Non-occupancy charges in cooperative housing societies

What do non-occupancy fees mean?

Housing societies impose non-occupancy fees on their members who own apartments but do not live there. The reason for this non-residence could be because the unit is rented out or vacant. The society may levy a flat owner non-occupancy fees if he chooses not to live in his unit and pays the same rent or leaves it unoccupied.

How are the non-occupancy charges calculated?

As to the Maharashtra government's circular, non-occupancy charges under Section 79A of the Maharashtra Cooperative Societies Act, 1960, are limited to 10% of the service charges of the society, excluding municipal taxes.

Assume, for instance, that a member's entire maintenance cost from society is Rs 3,500, which includes Rs 2,500 in service fees. Then, as non-occupancy charges, the society will collect Rs 250, or 10% of Rs 2,50.

What are the requirements to impose non-occupancy charges?

If the owner of the flat is residing there, they are not required to pay non-occupancy costs.

If the flat is occupied by family members, such as his son, daughter (married or single), or grandkids, they will also not be charged a non-occupancy fee.

To what extent can societies impose non-occupancy fees?

There was a great deal of arbitrary non-occupancy charge levies and collections prior to the Maharashtra government capping the amount at 10% of the service charges. Societies will impose outrageous fees for vacant spaces, up to Rs 9 per square foot. This had the unfavorable effect of raising rentals and burdening non-resident flat owners financially. Those most impacted were Non-resident Indians (NRIs), a large number of whom are enthusiastic Indian real estate investors. There were also cases emerging where the non-occupancy costs were imposed in an extremely unreasonable manner, amounting to several lakh rupees annually.

In the Bhartiya Friends Cooperative Housing Society case, it was discovered that two flat owners had paid Rs 2.5 lakhs in non-occupancy charges for their individual units in a building consisting of 49 apartments. However, the majority of this sum was used to settle the 47 remaining units' property taxes. This amounted to cheating and was quite unethical.

Comparably, the Bombay High Court noted that just three to six of the building's fifty-one flats were available for rent at any given time in the Mont Blanc Cooperative Housing Society v. State of Maharashtra case. Non-occupancy fees ranging from Rs 3 lakhs to Rs 24 lakhs were collected from these apartments. This was in sharp contrast to the society's property tax bills, which totaled only Rs 16 lakhs annually.

Consequently, it was clear that non-occupancy fees had evolved from being considered a small amount to a means of intimidation. Extra money received through non-occupancy was being improperly used to settle other members' past-due balances.

Apart from the 10% fixed charges, any sum imposed under any other head will be deemed unlawful. In such a situation, the society may face legal action under the Consumer Protection Act for willful negligence, service deficiencies, and overcharging combined with harassment and power abuse. When filing a lawsuit, the lessee must follow the proper channels and provide all necessary documentation.

What occurs if the owner of the unit refuses to pay the non-occupancy fees?

If the owner of the unit fails to pay the non-occupancy charges or refuses to pay, the housing society will send a reminder notice. If the money is not paid, it may declare the owner to be in default. Moreover, the housing organization will not provide the certificate of no dues.

Resolution from the government regarding non-occupancy fees

The Maharashtra Cooperative Housing Societies Act, 1960 (MCS Act 1960) governs housing societies in Maharashtra. The Act creates a framework of rules and regulations to supervise and control housing society operations. Disagreements between housing societies and their individual members may also be resolved in accordance with the Act's provisions.

The MCS Act of 1960, Section 79A, gives state governments the authority to publish circulars that specify rules for how societies should operate. The legal force is applied to circulars issued in accordance with Section 79A. Housing societies were prohibited by the Maharashtra government from charging their members exorbitant non-occupancy fees by virtue of Section 79A.

On August 13, 2001, the circular under 79A was released, capping the amount of non-occupancy charges at 10% of the society's regular service fees.The maintenance, common area electricity, elevator use, and security are all included in a society's service fees; municipal taxes are not. The circular required adherence and noncompliance would result in punitive measures, such as the expulsion of society officials.

A circular on non-occupancy costs and the Maharashtra Cooperative Societies Act

The Mont Blanc Cooperative Housing Society filed a lawsuit against the aforementioned 79A circular in the Bombay High Court. The group argued that the cap on non-occupancy fees violated Article 19 of the Indian Constitution and was therefore illegal. Additionally, it contended that the circular constituted an unjustified meddling in housing societies' internal affairs.

Maharashtra, on the other hand, said that its circular shielded minority citizens against majority persecution. Because a member's flat is his personal property and society has no power to restrict his use or enjoyment of it, the circular also safeguarded the right to property under Article 300A of the Constitution. 

The state additionally contended that charging outrageous non-occupancy fees would undermine the rental housing market and go against the cooperative movement's goals of lowering property rentals.

Court ruling prohibiting occupancy charges

A division bench made up of justices BH Marlapalle and JH Bhatia upheld the 79A circular, which set a 10% cap on non-occupancy fees in relation to basic service charges of the society, in a historic ruling. The purpose of the aforementioned circular was to stop minority members from being exploited because they were required to pay astronomically high non-occupancy fees. Furthermore, by setting a common non-occupancy charge rate and removing it from the flat's rental income, it was a legitimate attempt by the state to avert lawsuits and conflicts.

There was one change made to the High Court's ruling, nevertheless. The members' exemption from paying non-occupancy fees was narrowed by the court. It was decided that the only people who could be excluded from non-occupancy fees were the flat owner and his son, daughter or grandchildren, or members of his immediate family. If they lived in the flat, members of his extended family would be required to pay the standard non-occupancy fees and would not be eligible for any exemptions in this respect.

Currently, housing societies are only allowed to collect non-occupancy fees up to 10% of the monthly maintenance bill's service charge portion. These fees would be assessed as soon as the flat is turned over for use or becomes empty. If the flat was unoccupied before the sale, it is also recommended that the buyer of a resale property look for any such arrears.