty on Instruments
February 12, 2017

You the Member and your Society

Society

Being member of a cooperative Housing society a person may be facing problems on various issues. Similarly the society Managing committee is also facing several issues and problems. A Managing Committee is elected for a specific period only with a view to look after the affairs of the society. They have to administer the society as per the decisions of General Body Meetings, in which members will decide the policy matters but such decisions should be within the purview of the bye laws, governed by the MCS Act and the MCS Rules. It is no less a task to know the exact meaning and the under lying procedure for a common man as enshrined in the bye laws. Bye laws being a contract between the members and the society and the same is implemented through Managing Committee, each party should takes special care and gives specific attention at every stage that no violation is committed, no breach is done, no damage is caused to the property of the society, no funds are wasted etc. etc.

We are all well aware that we have several rights including fundamental rights but at the same time we habitually or conveniently tend to forget that there are fundamental duties as well. All said and done a contract can be performed only with the cooperation of both the parties because due performance demands that from both parties. In the case of a Housing Society, in order to mitigate the housing problem people are forming Housing Societies, buy land, construct buildings with their own or borrowed funds to have a shelter of comfort over their heads. While doing so primarily due to lack of knowledge or in many a time due to lack of interest, the members of the society or for that matter the society is cheated by seller of the land or middlemen and the consequences of not meticulously verifying the title of the seller follow. Any amount of caution is not enough now a days. After the construction is over or during construction itself the problems from or to members start. It may be regarding the contributions, it may be regarding the construction quality, quantity, area and other amenities. Pricing is not a factor of dispute in such cooperative societies where the society members brought the land constructed their dwelling units themselves.

Now we may think of the next category i.e. the land belongs to ‘X’ development is done by ‘Y’, sold by either ‘X’ or ‘Y’ or ‘XY’. In this category comes the 12.5% GES (PAP) land as well. Most of the housing units now facing numerous problems now a days are belonging originally to PAP and allotted originally by CIDCO Ltd. the society formation and conveyance are herculean tasks before the members. In many a time the members get the feeling that their whole life earning has gone to dogs. Flats are booked, flats are constructed, flats are sold, but necessarily to the person who paid the money. The flat purchaser never bothers in many cases even to search the title of the seller or developer in relation to the land before striking the deal or any time thereafter.

Maharashtra Ownership Flats Act (MOFA) stipulates provisions to control construction, development, management, sale, conveyance etc. etc. It also stipulates that society should be formed within a specified period, conveyance should be made within a specified period on formation of the society, the provisions for issuing title clearance certificate, the format of the Agreement to be entered, the offences and punishment, the fixation of liability all are subjects thereto. However it is seldom thought of before or in the process of buying a residential property. Shockingly most of the flat buyers have executed the documents without even reading the same. Everything is done in the so called “good faith”. Crores of rupees can be spent without any verification of the title, without any proper communication and information of the property sought to be purchased. So blaming the seller alone is not enough. There are definitely marketing experts who can sell even poison so handy and easily, then what about a flat which is an absolute necessity.

From time immemorial we have learnt that buyer should be beware but as buyers we do not bother and blindly believe anybody who gives an attractive offer.

In order to highlight certain every day issues I have identified the following.

Direct admission to society by a purchaser of Flat on the basis of his agreement with the Builder / Developer and on the basis of his declaration to abide by the bye laws and all other applicable provisions that are laid down for that purpose. It is necessary that the builder developer should issue a certificate of sale and a letter to the society for admitting the direct purchaser if such purchase is after formation of society.

Resale : Transfer of Flat from member of Society to incoming/prospective member: Let us call this as regular transfer of shares and property by existing member to incoming/prospective members. Both the society and the seller member and the buyer member have to follow the guidelines to ensure that all the formalities as laid down in the bye laws are complied with and completed for that purpose. The parties have to execute the requisite forms apart from executing and registering the Agreement for such transfer. In any case in order to be eligible to transfer the membership, the transferor should have held the share for not less than one year as per MCS Act. Only one connection that the incoming member has is his agreement to purchase a unit in the society and an undertaking to abide by the bye-laws, rules etc. The transferee is at the same time, the successor in the property and therefore he cannot escape any charge or encumbrance including the society/statutory dues on the unit. It is the duty of the purchaser to verify the membership, title of property whether society dues and applicable property tax and or other statutory payments are promptly made and are up to date before the sale.

Society is not permitted to transfer a flat or any unit without a duly registered document of transfer, whatever name it is called such as agreement for sale, sale-deed, gift deed, transfer deed, release deed, deed of assignment, exchange etc;

NOC for housing loan etc., is often demanded by purchaser. Unfortunately the society is in a dilemma as to whom they should support in the deal, i.e. the existing member or proposed member. The banks and financial institutions are asking NOC in favour of the purchaser. The purchaser has no property at that point of time in the society nor he has any membership right to be transferred. The payment is not complete, the formalities are not met, membership application is not accepted, the committee has not discussed the eligibility criteria and so on and so forth. In fact it is highly premature and risky for the society to issue NOC in favour of a purchaser. Since it is a regular practice the societies are issuing Mortgage NOC in favour of purchaser even before he becomes the member of the society.

Another question is the compliance of transfer through CIDCO of the unit being sold since before transferring the unit CIDCO does not give any mortgage NOC. Before issuing Mortgage NOC CIDCO is asking the resolution in which the resignation of seller member is accepted and the admission of the purchaser member is affected. Once the society NOC for registration, Mortgage NOC from both society and CIDCO, I am not sure what right of property and membership remain with the seller member.

Property tax dues:-Property tax dues may come up either during the current year or even thereafter after the flat is sold and a new member is admitted. Society therefore may obtain an undertaking from the incoming member that he is liable to pay the property tax dues remaining unpaid as and when demanded by municipality or society even though the period of the tax pertains earlier to the date of purchase of the flat by transferee /incoming member. Property tax dues are payable by the flat purchaser right from date of occupancy or handing over possession by builder developer.

Liabilities on the Flat: It is quite often seen that the outgoing member (Transferor) transfers his flat and apply for transfer of shares after creating all types of liabilities and encumbrances but before clearing the same to the respective person/authority/institution. It becomes a nightmare for society office bearers while scrutinizing the flat transfer of a businessman, since there could be mortgage loans, collateral security loans etc. for that category of persons. The experience shows that salaried employees are not far from manipulation and non-disclosure of true liabilities is almost a daily practice. Because of all these transfer procedure is a high calibered job. Further society cannot run after the outgoing member for any dues or for any subsequent compliance.

Subletting/caretaker/lease: This is another area which calls for prompt attention. Specific written permission of the society is to be obtained by the member before he enters into an agreement of leave and license etc. Though it is mandatory to have the subletting/caretaker/lease agreement to be registered (with effect from 1.4.1999). It is not being meticulously followed by members. There is punishment for not registering such agreements to the owner of the flat. Further police verification of the licensee is a must. Since there is revenue loss to govt., the society shall not in any way be a party encouraging such unregistered arrangements. The society is always on the risk of claim of revenue and or police investigation particularly in absence of police verification. We draw your attention to a very recent judgment of Bombay High Court (2004(4) ALL MR 458) where it was held that even if the concerned occupant was a nominee of the member and a close relative, still society was entitled to evict the member for breaching the byelaws of the society by not taking the prior permission to sublet. The licensee should be made a Nominal Member.

Uniform service charges: Service charges is one of the several items in the society charges. Bye-laws No 67,68, and 69 are to be kept in mind in that respect. Out of the 14 items of expenditure, only one item, ie service charges is to be equally charged. All other 13 items (except water charges ) are to be charged on the basis of built up area. Water charges to be charged on the basis of number of inlets (taps) in the flat. There are practical difficulties in this. It is not necessary that only a very large flat shall have several taps.

Normally the society may segregate the average estimated expenses on all items under service charges for the year, based on previous year’s expenditure plus the normal increases. Thereafter, the ensuing general body can approve the per flat service charges in lump sum, which should be billed as a separate item like property tax in society bills. The general body is the appropriate forum to fix the service charges and all other levies. Society cannot entertain the complaint that it is undemocratic to charge equally for small, medium and large flats, pent house etc. In any case committee cannot modify this item.

Conveyance of land and building: As per Section 10 of the MOF Act, 1963, the Builder /Developer (Promoters of the Building), should become member of the society in relation to his unsold units. Therefore, it goes without saying that he has to pay society dues from the date of registration of the society in respect of units held by him. He enjoys all the rights like any other member. Hence, his liability is similar to a member who transfers his unit to another incoming member. Because of this reason, all the society transfer forms are required to be submitted by the purchasers and the Builder / Developer, except the declaration of the Builder under the ULC. Similarly the transfer premium, share money and entrance fee should also be collected by the society. Hence there cannot be anything called a direct admission. All direct admissions are already effected by the society at the time of registration of society on the basis of list of flat / shop purchasers provided by builder / developers. All subsequent admissions are on the basis of transfer and not direct. Since the builder’s right to transfer is not affected by formation of society he is entitled to dispose of the unsold unit as per the provisions of law. The society is empowered to collect all society charges from builder irrespective of any understanding with builder, since provisions of law will ultimately dominate and decide the issue.

Legal remedy against the builders for obtaining Conveyance of the Land.

The builder developer is duty bound to convey the property to the society within four months of the registration of the society under section 11 of the MOFA. The Societies or the flat purchasers are at the mercy of the builder as well as a Villager (PAP) where land is under the 12.5% Scheme. Had the builder entered into a lease deed immediately after occupancy certificate is received by paying the full stamp duty, society could have got an assignment by paying nominal stamp duty. Apart from stamp duty registration fee of 1% is also payable on the market value of the property.

This is a serious deficiency in service by the builder developer and the society is entitled to approach the concerned Consumer Forum praying for removal of the deficiency (i.e. by executing the conveyance) or for claiming damages. The damage to be claimed shall be having some relation to the total expenses to be incurred by the society considering the total membership, apart from this, the society can claim compensation for mental agony. (the minimum stamp duty applicable on the present market value of the land may run into several lakhs of rupees. The Lease Deed should be entered before execution of Conveyance.

As per provisions of MOFA the society can prosecute for offences (i.e. non-performance as contemplated under MOFA of breach of the contract of sale entered between him and flat purchaser). This remedy is in addition to Consumer Complaint and or Civil remedy.

Limitation for filing: (a) Civil Suit – 3 years, (b) for Consumer Complaint/Criminal Complaint against builder promoter/landlord – no limitation (in view of the Bombay High Court Ruling)

Recovery of society dues: MCS Act provides for filing a dispute with Co-operative Court on any issues between the society and its member. Similarly member has the same provision at his hand. Recovery of dues is a dispute between member and society and therefore it falls under section 91 of the MCS Act. Apart from this the society can move expulsion proceedings against member if he is a persistent defaulter to the society. The cumbersome and drastic provision of expulsion may be avoided and should be the last resort. Apart from the above, as you are already aware you can move an application under section 101 of the MCS Act. When a recovery certificate or Court Decree comes the real struggle starts for the society due to shortage or in many cases non-availability of sale officer or his lethargic non-co-operative attitude.

The status of builder: The builder as per provisions of MOFA section 10 becomes a member of the society and he has to pay and discharge all the society dues like any other member. Further section 6 stipulates that the builder developer/promoter is liable for payment of outgoings till property is transferred. For that purpose society is the authority to whom such payments if any due needs to be paid. It is worth mentioning here that in a recent case the interim relief of 60% claim was allowed by the Cooperative Court against the builder developer. He went in appeal and the appellate court dismissed the appeal direct him to pay the amount as stipulated by the lower court. The builder developer filed a writ petition before the Hon’ble Bombay High Court which also rejected his writ petition. Most of the builders have been paying the dues on their unsold units to the society.

The member of a society is a consumer and society is answerable if there is a claim of deficient service on its part. Most often the member is going to consumer forum on non attended leakages. Society is a service provider and therefore society cannot escape.

Car Parking and Parking Charges: As per bye-laws of the society parking charge is one of the levy. Parking charge is levied uniformly on members who are allotted the common space of the society including stilt for parking their vehicles. It can be said that it is a rental charge. In bye law No.67 and 69 parking charge is mentioned as one of the levies by the society to its members. Bye law No. 84 requires that a member who has been allotted the stilt or the parking space shall be required to pay the parking charges. By the nature of the wording it is imperative that the levy is mandatory wherever there is a car parking allotted to a member. The rate of parking charges has to be decided in the General Body and payment needs to be made to society irrespective of the fact whether he actually park his vehicle or not. The levy is on the basis of number of parking allotted to a member and not on membership basis. For other vehicles such as scooter, motor cycle, autoriksha are also subject to such levy as fixed by the General Body.

Allocation Of Car Parking: Car parking is a subject under the prerogative of General Body. Bye law No.78 specifies that society shall allocate parking space open or stilt as per availability on the basis of demand made chronologically (first come first). The stipulation is notable that a member should be allotted at least one car parking which otherwise means that more than one car parking can be allotted to any member only after allotting car parking to each member. Because of the bye law provision society often finds it difficult to accommodate members having more than one vehicle and members who are not having vehicles. In such cases the only option is to request the member to surrender his/her car parking in favour of some other member who is in the waiting list or holding more than one vehicle. This does not mean a transfer of any right from the member not having a vehicle to a member holding vehicle. In fact it is the society has to re-allocate the parking on the basis of availability made possible due to not holding the vehicle or not requiring parking space for a specific period.

Car parking is not transferrable: The society is the only authority who can allot car parking in view of the recent judgement of the Supreme Court. The Supreme Court has already finally settled the law on the issue of common area and parking space apart from interpreting what is the entitlement of a flat holder under MOFA vide its judgement [reported in 2008(3) Bom.C.R.727] 2010(6) Bom.C.R.74 (Supreme Court). In the said ruling the Apex Court has categorically declared that the builder developer cannot sell any parking space whether stilt or open (except covered garages). Once the Supreme Court declares any point of law or interprets the existing law that is the final verdict applicable the entire Country.

The member, in view of the above judgement, cannot claim that he is the specific purchaser of any car parking space whether stilt or otherwise. Once the allotment or selling of such stilt and open car parking is nullified, the only authority who can allot parking is the society and the society in its turn should follow the provisions of the bye laws for allotment up-keeping, charging, re-allocation etc.

Bye laws prohibit a member from using more parking space/stilt than what is allotted to him (bye law No.79). The society has to number the stilt or open parking spaces in such a way that no inconvenience would be caused to any of the member of the society and the committee is mandated to ensure that the car parking space is used by the members for the said purpose only. It goes without saying that the compulsory open spaces in front of the gates, staircase, lift, exit and entrance, play and garden area are to be left free from such allotment and marking. The society has also to ensure that there should be enough maneuvering space all around the building and should ensure that passage of emergency vehicles such as fire brigade vehicles and ambulance and other emergency service vehicles shall have no obstruction at any point of time.

It is true that the bye laws of the society are stating the procedure as to how parking can be allotted or maintained by society on yearly basis. However, once Supreme Court has declared the final position there cannot be any other arrangement under the bye laws, since the verdict of the Supreme Court supersedes all and dominates all existing provisions of law, interpretation, or rules and regulations including the bye laws.

It is also to be borne in mind that the necessary changes on the basis of the law laid down by Supreme Court, above mentioned may be taken care in the new Model bye laws. The State Govt. has already declared that it shall make large modifications in the bye laws concerning housing societies. Let us wait to know what the Govt. offers.

Compiled and explained by:
Adv. Mohan K Nair
98201 62054 | 022-4127-0664

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