Important Questions and Answers

Q.10 Is there in reality not 10% expenses are about 50% of maintenance charges?

    It is known  that problem of housing is universal problem.

1. Some of the members of the co-operative Housing Societies tried to take the advantage of the shortage of residential or commercial accommodation and tried to indulge in exorbitant profiteering. However some are forced to keep their flat closed, as it would be difficult for them to recover the same and therefore Government is thinking to prevent this unlawful profiteering by issuing certain guidelines under section 79A of the Co-operative Societies Act to the Co-operative Housing Societies and has invited suggestions from some of the people who are experienced in the Co-operative Law.

2. While considering the question of problems arising out of Non-Occupation Charges -

What is meant by Non-occupation charges?
Whether Occupation Charges are required to be paid in respect of the premises, which are closed for some valid reason?
Whether the premises which cannot be occupied under the law and/or occupied illegally, can it be   said that the premises are occupied, and person is liable for payment of Non occupation charges?
Whether the members who are making exorbitant profits, can they be called upon to pay reasonable share in the profits?
Whether it would help to solve the shortage of housing/accommodation and also help both the members of the society and the society get some benefit of by allowing to give the premises on the basis of non-occupation charges.

Under the Maharashtra Co-Operative Societies Act, and subject to provisions of the Co-operative Societies Act and Rules, thon charges defined under bye laws are as under:-
"While referring to the definition of the Non-occupation charges, it must be noted that every premises non-occupied, does not mean the premises which are closed. The premises which are non-occupied mean the premises which are Sublette and/or given on Leave and License basis for the purpose of occupation."

4. The bye-law No.45 refers to permission for sub-letting, etc.
The very object of charging temporary occupation charges is not to prevent a person from subletting it or giving on license or for occupation to enable the Society to share the benefit arising out of   the transfer for the society itself and to its members, whereby the residential flats premises will not be unreasonably kept closed and they should be available for the needy persons and artificial scarcity will be reduced and the prices of the flat would come down.

The bye-laws also have made it clear that even the members of the family who may be father, mother, brother or sister will be allowed to stay in the premises and non-occupation charges will not be levied. It is also further made clear that the power has been given to the general body of the society even to allow the other persons who are closely related to occupier of the flat without charging any occupation charges. However, now it is suggested that for the proper business and management of the society the person who is allowed to occupy should be made nominal member of the society.

It is brought to the notice of the government that under Clause L of sub-section (2) of section 3 of Maharashtra Ownership Flat Act 1963 that the promoter shall not allow any person to enter into possession until completion certificate is given under the law and no person shall take possession until the completion certificate is duly given by the local authority. In such a case where the society is duly registered and where the persons have occupied the flat, they should not be allowed to escape from paying occupation charges.

While differentiating ordinary members and corporate members, it must be remembered that the Co-operative Society is to have better living and better management for the purchasers of the flat and they do not intend to make any profits, whereas in case of the corporate bodies, Companies and other Corporations profit is the sole and main object of such Corporate Bodies or Companies and those who are making profit for their institutions, can be treated liable for stamp duty and the transfer of the membership of the corporate bodies are restricted and  when they are to occupy the flat on the basis of leave and license  additional non-occupation charges   must  be levied.

When the Society gives premises for the purpose other than the residential purposes, it must be seen that the society should not be allowed to do so unless there is permission from the Municipal Corporation. The premises can be given on sub-letting and/or license basis only after it is permitted under the Municipal Laws and said permission can be granted for nursing home or for running classes and/or for beauty parlour and not for any other purposes.

9. In this context, Bombay High Court has already delivered a judgement, which states as under :-
"The Society being a Co-operative Society was the owner of the building and the member was no more than an allottee. If the member had introduced a stranger and was getting a profit out of it, it was but proper that the real owner should get some part of the profits, if not the entire profit, accruing to the member." (Ref : Sardar Mohan Singh Ahuluwalia (since deceased) through his wife and legal representative Smt. Sukhwant Kaur Ahluwalia V/s.Maitri Park Co-operative Housing Society Ltd. and another.  Citation 1986 C.T.J.418).

It is further suggested that when the flat is given on temporary Leave and License or temporary occupation purposes, it should be given along with the facilities for the purpose of car parking etc. whenever possible.  However where it is not a sale along with the facilities for the purpose of car parking facilities, temporary license or temporary occupant cannot get the benefit of car parking facilities.

It is further suggested that while considering the question of levying temporary occupation charges, the difference between the ordinary persons and corporate personas or between the flat costing below Rs.10 Lakhs and above Rs.10 Lakhs are required to be made.  The reason being taken into account is the hardship caused to flat purchasers who purchase the flat costing up to Rs.10 Lakhs certain concessions are being allowed and/or given to such flat purchasers.  For example it is fully exempted from the payment of stamp duty if the value of the flat is Rs.1 Lakh or less Rs.1 Lakh and/or up to 10 Lakhs.

12. However if the value of the flat is more than Rs.10 Lakhs, it is required to pay the stamp duty at 8%.  Now taking this into consideration, even this principle can be applicable in case into consideration, even this principle can be applicable in case of non-occupation charges and therefore, it is suggested that only one time service charges may levied in case of the flats which are costing more than Rs.10 Lakhs. However where the flat which are costing more than Rs.10 Lakhs and the society has taken heavy deposit for the license fees from the licensee, the Society must get reasonable benefit according to the percentage of profit made by the members of the society.

In conclusion, it can be said that when levying the temporary license/s occupation charges, it must be seen that very object is not only to share the profits when the premises are given to the society are encouraged to give the premises on Leave and License so that the societies are prevented from taking undue advantage of making profits and thereby artificial shortage of residential accommodation can be reduced to a maximum extent.


Q.1 What is the object and purpose of Order dated 1st August 2001 issued under section 79 of Maharashtra Co-op.Societies Act ? Whether earlier order dated 9th March 1999 is treated as cancel ?
Ans.   Object of the order is to encourage the people not keep the flat vacant but to give it on leave & licence on reasonable terms and conditions and also to share their income by paying 10% of the service charges excluding municipal charges.

   All the co-operative housing societies in the state have to amend the bye-laws/sections accordingly. Even if the amendment is not made, Non occupancy charges, should not be charged more than the maximum limit from the date of issue of this order.

  This order will come into force from its date of issue.


Q.2 What was the object and purpose of Circular issued on 9th March 1995 by the Department of Co-operation and Textile? 
Ans.    According to the said Circular it has come to the notice of the Government that some Cooperation and assistance on the basis of their majority they try to collect exhorbitant non-occupation charges and therefore they have decided to have only one time maintenance charges, no matter what is the income of the society.

   Considering the above situation and the contents of a letter dated 19.12.1994 from the Co-operative Commissioner and Registrar of Co-operative Socieities, from the point of view of the common public interest, the Government under Section 79 (A) of the Co-operative Act gives following directions :-

  The non-occupancy charges should not be more than one time of the service charges and if a member has given his tenement to below mentioned his near relatives then non-occupancy charges should not be charged :-

  Mother, father sister brother, son, daughter, son-in-law, brother-in-law, sister-in-law, grand-son, grand-daughter and besides this other relatives as decided by Society.

  Subject to the aforesaid both the conditions the Housing Societies can recover non-occupancy charges as per the procedure referred to in the Model Bye-law No.45(3)(C) of the concerned Co-operative Society.

  The above directions shall be applicable to the residential and commercial flats as well as to the all types of Housing Societies and these directions shall come into effect from the date of issuance of the same.


Q.3 Whether it is necessary to make distinction between the flats which are purchased for the purpose of investment and for the purpose of residence ? whether the order issued by the under Secretary, co-operation Textile Department having regard to taking into consideration this point ?
Ans.    The order refers to the general provisions stating that non occupancy charges shall be charged more than 10% that of the services charges (including Municipal Taxes). At least two broad categories should be made while charging non-occupation charges.


Q.4 How far the fresh non occupancy charges is correct ? when non occupation charges are not recovered when the flat is not occupied but the charges are occupied when the premises are sublet or given on leave and licence to the members of family ?
Ans.    It must be noted that Artificial scarcity of the premises are created in as much as people were reluctant to give the premises  to the persons other than the members of family. If the premises are not occupied society does not get any amount in addition to the regular maintenance charges. In fact the premises are vacant there is no consemption of electricity charges, water supply or lift services. One of the object of  allowing the members of family to use the premises free of charges is to reduce the problem of accused shortage of housing which has resulted in created artificial rights in the prices as the premises are kept vacant. Instead of calling non occupation charges it should be called non occupancy charges by member.


Q.5 How composition of charges of the society made ? 
Ans.     The contribution to be collected from the members of the society, towards outgoing and establishment of its funds, referred to in these bye-laws as the charges may be in relation to the following :

  (i) Property Taxes (ii) Water Charges (iii) Common Electricity Charges (iv) Contribution to Repairs and Maintenance Fund, (v) Expenses on repairs and maintenance of the lifts of the society, including charges of running the lift (vi) Contribution of sinking fund (vii) Service Charges (viii) Car Parking Charges (ix) Interest on the defaulted charges (x) Repayment of the instalment of the loan interest (xi) Non-Occupancy Charges (xii) Insurance charges (xiii) Lease rent (xiv) Non-agricultural tax (xv) any other charges.


Q.6 How the services charges of the Society calculated ?
Ans.   The service charges of the society referred to at (vii) above shall include the following :
Salaries of the office staff, liftmen, watchmen, malis and other employees of the society.
Where the Society has independent Office, the property taxes, electricity charges, water charges etc for the same.

  Printing, Stationery and Postage
Traveling Allowance and conveyance charges to the staff and the members of the Committee of the Society.
Sitting fees paid to the members of the Committee of the Society.
Subscription to the education fund of the Maharashtra Rajya Sahakari Sangh Ltd.,
Annual subscription of the Housing Federation and any other co-operative institution to which the Society is affiliated.

  Entrance fees for affiliation to the Housing Federation and any other co-operative institution.
Audit Fees for internal, statutory and reaudit, if any

  Expenses incurred at meetings of the general body, the Committee and the sub-committee, if any.
Retainer fees, legal charges, statutory enquiry fees
Common electricity charges

  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.


Q.7 How many flats are vacant in the state of Maharashtra ?
Ans.   It appears from the press report that there are more than 12,50,000 flats (18,000  + 11,000 housing Societies) out of which about 15,000 or thereabout are in posh localities like Malabar Hill, Nepean Sea Road, Cuffe Parade, Warden Road, Worli, Bandra and such other localities where it is found that some of the members of the Co-operative housing Societies take exorbitant and unreasonable deposit when the premises are sub let or given on leave and licence and they are also collecting exorbitant amount in the form of compensation.  By such a transaction the members are benefited but society does not get any benefit about such transaction. Some of the Co-operative Housing Societies thinking to challenge the Order. However there are more than 90% of the small flats of less then 2 bed room and costing less than 10 lacs or thereabout. 


Q.8 What steps are taken by the Government to reduce financial burden of Flat Owners ?
Ans.   The Government of Maharashtra in order to reduce the financial burden has given such flat purchasers concession from Stamp Duty and has tried to reduce it from time to time. Originally the small flats up to area of 650 sq.ft were fully exempted subsequently flat costing up to 10 lacs were required to pay   sum of Rs.49,000/- this amount was reduced Rs.47,500/- and   thereafter   it   is    reduced Rs.38,750/- with effect from 1st September 1995.
The Government realising the financial burden caused to the Flat Owners/the members of Co-operative Housing Society, in order to give them some incentives to sub-let the premises or give to Leave and Licence, amount of Non-occupation charges is also reduced from 100% to 10% i.e. One time maintenance charges to 10% of service charges excluding Municipal Taxes. This was done on the basis of several representations that the Government received from several Co-operative Housing Societies and Flat Owners Organisations all over Maharashtra.


Q.9 What additional protection is given to the Flat Owners ? 
  In order to give reasonable protection to the Landlord or to the Licensor amendment is also made to the provisions of Maharashtra Rent Control Act wherein notwithstanding anything contained in any other Act registration of leave and licence is mandatory. As a result of which Licensor were hopeful of getting the possession back after expiry of the period. 

  However, in addition to non-occupation charges which they were required to pay to the society they were required to incurred additional expenses payment of Stamp Duty which was Rs.2000/- for a period not exceeding 1 year without any renewal clause and Rs.10,000 for a period of 1 year but not more than 3 years without any renewal clause. The Period over 3 years they were required to pay same Stamp Duty as leavyable under Article 36. 

Q.10 Is there in reality not 10% expenses are about 50% of maintenance charges?
Ans.     In addition to that the parties were also required to pay the Registration Charges Rs.1000/- if the property is situated within the area of Municipal Corporation   and Rs.500/- in other areas. I therefore say that it can be seen that when a member was allowed to give the premises on leave and licence he is required to incurred the following expenses :-
Payment of stamp duty Rs.2000/- or 10000/- 
1% on   Security Deposit i.e.   in   case Rs.10,00,000 the Security Deposit will be 10,000/- 
Registration fee in City Limit Rs.1,000/-
Legal expenses Rs.2,500/- to  10,000/- or thereabout 
Non occupation charges 10% i.e. if the maintenance charges are Rs.1000/- per month Rs.100/-
Therefore the total expenses would be more than Rs.7,500/- to 10,000/-

  It is not only the payment of non-occupation charges of 10% but there are other expenses are involved and in addition to that there is great risk for recovery of possession of the flat. If the value of the flat is Rs.10 lacs he may get small amount of Rs.1000/- as licence fee but he may loose his flat forever or he may be deprived of possession for long time and that in such circumstances.


Q.11 Is Order dated 10th August 2000 is legally valied ? Is the Order is consistant with Directive Principles of State Policy ?
  1. The order passed on 1st August 2000 is constitutionally valid and legal. I understand that preamble of Maharashtra Co-op Societies Act refers to   providing for Orderly development of   Co-operative movement in the State of Maharashtra in accordance with relevant directive principles of the State policy enunciated in the Constitution of India etc.
  2. The object of this Order appears to be to encourage the members to sub-let or given the premises on Leave and Licence and reduce the problems of shortage of housing and prevent also further raise in the value of the flats and while doing so allow the members to receive some money in the form of leave and licence. It can be seen that the Society did not get any extra amount except the maintenance charges however they get 10% of non-occupation charges when the premises are sub-let or given on Leave and Licence.
  3. The Part IV of the Constitution of India refers to the Directive Principles of State Policy. Clause (a) of Article 39 states that State shall in particular direct its policy towards securing  (a) the citizens men and women have right to and adequate means to livelihood. (b) The ownership and control of material resources of the community so distributed as best to protect common goods.
  4. Article 39-A and 41 requires the state government to secure citizen adequate livelihood and right to work therefore it would be sheer pedantry to exclude the right to livelihood from the content of the right to life.  The State may not by affirmative action, be complatible to provide adequate means of livelihood or work to the citizens.  But any person, who is deprived of his right to livelihood except according to just and fair procedure established by law, can challenge the deprivation of offending the right to life conferred by Art.21. AIR 1960 SC 932 Disting.

    In case, one need further guidance please contact the Secretary, Flat Owners Association, at the address given below:

Gen. Secretary.

23, Hamam Street, 3rd Floor , Above Quality Machine Tools , Fort , Mumbai - 400 023
Tel : +91-22-22650284/22657291 , Fax: +91-22-22657291
© Copyright 2003, The Flat Owner's Association, Mumbai.
Updated On 27thJune 2003.