Society and Maintenance, Non Occupancy charges and Transfer Fees - common problems - Adv. ROHiT ERANDE. ©

Society and Common Problems relating to Maintenance, Non Occupancy charges and Transfer Fees:
Adv. ROHiT ERANDE. ©

On and average most of the disputes, problems in the Co.operative societies revolve around monetary issues and that too relating to Monthly maintenance, Non-Occupancy Charges and Transfer Fees. In Spite of the Law being very clear on these points, still AGMs are witnessing heated discussions on these topics. Let's try to study in brief these legal issues.

Transfer Fees - Maximum Rs.25,000/- is the limit :

1. As there were lot of complaints regarding Societies making profits under the garb of Transfer Fees, the Govt. of Maharashtra long back  vide its GR dated 09/08/2001 have clarified that Maximum Transfer fees for  transfering the membership in a society can be charged Rs.25,000/- and not more than that. Inspite of this fact, there have been cases where Societies are charging Transfer Fees based on per sq.ft. area or in lakhs of rupees and same is ex-facie illegal.

2.  Hon. bombay High Court in its various judgments have upheld the said GR dated 09/08/2001. In the case of New India Co.Op. Society V/s. State of Maharashtra, (2013) 2 Mh.L.J.666, Hon.Bombay High Court struck down the decision of Society which demanded Transfer Fees @ 10% of the market value of the Flat, which came to Rs. 2 Crores !. 

3. The Society was relying on its duly approved bye-laws and bye-laws permitted to charge the Transfer Fees at such exorbitant rates. The High Court in clear and unequivocal words held that Govt. Resolution shall prevail over bye-laws even though the bye-laws are duly approved.

4. One more thought in this aspect. The Society which owns the land as well as building can certainly charge Transfer Fees. But if there is no Final Conveyance in favour of the Society, on what legal basis it can charge Transfer Fees ? This factum should be clarified by the Govt.

Non Occupancy Charges : Maximum 10% of the Maintenance Charges.

1. If any member is not using his/her tenament for himself/herself and it has been let out to some third person, then the member has to pay Non Occupancy Charges. But again, there were lot of complaints regarding charging of Non-Occupancy charges and some societies started charging in proportion to the amount of monthly rent or per sq.ft. basis. 

2. Thus again Govt. of Maharashtra drew a GR dated 01/08/2001 U/Sec.79A of the Maha. Co.Op. Soc. Act and clarified that Non-Occupancy Charges can be charged maximum @ 10% of the monthly maintaince Charges. The Constitutional validity of this GR  was confirmed by Hon. bombay High Court in its landmark Judgment of  Mont Blanc Co-Operative Housing ... vs The State Of Maharashtra, reported in  2007(4) Mh.L.J. 595.

3. The Society contended that said GR was against the interest of the Society and its members and the member can earn money but the Society will not be benefited consequently. However the Court rejected all the contentions of the Society and upheld the said GR. 

4. Exceptions to Non-Occupancy charges :

However in the said GR  certain exceptions were made wherein certain relatives if using the flat/shop were not required to pay Non Occupancy Charges. However the Hon. high Court modified said exceptions and held that exemption from the payment of non-occupancy charges will not be applicable to the near relations like son-in-law, brother-in-law (sister's husband), sister-in-law (wife's sister) and sister-in-law's (wife's sister) husband and the same exemption shall be applicable only to the members of the family, including a married daughter and grand children.

5. One important thing should be clarified that the alongwith Non-occupancy charges Society cannot also charge additional or more maintaince if the Flat / shop is let out.. 

Maintenance charges  : SHOULD BE EQUAL TO ALL, IRRESPECTIVE OF AREA OF FLAT

1. This is the main issue faced in almost all the societies. If there are  flats with different sq.ft. areas, then the Flat holder with larger area is charged more as compared to flat holder with lesser area. This is incorrect and wrong as the members enjoy all the facilities equally. 2. The Hon. Bombay High Court in various judgments has considered this aspect and has held that Maintenance amount should be common to all the members, be it residential or commercial. 

3. How much maintaince is to be charged is the prerogative of the Society, but it should be common to all. There cannot be discrimination based upon area of flat or on which floor the flat situates or whether the tenement is commercial or residential.

4. Let's see 2 important judgments of Hon.Bombay High Court on this point. 

This discussion would be incomplete without referring to landmark judgment of Bombay High Court in the case of Venus Co.Op. Hsg. Society V/s. Dr. J.Y. Detwani, reported in 2004 (5) Mh.L.J. 197 = 2003(3) ALL M.R. 570. In case of Venus Co-operative Housing Society there were flats of different sizes, 284 small flats with two bedrooms and 39 large flats with four bedrooms. The society passed a resolution levying the different maintenance charges as per the area of the flats and issued a circular to that effect to members. This circular was challenged by the Respondent in the Co.Op Court. The Court even appellate Co.Op. Tribunal set aside the circular being illegal, against which the Society approached Bombay high Court. The observations of Hon. Bombay high Court are worth reading,

"This Court held that the resolution of the society levying differential charges on the basis of the area of the flats was arbitrary, unreasonable, without any rational and without any source of power. It held that services of the society were enjoyed by all the members equally and there was no reason for the society to make the large flat holders pay more on the basis of the area of the flats. "

"Though the supremacy of the general body cannot be doubted, even the supreme general body had to pass resolutions considering all facts and circumstances of the matter. The general body cannot pass arbitrary and unreasonable resolutions merely because it is supreme and it has a large majority in favour of any issue on the agenda."

5. This judgment was followed by Hon. Bombay High Court in its subsequent judgment in the case of Sunanda Janardan Rangnekar vs Rahul Apartment No. 11, reported in 2006 (1) Mh.LJ. 734, wherein discrimination between Commercial and Residential Tenements was struck down. In said case their Lordship observed that,

"The society has no authority in law to treat the members differently and levy the charges for the commercial premises at a rate twice the rate of the residential premises." 

It further observed that ,

"There should be equality in sharing of the burden of expenses for maintenance and common expenses which are recovered by the society as service charges or maintenance charges. They should be recovered equitably and equally from all the members."

Lastly it also held on the point of Non occupancy Charges that,

"In view of the Government order issued under Section 79-A of the Act the non-occupation cannot exceed 10% of the maintenance charges applicable to the concerned flat/unit. The society was therefore not entitled to recover the charges as claimed by it in the recovery certificate."

Bye-laws are not superior to the Law

In almost all the cases cited above, it was contended on behalf of the Societies that since thier bye-laws were duly approved by the Registrar, the members have to accept the resolutions as per bye-laws. The Law is very clear on this point that Bye-laws can never supersede the Law.

One more important exception, all these case-laws are not applicable to Apartment Association and only applicable to Co.Op. Societies. In case of  Apartment,  Transfer Fees or Non-Occupancy charges cannot  charged. However the maintenance is charged as per are area. 

Lastly I would like to conclude that all these issues are the outcome of Ego-Clashes between the members. No doubt for running a society it requires money, but it should not be recovered by arm twisting tactics. The Job of Society Committee is a thankless job. members should also take active part in the society affairs. If there is proper communication and trust between the members and the committee, then there will be lesser problems. The Court should be kept as a last resort and as far as possible try to mediate and conciliate the problems with the help of experts.

Thanks and regards

Adv. Rohit Erande
Pune.©