AN IN-DEPTH COMPARISON BETWEEN A CONDOMINIUM AND A SOCIETY

Though the condominium is more than a forty year old ownership concept for buildings, it is the cooperative society model which has been the most popular so far. However, in recent times, the concept of a condominium is slowly gaining momentum. Buyers who purchase premises on an ‘ownership’ basis require to come together to manage the building and for that purpose, one of the ways is to form a cooperative society, which is governed by the Maharashtra Cooperative Societies Act, 1960.
An alternative to a cooperative society was introduced by the Maharashtra Apartment Ownership Act, 1970, which provides for the formation of a condominium. The buyers of premises in a condominium are called apartment owners who form an association known as an ‘association of apartment owners’, in case of both, residential as well as non-residential premises.
Although the basic purpose of both the models is similar, there are many differences between a society and condominium, some of which are:
    FORMATION: To form a society, generally 10 persons, each from a different family who reside in the area of operation of the society (within the same city) and who have taken premises in the building, would be required. However, even one person who owns the entire building can form a condominium, provided there are at least five apartments in the building.
    OWNERSHIP: In the case of a society, the title of the land and the building is conveyed to the society, which becomes the owner thereof. Persons who have purchased premises are made members of the society and are allotted the particular premises. In the case of a condominium, the title of each apartment rests with the apartment owner, who also has a proportionate undivided interest in the land on which the building stands, the common areas and facilities of the building.
    BYLAWS: A society adopts the model bylaws in which little can be changed. While adopting the bylaws in a condominium, suitable changes can be made, so long as the provisions of the Act are not contravened.
SHARE CERTIFICATE: A society issues certain shares to its members, as per the bylaws and the share certificate becomes an important title deed, since the allotment of the premises are related thereto. This is not so in a condominium.
    MANAGEMENT: The affairs of the society are managed by the managing committee, which is elected by the members of the society. The managing committee elects a chairman, secretary and a treasurer. Similarly, the affairs of a condominium are managed by the board of managers, who are elected by the members of the apartment owners association. The board also elects a president, vice-president, secretary and a treasurer.
    TRANSFER FEES: Under the model bylaws, a society can charge only Rs 500 as transfer fees and a maximum of Rs 25,000 as a premium. In case of a condominium, the bylaws can be more flexible and the amount of transfer fees can be provided therein.
PERMISSION TO LET: In a condominium, the owner can give his apartment on lease or leave and license basis without the approval of the board of managers, while in a society, permission is required.
VOTING RIGHTS: In a society, every member has one vote, irrespective of the area of his premises. In a condominium, every apartment owner has a voting right in proportion to the value of his premises, which is generally as per the area of the apartment owned by him and which is defined while forming the condominium.
    DISPUTES: In a society, disputes are generally referred to the registrar appointed under the Act or to a cooperative court, depending on the nature of the dispute. In the case of a condominium, the court having jurisdiction over the area in which the condominium is located, hears the disputes.
    EXPULSION: A society can expel its member under certain extreme circumstances. In case of a condominium, there is no such provision. However, if an apartment owner fails to comply with the bylaws or the rules and regulations, either damages or injunctive relief or both can be claimed against him.
    NOMINATION: In a society, a member can nominate a person in whose favour shares of the society should be transferred upon the member’s death. No such facility is available in a condominium. An apartment can be transferred to a person to whom the apartment owner bequeaths the same by his will or to the legal representative of the apartment owner’s estate

1) Using increased FSI in future – The builder is interested in using the increased FSI which will be awarded by the govt. for that area in the future. If the ‘Society’ is formed, then the increased FSI will be owned by the Society and the builder does not have any right on it. But if it is an Apartment, then the builder owns that increased FSI and can use it anywhere. Thus the builder will keep taking advantage of the FSI increase throughout in the future.

2) In an apartment, the builder retains the ownership of the open spaces which are not included in the saleable are. Example – Terrace, or any open parking/stairs space which is not included in the saleable area. But incase of Society, the builder cannot retain any right on any of these areas and has to hand over everything to the society.

3) Rules of ‘Society’ are binding on all the residents and nobody can follow his/her whims. So if the society decides to ban any objectionable commercial activities in the flats (such as noise-making music classes or using the flat for catering activities etc.) or not to rent out to bachelors etc., then all the residents have to abide by it. But if it is an Apartment, then owners can violate the apartment rules and the apartment body can just file a case in the civil court. And while the society disputes are resolved in a separate court (dedicated to cooperative society matters) and hence they are fast resolved, the Apartment matters have to be taken to the normal Civil Court and hence they typically take years and decades to resolve.

4) When the buildings go for redevelopment after 25-30 years, the ‘Society’ decision will be final and hence the society members will have negotiation power with the builder at that time. But if it is an apartment, the consent of every resident is required and hence it goes into an endless delay due to lack of a common decision acceptable to everybody. There are many instances in Mumbai wherein finally the buildings had to be forcefully vacated by court order due to this delay since they became unlivable. Thus while the decisions are taken on a ‘majority’ basis in society, the apartment goes with an ‘acceptable by everybody’ rule. So if the builder has retained even one flat in an apartment, he will play a veto card in his favour at the time of redevelopment.

5) In society, Society is the owner of the property and all the flat holders are its members. All the flat holders have equal share in the property of the society. Nothing common is supposed to be reserved for anybody. 

6) In Apartment, the share of the flat holder is different (proportionate) as per his/her area of Flat occupation. There can be reservations by the members such as parking, common terrace and easement rights. Also, if there is any excess FSI available, or would be available, builder can reserve it for himself and utilise it at any other place. 

A Co- Operative Housing Society is the owner of the Land & Building & individual member enjoys the ownership right of the Flat/ Shop based on the Share Certificate issued by the Co- Operative Housing Society.A vast majority of Co- Operative Housing Societies does not have the Conveyance in their favour & hence are not the owners of their Land & Building. In this situation, even though each member of the Co- Operative Housing Society has paid full consideration and is in possession of the Flat/ Shop allotted, he does not enjoy the benefits of title ownership of the Flat/ Shop.
In case of Co- Operative Housing Societies formed long back, many of the Buildings are in dilapidated condition and their repairs are not economically viable. The best solution available for these Co- Operative Housing Societies is to go ahead with Redevelopment. The non- availability of the Conveyance & therefore free/ marketable Title affects the Redevelopment Process badly.

Checklist for Handover from Builder to the Society / Owners Association

*Property

1. Property Documents executed between the Landowners and Builders

2. Approved Construction Plan

3. Completion Certificate

4. Occupancy Certificate

5. NoC from Fire Department

6. NoC from Electrical Inspector

7. Clearance to operate Elevators

8. Property Insurance Document (if any)

*Operations

1. Drawings of the Electrical Wiring including Earthing Points

2. Drawings of the Water Piping

3. STP Drawing & certification by Architect/Pollution Control Board

4. Waste Disposal system with approval from Pollution Control Board

5. AMC Documents – Lift, Generator, Transformer, ApartmentADDA portal, etc.

6. Invoices and Warranties for all Assets – Pumps, Lift, Generator, Transformer, Pool Equipments, Gym Equipments

7. Maintenance Schedule for all Assets

8. Work Schedule of all Staff maintaining the complex

*Finance

1. Payment Record for Taxes towards Property, Construction and Maintenance

2. Payment Record for City/Municipality Water Supply

3. Record of Maintenance Expenses while under Builder’s Maintenance

4. Record of all Collections made from the Owners (except purchase related)

5. Contracts with existing Maintenance, Security staff (could be same as L6)

*Legal

1. Sale Deed copy/Proof of Ownership of all Owners

2. Share Certificate Copies for all Owners (where applicable)

3. Khatha Certificate Copies for all Owners (where applicable)

4. Car Parking Allocation Record

5. All Legal Documents executed between the Builder & Landowner (could be same as P1)

6. Contracts with Vendors

7. Undertaking by the Builder regarding Indemnity & Limitation of Liabilities of the Society for all transactions prior to the Handover Date

Can a Co-operative Housing Society be formed if the builder refuses to co-operate ? Yes it can be formed according to Section 10 of the Maharashtra Ownership flats (Regulations of the Provisions of Construction Sale, Management and Transfer) Act makes it obligatory on Promoter / Builder to submit proposal for registration of a Co-operative Housing Society, within a period of four months from the date on which the minimum number of members required to form such a society have purchased the flats, a Co-operative Society can be formed even if the builder does not co-operative. In such a situation a notice should be issued to the builder. A copy of such notice has also to be sent to the Dy.Registrar / Asstt. Registrar of the concerned ward with a request to call upon the builder to explain his stand on the above and matter. The minimum number of members required to form a Co-operative Society is ten. However societies can be formed with less than ten members after obtaining the permission from the Competent Authority.

Deemed conveyance occurs when the builder/land owner or the legal heir refuse to co-operate in handing over conveyance certificate to the management committee of Housing society. In such case, the housing society has to appear before the designated competent authority who will hear the case of both parties i.e. the housing society and the builder and would pass the required order of conveyance. It is a remedial measure obtained by the society against the builder/landowner who does not wish to convey the property since he/she sees a commercial gain out of the property in the future. This could include usage of potential FSI for their personal gain.
Deemed conveyance is final conveyance and the same can be registered. Once the designated competent authority has passed the order, there cannot be an appeal against it.

Deemed Conveyance Amendment is applicable to the Societies that have not received Conveyance from the Land Owners & Property Developers
within 4 Months of their formation.
• The aggrieved Society shall make a Deemed Conveyance Application to the Competent Authority designated by Government of Maharashtra.
• The Deemed Conveyance Application of the Society shall include the Documents notified by Government of Maharashtra for Deemed
Conveyance.
• The Competent Authority shall hear the say of the Land Owners & Property Developers.
• The Competent Authority on satisfaction shall issue the Deemed Conveyance Order & Certificate in favour of the
Aggrieved Society.
• The Competent Authority shall execute the Deemed Conveyance Deed on behalf of the Defaulting Land Owners & Property Developers with the Aggrieved Society.

Deemed Conveyance has become the Buzz word in this era of Redevelopment and every one is talking about it. Several Websites and Blogs have mushroomed trying to explain the importance of Deemed conveyance and the steps involved in getting the same.

However none of them explains the cost implications of Deemed Conveyance. the latest news paper reports show that Deemed conveyance which was launched by the State Government of Maharashtra has evoked a poor response and there are hardly any takers for the same.