Non-Occupancy Charges: Everything You Need To Know

Non-occupancy charges: everything you need to know

Non-occupancy charges are one of the charges stated in the bye-laws of a Co-operative Housing Society (CHS) in Maharashtra. These rules apply to homes that are not occupied by owner or members of his family.

We examine a number of court decisions to illustrate the applicability of non-occupancy fees under the Maharashtra Cooperative Societies Act, as well as the maximum amount that societies can legally demand.

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What are the non-occupancy charges?

Non-occupancy fees are assessed when a developer/society transfer’s ownership of a property to the owner, but the unit remains vacant despite being in move-in ready condition. However, these only apply if the unit is rented out. If the flat is not sublet and stays locked, or if the unit is occupied by a family member such as a spouse or parent, these fees are not due.

"If a property in a housing society is not self-occupied and the owner generates a profit from it, the owner is required to pay the society non-occupancy expenses."

The topic of non-occupancy costs has been the subject of heated debate in the past. It has frequently resulted in conflicts between a society & its members in the absence of clear norms. The majority of householders believe that the society has imposed excessive fees on them. The society, for its part, defends the imposition of such fees on members who sublet their flats and generate a healthy rental income. To make matters more confusing, authorities are inept in enforcing the law, and legal experts have differing interpretations.

"Non-occupancy charges apply when a society member's flat is occupied by non-family members," There is no charge for non-occupancy if the following conditions are met:   

The flat is occupied by a member of the society.

The apartment is closed, locked, vacant, or unoccupied.

The flat is occupied by family members.

Court judgment on non-occupancy charges While cooperative societies have asserted their right to collect non-occupancy fees, state governments have intervened to protect homeowners' interests. The Maharashtra government constituted a committee in June 1997 to look at the entire subject of NOC in depth. The state government ordered in August 2001, in response to the committee's report, that the NOC charges should not exceed 10% of the service rates. In March 2007, the Bombay High Court supported the state government's decision. Following that, the Supreme Court approved the state government's notification.

How to calculate the non-occupancy charges?

As previously stated, non-occupancy charges assessed by societies shall not exceed 10% of service charges. Non-occupancy charges, for example, would be Rs 271 (10 percent of Rs 2,710) each month if the service charges component of the monthly maintenance calculation is Rs 2,710.

What are the criteria for levy of non occupancy charges?

If a flat owner lives in the unit, he is not responsible for paying non-occupancy fees. If the flat is occupied by member of his immediate family, such as his son, daughter (married or unmarried), or grandchildren, they will not be charged non-occupancy fees.

What are the service charges?

Service charges are defined as salaries and allowances for personnel, outgoings for the society office, sitting fees for committee members, printing & stationery charges, and common electricity charges, according to bye-law 68 of the new model bye-laws.

According to Bajaj, if a home owner refuses to pay non-occupancy fees, the society would issue a reminder notice and may label the owner a defaulter. Furthermore, the society will not issue a no-dues certificate.

How much can societies charge as non occupancy charges?

Prior to the Maharashtra government capping non-occupancy rates at 10% of service charges, there was a lot of arbitrary levying and collection. As non-occupancy premises, societies would levy extravagant rates, up to Rs 9 per sq ft. This had the unintended consequence of driving up rents and putting a financial strain on non-resident apartment owners. Non-resident Indians (NRIs), most of whom are active real estate investors in India, were particularly hard hit. There have also been reports of non-occupancy charges that were disproportionately large, amounting to several lakh rupees per year.

As a result, non-occupancy fees had effectively become an instrument of harassment, rather than being considered as a minor expense. Non-occupancy funds were being misused to pay the dues of other defaulting members.

Apart from the fixed charges of 10%, any sum charged under any other heading will be considered illegal. The society could be prosecuted under the Consumer Protection Act for purposeful negligence and inadequacy in services, as well as overcharging the amount with abuse of power and harassment. While taking legal action, the lessee must follow the proper processes and produce relevant documented proofs.

What happens if the owner of the flat fails to pay the non-occupancy fees?

If the flat owner does not pay and refuses to pay the non-occupancy charges, the housing society will send a reminder notice. If the money is not paid, it might label the owner a defaulter. Furthermore, the housing society will not give a no-dues certificate.

Resolution of the government on non-occupancy fees The Maharashtra Cooperative Housing Societies Act, 1960 governs housing societies in Maharashtra (MCS Act 1960). The Act establishes a legal & regulatory framework for housing societies to be supervised and administered. Disputes between housing societies & their members can also be resolved through the Act's provisions.

The state government can issue circulars prescribing instructions for the functioning of societies under Section 79A of the MCS Act 1960. Circulars issued pursuant to Section 79A are legally binding. The Maharashtra government used Section 79A to prevent housing societies from charging high non-occupancy fees to their members.

The circular under 79A, which was released on August 13, 2001, set a limit of 10% of the society's basic service charges for non-occupancy charges. Lift, common area energy, security, and maintenance expenses are all included in a society's service charges, but municipal taxes are not. Any violation of the circular would result in disciplinary action, which might include the expulsion of society office holders.

The Maharashtra Cooperative Societies Act and the non-occupancy charges circular The 79A circular was challenged in the Bombay High Court by Mont Blanc Cooperative Housing Society. The society claimed that the non-occupancy charge cap was unconstitutional and in violation of Article 19 of the Indian Constitution. It further claimed that the circular was an unlawful intrusion into housing societies' internal business.

Meanwhile, the state of Maharashtra contended that its circular protected minorities against majority oppression. Because a member's flat is his personal property, the society has no power to interfere with his use or enjoyment of it, the circular also protected the right to property under Article 300A of the Constitution. The state also contended that imposing high non-occupancy fees went against the cooperative movement's spirit and would raise property rentals, hurting the rental housing market.

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