In the name of Condominiums; Builders in Mumbai are up for big-game of increased FSI sale (MAOA-1970 misused)
A big inquiry here is that why the builders in Mumbai are recently wanting to go for ‘Apartment Owners’ Association' arrangement and are attempting to maintain a strategic distance from the age-old 'Society' structure?
The reason is that the builders/developers have a lot of personal GAINS in doing so, which are as listed below:
- The builder/developer is interested in utilizing the extra FSI which will be recompensed by the Government for that zonein future. On the off chance that the Society is formed, then upon the transfer of the land area to the Society, the extra FSI will be in possession of the Society and the developer might not have any right over it. In case of an Apartment, then the developer can claim that extra FSI and can utilize it at anyplace or even sell it for personal gains. Therefore, the developer will continue to exploit each increase in FSI in years to come for his personal gains.
- In an Apartment, the builder/ developer retains the ownership for open spaces which are excluded in the saleable range. For illustration – Terrace or any open spaces which are excluded in the saleable area. Be that as it may, in the event of a Society being formed, the developer cannot hold any privilege on any of these areas and needs to hand over everything to the Society. The Maharashtra Apartment Ownership Act-1970 (henceforth referred to as MAOA) accommodates the responsibility for individual Apartment in a building and to make such Apartment heritable and transferable property. This is the weakest sentiment of the condominium(Apartment Owners’ Association) purchasers i.e. the word 'ownership' and the developers are prepared to exploit this and snatch different advantages for which generally the purchasers are qualified for in a Society structure. In a Society structure, the purchasers get all the rights in the apartment owned by them and the proportionate ownership of undivided land and common areas. However the expressive term used in MAOA: - “apartment on ownership basis” is fully exploited by the builders to their advantage by making the apartment owners believe that they are the true owners. A layman is satisfied with this title but is ignorant that there is much more to this and there is a possibility of foregoing the benefits arising out of extra FSI in future thus making the builder the sole beneficiary and the sole land owners.
- Bye-laws and Rules of "Society" are official on every one of the occupants and no one can go about according to his/her impulses. Thus, if the Society chooses to boycott any questionable business exercises in the flats, for example, clamor making music classes or utilizing the flat for catering or courier activities and so on or not to lease to single guys and so forth, then every one of the occupants needs to abide by it. However, in the event that it is an Apartment, then owners can flout the Apartment Rules and the only recourse for the members of the Apartment is to file a case in the Civil Court. In any case, while the Society disputes are quickly resolved in a different Court i.e. Co-operative Court that deals with Society matters, the Apartment matters must be taken to the Civil Court and can take years and decades to be resolved.
- At the point when the building is under consideration for redevelopment after about 25-30 years, the Society's choice will be final based on majority votes and consequently the Society members will have negotiation power with the builder. However, in an Apartment, the consent of each Apartment-owner is required and the activity could go into a never ending deferral because of absence of a typical choice acceptable to everyone. There are numerous occurrences in Mumbai wherein the decrepit structures must be mightily emptied by a removal request from Court since residents have refused to vacate the premises. Along these lines, while the decisions are taken on a majority basis premise in a Society, the Apartment runs on the standard of 'Acceptable by Everybody'. So if the developer holds even one level in an Apartment, he will play a veto card to gather support the time of redevelopment.
Contrasts between a Society and Condominium (Apartment Owners’ Association)
In spite of the fact that the essential motivation behind both the arrangements is comparable, there are numerous contrasts between a Society and Condominium. A portion of the differences are as under:
- For the most part to form a Society, 10 persons would be required and each of them is to be from an alternate family who dwell in the Society and who have bought premises in the building. Prior to any selling, the builder can form a Condominium and make the subsequent buyers as members of the Condominium. However, a builder after selling the apartments under MOFA 1963, cannot form a condominium on his own without the consent of each and every apartment owner.
- On account of a Society, the title of the land and the building is transferred and passed on to the Society, which turns into the owner thereof. Purchasers upon buying flats get to be the members of the Society. On account of a Condominium, the title of every Apartment rests with the Apartment owner, who likewise has a proportionate undivided interest in the land on which the building stands the common areas and facilities of the building. Yet developers attempt to keep the land in their names without exchanging the same as in proportionate ratio to the apartment buyers as Condominium is an artificial structure for the maintenance of the building. In regular course a developer should exchange the proportionate privileges/ right of land and common areas to all and get the same reflected in revenue and metropolitan records, whereas builders in a condominium structure keep the transfer dodging for years together, so that, their game of selling extra FSI granted by Government from time to time goes unquestioned.
- A Society adopts the Model Byelaws periodically with changes if required yet with consequent endorsement from Dy. Registrar of the particular ward. Likewise, while receiving the Byelaws in a Condominium, appropriate changes can be made so long as as the provisions of the Act are not negated. Any such amendments requires the permission of each and every Apartment Owner.
- A Society issues certain shares to its members according to the Bylaws and the Share Certificate turns into a critical title deed, since the allotment of the premises are connected thereto. This is not so in a Condominium of Apartments/Buildings.
- The issues of the Society are overseen by the Managing Committee which is chosen by the members from the Society. The Managing Committee chooses a Chairman, Secretary and a Treasurer. So also, the undertakings of a Condominium are overseen by the Board of Managers which is chosen by the members from the Apartment Owners’ Association. The Board appoints from amongst its members a President, Vice-President, Secretary and a Treasurer. Very often, where the builder/ developer resides in the building, though there is a conflict of interest, he himself gets into the post of the President or Chairman and then proposes a caucus that abides by his instructions. Thus the larger interests of the members are heavily compromised.
- Under the Model Bylaws, a Society can charge just Rs. 500/ - as Transfer Fee with a maximum of Rs 25,000/ - as a premium. In the event of a Condominium, the Bylaws can be more adaptable and the measure of Transfer Fee can be provided in the same.
- In a Condominium, the owner can give his Apartment on lease or leave and license premise without the endorsement of the Board of Managers. In a Society, authorization of Managing Committee including 'Police Verification' is required.
- In a Society, each member has one vote, irrespective of the area of his premises owned by him. In a Condominium, each Apartment owner has a voting right in proportion to the estimation of his premises which is for the most part according to the area of the Apartment possessed by him and which is characterized while framing the Condominium.
- In a Society, disputes are for the most part alluded to the Registrar designated under the Act or to a Co-operative Court, contingent upon the nature of the dispute. On account of a Condominium, the Court having jurisdiction over the area in which the Condominium is located, hears the disputes.
- In a Society, a member can nominate a person in whose support shares of the Society ought to be transferred upon the member's death. There is no such provision in case of a Condominium unless mentioned specifically in the Bye-laws.In an Apartment, the transfer can be effected in the name of the person as per the owner’s “will”or to the lawful illustrative of the Apartment owner's bequest.
Though there are minor cosmetic individualized features in favour of apartment owners in Maharashtra Ownership Apartment Act, 1970; but majorly, the Maharashtra Ownership Apartment Act, 1970 benefits the builders and developers. It has become too handy to the builders to usurp the rights of the apartment purchasers. The situation is worse if the builder decides to stay in the redeveloped building as he continues to play the role of an owner though his ownership has ended the moment he has decided to sell the flats under MOFA 1963.
Lack of unity among the apartment purchasers, vulnerability of the purchasers for some freebies are the points which make the builders continue to smile though there are going to be protests by some affected purchasers. The builders fail to understand that even MOFA-1963 allows for prosecution of the builders and developers in case of promises made by them in ‘Agreement for sale’ differ from their subsequent acts thereof in a bid to usurp the rights of the purchasers. Again, the comfort of the builder is that, if one goes for litigation, it takes a long time and they still prefer to play a role of MOGAMBO.
Hence, purchasers need to be careful and the safest bet is to urge the Developers to form a Co-operative Housing Society just under the Provisions of Maharashtra Co-operative Societies Act, 1960 in light of a legitimate concern for flat owners.
Iyer, S. (2015). Why Co-op Housing Society is better than Apartment Owners Association in Maharashtra.
Maharashtra Apartment Ownership Act 1970
Maharashtra Ownership Flat Act 1963 (MOFA 1963).
Dr.V.V.L.N. Sastry is a Researcher in Law (Criminal Justice) at Walden University, U.S.A.
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LIVELAW and LIVELAW does not assume any responsibility or liability for the same.