ALL ABOUT THE NON-OCCUPANCY

CHARGES IN A HOUSING SOCIETY

 

The criteria for levy of Non-Occupancy Charges qualifies that if a property in a Housing Society (hereinafter referred to as the ‘Society’) is not self-occupied and the owner of the flat who has a commercial gain out of it for example monthly rent received out of the flat given on Leave & License basis, the Non-Occupancy Charges have to be paid by the owner to the Society. The Non-Occupancy Charges are applicable when an owner’s flat is occupied by non-family members/paying guest. There is no Non-Occupancy Charge if the owner’s family members are staying in the owner’s flat.

The family members mean a group of persons which includes Husband, Wife, Father, Mother, Sister, Brother, Son, Daughter, Son-in-Law, Brother-in-Law, Sister-in-Law, Daughter-in-Law, and Grandson & Grand-Daughter. The intermittent joint-stay of other family members or friends shall also not attract Non-Occupancy Charges.

As defined in the GR dated 1.8. 2001 and 25.2. 2011 appended at the end of this article issued by the Textile & Co-operative Dept. of the Govt. of Maharashtra, the Non-Occupancy Charges levied by the Societies should not be more than 10% of the consolidated/aggregated service charges excluding govt/statutory taxes. For example, if the service charges portion in the monthly maintenance bill is Rs.3,500/- per month, the Non-Occupancy Charges would be Rs.350/- (10% of Rs.3,500/-) per month. 

According to the latest model Bye-Laws governing the Societies in Maharashtra, the service charges include salaries and allowances to staff, outgoings for society office, sitting fees to committee members, printing and stationery charges, common electricity charges and others are considered under Section 79-A of MCS Act to serve the interest of the Societies as well as the members. In numerous cases at had been noticed by the Co-operative Dept. of Government of Maharashtra that by virtue of a naĂŻve majority and with a view to extract more money from the members not occupying the flats, Non-Occupancy Charges were being imposed whimsically and at exorbitant rates.

The quantum of the Non-Occupancy Charges was settled by the Hon’ble Bombay High Court by its Judgment dated 2nd March, 2007 by upholding the Government Order dated 1st August, 2001 prescribing therein, the Non-Occupancy Charges not more than 10% of the only service charges excluding the Municipal Taxes, Sinking Fund, Repair Fund etc. both in respect of residential as well as commercial premises irrespective of the fact whether the new Bye-Laws are adopted by the Societies or not. This Judgment had brought in a great relief to the members of the Societies who give the flats on rent or Leave and Licence Basis.

The Society is concerned only with the fixed 10% extra charges over the regular service charges as "Non-Occupancy Charges" and strictly nothing beyond this. There is no concept of less than 10% or greater than 10% Non-Occupancy Charges. The Society cannot stop any services/amenities nor dictatorially collect any extra charge under any additional form from the said Lessee under the pretext of ‘Third-Party’ Charges irrespective of any resolution passed by the General Body of the Society.

Any amount under any additional head whatsoever collected besides the fixed amount of 10% of Non-Occupancy Charges, shall be considered absolutely illegal and abuse of power and the Society can be prosecuted under the Consumer Protection Act under the charge of ‘deliberate negligence and deficiency in services and over-charging of Non-Occupancy Charges with abuse of power and harassment including demanding compensation for causing mental and physical trauma as also under the Indian Penal Code (Criminal Acts) under the charge for Cheating u/s 418, Mischief u/s 427, illegal extortion of money u/s 383 etc. The Lessee must follow due documentary procedures along with the relevant documentary evidences (proofs) before initiating above legal actions.

In case the flat is owned by Trusts or Corporates, Non-Occupancy Charges cannot be levied on the guests such as bonafide staff members or the Directors, Executives, Managers etc. The Company has to submit to the Society, a Resolution passed by its Board of Directors giving the details of the person who shall stay in the flat.  

It is obligatory on the part of the owner-member i.e. Lessor of the flat who wants to rent/leased out his flat is obliged to comply with the submission of basic requirements to the Society under the Bye-Laws such as obtaining “No Objection” from the Society, certified photocopy of the Leave & License Agreement duly stamp duty paid and registered and Police Verification Report of the Lessee.

In this regard, it is obligatory on the part of the Society to follow the mandatory procedure as laid down in the Bye-Laws governing the housing societies in Maharashtra before start-up of charging the Non-Occupancy Charges to the owner-member of the flat.    

Bye-Law No. 20: A Sublettee, a licensee, a care-taker, or occupant who is eligible to be a Nominal Member and who shall apply through Member for such membership in the prescribed form applicable, along with entrance fee of Rs. 100/- as per Appendix – 11, may be admitted as Nominal Member by the Committee.

Bye-Law No. 24–b: The Associate/Nominal Member may have a right to occupy the flat with the consent of the Member and written intimation to the Society, subject to the conditions set out by the General Body Meeting.

Bye-Law No. 26: A nominal Member shall have no rights such as Member.

Bye-Law No. 29: A sub-letter, licensee, caretaker or possessor of a flat or part thereof, who has been admitted as a nominal Member of the Society may resign his nominal membership at any time, by writing the letter of the resignation to the Secretary of the Society, through the Member who has been permitted by the Committee to sub-let, give on Leave and Licence or caretaker basis the flat or part thereof or part with its possession in any other manner.

The Secretary of the Society shall place the Letter of Resignation before the meeting of the Committee, held next after the receipt of the Letter of Resignation duly recommended by the Member concerned for acceptance by the Committee. The decision of the Committee, accepting the resignation shall be communicated by the Secretary of the Society to the Member concerned and his sub-lettee the licensee, the caretaker, or as the case may be, the possessor of the flat or part thereof, within 15 days of the decision by the Committee. If the resignation is rejected, the Committee shall record reasons there for in the minutes of its meeting and the secretary of the Society shall communicate the same to the Member concerned and his sub-lettee, licensee or caretaker etc. within the time specified above.

Bye-Law No. 62-g. The Secretary of the Society shall communicate the decisions of the Committee or the General Body, as the case may be, to the applicants concerned within 15 days of the decisions of the Committee or the General Body, as the case may be, with reasons, where the applications are rejected by the Committee or the General Body, as the case may be, If the Society does not communicate the decision to the applicant within three months from the date of receipt of application for membership including nominal or associate membership, the applicant shall be deemed to have been admitted as a Member as provided under Section 22(2) of the MCS Act which reads as under:

Section 22(2) of the MCS Act: Where a person is refused admission as a member of a society, the decision (with the reasons therefore) shall be communicated to that person within fifteen days of the date of the decision, or within three months [from the date of receipt of the application for admission, whichever is earlier. If the society does not communicate any decision to the applicant within three months from the date of receipt of such application, the applicant shall be deemed to have been [admitted] as a member of the society. [If any question arises whether a person has become a deemed member or otherwise, the same shall be decided by the Registrar after giving a reasonable opportunity of being heard to all the concerned parties].

In case if the Society has charged the Non-Occupancy Charges in excess of the amount as described herein above, besides the prosecution under the Consumer Protection Act and also under the Indian Penal Code (Criminal Acts), the Lessee can make a written complaint to the Dy. Registrar of the concerned Ward stating that the Society may be directed to refund excess amount charged along with interest @18% per annum.

CASE LAW

After the consideration of the Committee’s Report, the State Government issued an Order dated 1.8.2001 in Public Interest under Section 79 A of the MCA Act, 1961 there by directing the Societies not to charge Non-Occupancy Charges beyond 10% of the Service Charges (excluding Municipal Taxes, Sinking Fund, Repair Fund etc.)

Palm Beach Riviera CHS Ltd. challenged this Government Order dated 1.8.2001 before the Hon’ble High Court during the years 2002 and 2006 on various grounds that this Order was against the interest of the Societies, arbitrary and not in public interest and unwarranted.

The State Government, justifying the Order dated 1.8.2001 and submitted before the Hon’ble High Court that it had been issued in exercise of statutory powers under Section 79-A of the MCS Act in public interest and stop the Societies forthwith who were in the business of extracting more money from the members not occupying the flats and levy various charges in the name of Non-Occupancy Charges which were being imposed whimsically at exorbitant rates.

It was also pointed out in the High Court that in such cases, Societies do not spend any extra money on account of the member giving the flat on leave and license basis. Therefore, the State Government issued the Order dated 1-8-2001 and at the same time, replaced by Bye-law No.45 in the amended Bye-Law, 2003 numbered as 43 which interalia, provided as under:

“Bye-Law No.43 (2) (C) of the year 2003 which read as under:

He shall pay Non-Occupancy Charges to the Society. Non-Occupancy Charges shall be charged in accordance with the Circular issued by the Government of Maharashtra, Commissioner for Co-operation from time to time and shall not be levied if the flat is occupied by the family of the member as defined under these Bye-Laws.”

The Hon’ble High Court observed that the validity of Section 79 A of the MCS Act has already been upheld by this Court in the cases 1989 Mh-L-J. 173 and 1993 (2), Mh-L-J. 1716, passed the Judgment on dated the 2.3.2007 by upholding the Government Order dated 1.8.2001 prescribing the Non-Occupancy Charges not more than 10% of the service charges excluding Property Taxes, Sinking Fund and Repair Fund etc. both in respect of residential as well as commercial premises irrespective of the fact whether the new Bye-Laws are adopted by the Societies or not. This Judgment has brought in a great relief to the members of the Societies who give the flats on rent or Leave and Licence Basis. Therefore, all the housing societies in the Maharashtra State should take necessary action to make appropriate changes in their Rules/Bye-Laws. In case of changes as above if not made, the Non-Occupancy Charges should not be assessed more than the mentioned maximum limit in this order, effective from date of issue of Government Order dated 1.8.2001.

 

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