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LEVY OF CHARGES OF THE SOCIETY

The bye-law 65 provides the provision for contribution to be collected from the members of the society towards outgoings and establishment of its funds, referred to in these bye-laws as ‘charges’ may be in relation to the following:

(i) Property Taxes

housing-society-funds

Property Tax is also known as Capital Tax & Real Estate Tax. Property tax is the annual amount paid by a land owner to the local government or the municipal corporation of his / her area. The property includes all tangible real estate property, his house, office building and the property he has rented to others.

Property Tax is also known as Capital Tax & Real Estate Tax. Property tax is the annual amount paid by a to the local government or the municipal corporation of his / her area. The property includes all tangible real estate property, his house, office building and the property he has rented to others.

In India, the municipal corporation of a particular area assesses and imposes the property tax annually or semi-annually. The tax amount is based on the area, construction, property size, building etc. The collected amount is mainly used for public services like repairing roads, construction schools, buildings, sanitation

However in most part it is known as “Property Tax” only which levied and collected by the local municipal body based on the area of the flats / shop / garage / bungalow. While the individual flat owner pays the property tax as may be applicable for his / her flat but will contest to pay the propionate tax for common areas. Thus many Cooperative Housing Society / RWA struggle to find the right way to calculate the contribution each member needs to pay towards the common area. Since all member enjoys the benefit of the common area like passages, lift lobby, community hall, security cabin, etc. it is advisable that the society calculate the total Property Tax levied by the local body for use of such area and add equal amount in each members property tax contribution irrespective of their flat / garage / bungalow size.

(ii) Water Charges  

In most of the older societies there is one / two common meter for water supply to the various flats / shops / bungalows etc. Hence they are required to collect the “Water Charges” from its members. This most of the time leads to lot of arguments and debuts on the method of calculation of the water charges. Some of the suggested bases for calculating “water charges” which society can adopt are as below;

  1. Common water charges (for Garden, Car washing, Lobby /Staircase washing, Fire-tanks, Rain-dance showers, Swimming pool etc.), are to be borne equally by all members, irrespective of anything.
  2. Actual Water bill amount must be divided by the total number of Inlets, irrespective of water usage pattern to arrive the per inlet charges.
  3. Add the number of each Inlet-pipe connected and going inside the members flat. This can be determined by Plumbing-Layout diagram, as approved by corporation.

Society can accordingly amend its Bye-Laws, to change the criteria for levy of water charges to it’s members.

Now-a-days most of the new societies are installing individual water meter to avoid any confrontation with the members and just collect the “Water Charges” equally for the common services like Garden, Car washing, Lobby /Staircase washing, Fire-tanks, Rain-dance showers, Swimming pool etc. which perhaps is the best way to handle such issues. 

(iii) Common Electricity Charges

While calculating the common electricity charges, one should ensure to include all the electrical expenses on account of compound lighting, borewell electricity expenses, passage lighting, lift electricity expenses etc. and should be divided equally amongst all the member irrespective of their flat size. Some of the Housing Societies / RWA member may raise objection / issues on the inclusion of the lift electricity charges of other wing / building while calculating the common electricity charges with an argument that they do not use. However, such facilities are used in common by all the members and one cannot establish as to whether the member of particular building / wing is using and or not using the lift facility of other wing / building. 

(iv) Contribution to Repairs and Maintenance Fund, 

13 (a) of the Society Bye-laws provide the provision of creating the “Repairs and Maintenance Fund” which should be fixed at the society general body meeting subject to minimum of 0.75 per cent per annum of the construction cost of each flat, incurred during the construction of the building of the Society and certified by the Architect, for meeting expenses of normal recurring repairs of the Society’s buildings/property.

Example:

Assumptions:

  1. Construction of cost = 800/- per sq.ft.
  2. Individual Member flat Area (built-up area) = 600 sq.ft.

So, Repair & Maintenance Contribution Calculation

= {600 x 800 x 0.75%} / 12 = Rs. 300 per month

It has been seen in many Housing Societies / RWA that once they fix the Repairs and Maintenance contribution, they do not revise periodically inspite of inflation. Over a period they feel difficulties in maintaining the building in absence of sufficient fund. Therefore, we suggest that the society should at-least review and revise such charges once in five year, though not mandatory but can use used as one of the Best practice of society management.

(v) Expenses on repairs and maintenance of the lifts of the Society, including charges for the running the lift,

In many Societies up till now, if there were shopkeepers/members on the ground floor they were exempted from paying the maintenance and repair charges, of the lift since they were not using it at all. Whereas some of them did not charge any amount to the members residing on the ground floor and sometimes even to those members residing on the first floor, on the ground that they hardly made use of the lift. This thinking on the part of the Society is understandable because neither the shopkeepers nor the members residing on the ground or the first floor would generally use the lift.

Some societies which were formed many years back had even passed a resolution that under no circumstances the members residing on the ground floor and on the first floor would ever be called upon to pay the maintenance and the repair charges for the lift.

Now the situation under the Model-Bye Law has substantially changed. Under clause 67 (a) (iv) of the new Model Bye-Laws it is stated that each and every member of the Society shall have to pay the expenses for the repairs and maintenance of the lift including the charges of running the lift equally irrespective of the fact whether the members use the lift or do not use the lift at all.

It’s important for us to understand that what was the necessity of incorporating this Clause in the Model Bye-Laws? It is obvious that no members can be prevented from using the lift at any time if he wishes to do so. A member residing on the ground floor may not use the lifts most of the times as it is not necessary, but if he wants to visit any member on the upper floor, he cannot be prevented from using the lift. A resolution cannot be passed by a Society that the members residing on the ground floor and the first floor, and the shopkeeper would have no right to use the lift of the Society at all.

(vi) Contribution to the Sinking Fund,

In the context of Cooperative Housing Society, “Sinking Fund” provisions have been made under Bye-Law No. 13 (C) for reconstruction of the building when the existing building is not safe for human habitation since it is difficult for the Cooperative Housing Society/RWA (non-profit organization having no other source of income) to generate such a huge fund in short period of time.

This provision helps cooperative housing society to collect contribution towards this sinking fund from the society members on month on month basis and keep on accumulating year after year by long term investment in accordance with Bye Law No. 15 and directions given under section 70 of the Maharashtra Co-operative Housing Societies Act, 1960.

An outgoing member cannot ask for the reimbursement of his accumulated contribution towards the Sinking fund under any circumstance / pretext however the new buyer / member may request to know the accumulated contribution accrued against the account of the intended flat to be purchased. As and when the flat is sold or the membership is transferred this amount invariably gets automatically transferred to the buyer’s account.

Calculation of Sinking Fund Contribution:

In accordance with Bye Law No. 13 (C), the General Body can decide the Sinking Fund contribution, subject to the minimum of 0.25% per annum of the construction cost of each flat incurred during the construction of the building of the Society and certified by the Architect, excluding the proportionate cost of the land.

Example:

Assumptions:

  • Construction of cost = 800/- per sq.ft.
  • Individual Member flat Area (built-up area) = 600 sq.ft.

So, Repair & Maintenance Contribution Calculation

= {600 x 800 x 0.25%} / 12 = Rs. 100 per month

Most of the Cooperative Housing Society takes the decision on the Sinking Fund Contribution at the time of taking over from the builder / developer / inception, which remains constant for years together, while the construction cost of the flat keeps on increasing.

It is therefore suggested that the Managing Committee should conduct a valuation of the construction cost of each flat by a certified Architect once in 5 year and decide the revision in sinking fund contribution in General Body Meeting.

In case of an open plot type co-operative housing society (which has purchased or taken a place of land on lease and constructed building / buildings thereon) it is not difficult to work out the cost of construction of a flat only. Most of the Cooperative Housing Society faces difficulty in working out the cost of construction of a flat in certain cases, particularly the flat owner’s society in which flats are taken by purchasers under agreements under section 4 of the Maharashtra Owners Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963. A builder/ promoter / developer sells the flats on different occasions to different purchasers with a different cost for the identical sizes flats and no difference in the type of construction and the amenities provided.

The price paid for a flat proportionate land also and further that the cost of construction of a flat is not on the basis of actuals. In the majority of cases, the actual price paid by a purchaser is more than that mentioned in the agreement. It would thus be wrong to recover contribution form members at the fixed rate towards the Sinking Fund on the basis of the value shown in the agreements. In most of the cases, the builder/developer may be most unwilling to give the actual cost of construction. We therefore suggest that Cooperative society should employ the agency of an architect or a valuer, appointed by the general body meeting of the construction of the building and apportion such cost amongst costs of a flat so arrived at may be taken as the basis for fixing the amount of contribution to the sinking fund in respect of the flat/shop/garage etc.

(vii) Common Service Charges / Common Maintenance Charges

Some of the Housing Societies / RWA collect the contribution on account of below expenses as defined under Model Society bye-laws 65(vii) as “Common Maintenance Charges” while they will have “Repairs and Maintenance” head reflecting in the demand notice / invoice. Hence often this mis-lead the member as to why society are levy two different “Maintenance Charges”. It is thus recommended to change the nomenclature of “Common Maintenance Charges” to “Service Charges or Common Service Charges” to cover expenses as defined hereinunder;

  1. Salaries of the office staff, liftmen, watchmen, maids and any other employees of the Society.
  2. Where the Society has independent Office, the property taxes, electricity charges, water charges etc. for the same.
  3. Printing, Stationery and Postage,
  4. Travelling Allowance and conveyance charges to the staff and the Members of the Committee of the Society.
  5. Sitting fees paid to the Members of the Committee of the Society
  6. Subscription to the Education Fund of the Maharashtra Rajya Sahakari Sangh Ltd.
  7. Annual Subscription of the Housing Federation and any other co-operative institution to which the Society is affiliated.
  8. Entrance fees for affiliation to the Housing Federation and any other cooperative institution.
  9. Audit Fees for internal, Statutory and re-audit, if any.
  10. Expenses incurred at meetings of the general body, the Committee and the Sub-Committee, if any
  11. Retainer fees, legal charges, statutory enquiry fees.
  12. Common electricity charges.
  13. Any other charges approved by the General Body at its Meeting. However such charges should not contradict the provisions of the Act, Rules and Bye-laws of the Society.

It has been a normal practice that in the initial stage when home buyer purchase the property has to pay a fix maintenance charges (one year / two year etc.) to builder / developer as Society /RWA/Flat Buyer Association etc. is not formed however in absence of any clarity as to “what such advance maintenance covers?” there were lots of dispute between the members and developer / builder.

Recently enacted law by Parliament of India in 2016 i.e. Real Estate (Regulation and Development) Act in 2016 (RERA) made it mandatory to bring such transparency between the seller & buyer.  

As per RERA, the builder or developer is responsible to provide maintenance for the sold property on a regular basis, the charges of which has to be borne by the resident. However, it ensures that these charges are reasonable.

RERA has made it mandatory to sign a maintenance agreement between the builder and the buyer, in which the actual amount that would be charged for the maintenance, along with its cost breakdown and frequency, should be mentioned. This ensures that the buyer is aware of the charges, which were at times previously hidden from the customer. In case the process is not transparent, RERA is always there to the rescue of the home buyers.

(viii) Car Parking Charges

parking-charges-in-housing-society

Whether it’s a two-wheeler bike parking or four-wheeler car parking in open or stilt area… Parking has been a matter of major concern for housing societies / RWA / Flat Buyer -Association or Condominium. Method of parking allotment, space, parking charges, ownership of the parking space etc. are some of the key issues society members and office bearers keep struggling. Let’s look at what are the legal position on parking space in society;

Model Cooperative Housing Society Bye-laws

The recent bye-law 78 till 84 of the Model Cooperative Housing Society provides better clarity on Policy of Parking allotment, Restriction of Parking Slots, Marking parking space, Eligibility of Parking space allotment, Parking Charges etc.

The Maharashtra Ownership Flat (Regulation of Promotion of construction, Sale, Management of Transfer) Act 1963 (MOFA)

Under Section 84 of the MOFA Act, every member who has allotted the stilt or the parking space shall be required to pay the parking charges at such rate as may be decided by the General body of the Society at its meeting, irrespective of the fact whether he parks his motor vehicle or not. The Society can recover different rates for different types of vehicles.

Both the applicable legal provisions provide the window for the General Body to decide ad fix the rates / charges for the Car / Bike Parking which can range from Rs. 10 to Rs. 10,000/- per month. It has also been seen that many society also impose a Refundable Security Deposit for Car Parking Space ranging from Rs. 50,000/- to Rs.5,00,000/- by passing a resolution in the General Body meeting. It is important to note that such resolution is in violation of the bye-laws / Society Rules. Maharashtra Society Rules 39 restricts these rights of the society to raise such funds. 

It has also been noticed that most of the builders / developers sell the open / stilt parking space to the members at the time of selling the flat somewhere between Rs. 2,00,000 to Rs.20,00,000 depends of the type of building / property, which is illegal (read more on parking) since such space is defined as “Common” space and apartment complex / society / RWA “Solely” owns the common spaces wherein each member of the society has the equal right. Therefore;

  1. The members DO NOT own these spaces individually
  2. Allotment of Parking space is in accordance of the guidelines set by the General body which is an “Administrative function” and the Managing Committee as well as General Body are empowered to allot the parking space to its own registered members
  3. Registered members include family members and associate members staying in the same flat in the same society
  4. Tenants are Nominal Members and have no rights of a regular member, which includes having no rights of parking in the CHS premises. However, at the discretion of the Managing Committee, parking can be an extended as humanitarian facility to the nominal members subject to parking space available in surplus.
  5. Parking area (Stilt, Open or whatever) is not covered under Floor Space Index (FSI) being common area and hence no one can sell.

(ix) Interest on the Defaulted Charges

A Member shall be required to pay simple interest at 21% per annum, or, at such lower rate as may be fixed by the General Body, on the outstanding dues to the Society, from the date the amount was due as prescribed under Bye-law no. 69, till full and final payment by the Member.

We have noticed that various housing society follows different methods when it comes to calculation of the interest specially when there is a partial payment / part payment. The accounting / billing of housing societies are pre-dominantly managed by various CA firms / accountants and hence invariably they follow the best accounting principal;

Partial Payment:

In such case, most of the people first adjust the interest due and then balance is adjusted against the other charges. While such practice is best accounting method but is completely in violation of the society bye-laws. While adopting such method, you are actually imposing / charging “Compounding Interest” i.e. Interest on interest, while the bye-law says that the members are required to pay “Simple interest”.

Therefore, it is suggested to first adjust the society charges and if there is any balance left out then adjust the interest. If no balance then carry forward the principal (remaining, if any) and interest for subsequent month for calculation.  

(x) Repayment of the installment of the loan and interest  

The amount of each installment with interest fixed by the financing agency from members in proportion to built-up area.

(xi) Non-occupancy Charges 

Among the various charges listed in the bye-laws for a Co-operative Housing Society (CHS) in Maharashtra are non-occupancy charges. These are applicable for properties that are not occupied by the owner or his family members.

  1. If a person purchases a flat in a CHS for his own residential usages and keeping his flat locked at all times, when he stays somewhere else or overseas, the member is still required to pay the “Full” Society maintenance charges, without and discount / concessions. In such case member is NOT REQUIERD to pay any NON OCCOUPANCY charges.
  • If the member flat is occupied by family members means Group of persons includes Husband, wife, father, mother, sister, brother, son, daughter, son in law, brother in law, daughter in law, Grand son and Granddaughter. Non- occupancy charges can-not be levied to the above family members of the bonafide member. However, intermittent joint-stay of the other family members OR friends, will not attract Non-Occupancy Charges.
  • Member flat occupied by non-family members (other than above), means Rentees / Licensee / lessee etc. is equal to “Non-Self Occupancy” and therefore the member is required to pay Fixed “10% of the consolidated Service Charges” (Excluding the statutory taxes) as mentioned in  Bye-laws 66 of Model Bye-laws of the Cooperative Housing Society.
  • In the event the Flats in the name of the Trust / Corporates, NON- Occupancy can-not be levied on the Guest staying in such flats i.e. Bonafide Staff members (Director, Executive, managers and so on). However, the corporate is required to provide the copy of the Board Resolution with the details of the company employee/person who is authorized to stay in flat. A company-owned flat can not be used a regular Transit / guest house.

The society is concerned only with the FIXED 10% extra charges on the regular service charges as “Non-occupancy Charges” and strictly nothing beyond this. Any society charging more the specified charges are liable for the action under the Consumer Protection and Indian Penal Code (Criminal Act).  

(xi) Insurance Charges

It is proportionate to the built-up area of each flat. If there is an increase in the insurance premium due to the storing of specific goods in any flat, used for commercial purposes, the extra burden of insurance premium shall be shared by those who are responsible for such increased premium in proportion to the built up areas of their flats.

(xii) Lease Rent  

In case where the land is given by the MAHADA, CIDCO, or any other similar authority then the applicable Lease Rental may be recovered from the members in proportion to the built-up area of each flat.

(xiii) Non-Agricultural Tax  

The Non-Agricultural tax may be recovered from the members in proportion to the built-up area of each flat.

(xiv) Education & Training Fund

In order to impart the education and training for the members, elected representatives, managers and employees, each member is required to contribute Rs. 10 per Flat/unit per month.

(xv) Election Fund

Equally by the Members and as prescribed by the Election Authority in the Rules

(xvi) Any other charges

As may be decided by the general body of the society at its meeting

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