Non Occupancy Charges can not be more than 10% of Service Charges

By S R Agarwal Advocate

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 said Act, there by directing the Societies not to charge non-occupancy charges beyond 10% of the service charges (excluding Municipal Taxes)

The levy of non-occupation
charges has been a controversial issue for a long time, which resulted into disputes between members and the Societies flooding the offices of the Deputy Registrar and the Courts. Therefore, attempts have been made by the State Govt from time to time to regulate it. The commissioner for Co-operative Societies, Maharashtra State, issued a Circular on 13.3.1992 laying down that the Societies could levy non-occupation charges upto a maximum of 25% of service charges and, accordingly, clause No: (C) of Bye-law No: 45 (2) (iii) of the old bye-laws was replaced by the following words.

“He shall pay non-occupancy charges to the Society at a rate of not exceeding 25% of the service charges as will be determined by the meeting of General body of the Society.”

This Circular was challenged in Writ Petition No: 1618 of 1993, but it was disposed off as the said Circular was withdrawn. In exercise of the powers vest in the State Government under Section 79 A of the Maharashtra Co-Operative Societies Act, the State Government issued an Order on 9.3.1995 laying down that the non occupation charges shall not be fixed beyond 100% of the maintenance charges. But this Order was also challenged in Writ Petition No: 1398 of 1996. Therefore, the State Government appointed a Committee on 19.6.1997 to look into the whole gamut of non-occupancy charges. The Committee submitted its report to the State Govt. on 31.7.1998 and when the said Writ Petition came up for hearing in January 2000, it was dismissed as withdrawn, as the State Govt submitted that the report of the said Committee was under consideration of the State Government and, in the meanwhile, the earlier Order dated 9.3.1995 was not being applied.

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 said Act, there by directing the Societies not to charge non-occupancy charges beyond 10% of the service charges (excluding Municipal Taxes). Again a number of the Societies led by Palm Beach Riviera CHS Ltd. challenged this Government Order dated 1.8.2001, fixing the non-occupacncy charges not more than the 10% of the service charges, before the Hon’ble High Court during the years 2002 and 2006 on various grounds such as, that this Order was against the interest of the Societies, arbitrary, not in public interest and unwarranted interference in the affairs of the Societies and there is no legislative policy enabling the Govt or Registrar to override the bye-laws of the Societies duly approved by the Registrar enabling the General Body to fix the non-occupancy charges payable by the members and that the said Order may enable a member to use the flat as a vehicle for carrying out the object of earning money, thereby defeating the spirit of the co-operative housing.

The State Government, justifying the Order dated 1st August 2001, submitted before the Hon’ble High Court that it has been issued in exercise of statutory powers under Section 79 A of the said Act in public interest as it serves the interest of the Societies, as well as the members, because by virtue of a brute 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 and on the basis of the income earned by such members, which amounted to levying the tax on income of the members and in some cases at the rate of per sq. ft. of the area of the Flat and the complaints were received by the Govt. that in case of a few Societies, the non-occupancy charges recovered in respect of two flats were being utilized towards the property taxes for the remaining 47 members, who were not required to pay anything towards the Property Tax and the non-occupancy charges recovered from three to sex flats were more than the property tax bill of the entire Society, which levied these charges @ of Rs. 9/- per sq.ft. per month. Therefore, the Government constituted a Committee and after due consideration of its recommendations decided a uniform rate of non-occupancy charges throughout the state, without linking the same with the rateable value of the flat or the rental income derived by such members and to achieve the objective of stopping the Societies from profiteering and to prevent unjust enrichment and acting to be detriment of the members, who gave their flats on rent or on leave and license basis and to protect such minority members from the oppression by majority in as much as a flat is a property of the member and he is entitled to return from the same sa he has invested the money for acquiring the same. It was also pointed out that in such cases, Societies do not spend any extra money on account of the member giving the flat on leave and license or rental basis and Govt is concerned for solving the housing problem in the State. Therefore, the State Govt issued the Order dated 1-8-2001 and at the same time, replaced by Bye-law No: 45 in the amended Bye-law numbered as 43 which, interalia, provided as under :-

“C) 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.”

After the careful consideration of the submissions made on behalf of the Societies and the State Government, the Hon’ble High Court observed that the validity of Section 79 A of the said Act has already been upheld by this Court in the cases 1989 Mh-L-J. 173 and 1993 (2), Mh L.J. 1716 and that it has been found that in some area, levy of non-occupancy charges has become a profit making business and the State Government is empowered to issue Order in public interest preventing the affairs of the Society being conducted in a manner detrimental to toe interest of the members and looking at the housing cost as at present, the member concerned must be allowed to earn some income on the investment he has made and a good member of flats remain unoccupied for various reasons and if non-occupancy charges are allowed at the rate, the majority decide, it would be an additional impediment in the flats being available on leave and licence or tenancy basis, which does not in any way violate the provisions of the Maharashtra Ownership Flats Act and the provision of the earlier Bye-law No: 45, empowering the General Body of the Society to fix the non-occupancy charges, was being abused by some of the Societies, which cannot be allowed to use the authority under the Byelaws, a vehicle for making money and exploit the minority members, as it is not the business of the societies to impose taxes and derive income by different modes, like non-occupancy charges etc. The Hon’ble High court came to the conclusion that the exercise of the power by the State Government is bonafide one with the objective to avoid unnecessary litigation and disputes and bringing uniformity in the rate of non-occupancy charges without linking the same to the income derived by the concerned member or the rateable value of the Flat and to prevent the exploitation of minority members. The argument on behalf of the Societies that the entire property of the Society was assessed as one Unit for Municipal Taxes and the flats given on rent or leave and licence basis would add to the rateable value component thereby, giving rise to increase in such taxes did not find favour with the High Court as of no significance and need not be considered, as each flat is assessed separately for Municipal taxes with effect from 1st April 2006.

Thus, the issue of the quantum of the non-occupancy charges has been finally settled by the Hon’ble Bombay High Court by its Judgment dated the 2nd March 2007 by unholding the Government Order dated 1st August 2001, prescribing the non-occupancy charges not more than 10% of the service charges, excluding property taxes, 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.

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80 thoughts on “Non Occupancy Charges can not be more than 10% of Service Charges

  1. I have a flat given on rent, my society have asked for Rs.3000 in the begining as I have given flat on rent and then they have asked me to give extra maintenance charges, for others they charge 685 and for owner who have given room on rent they charge 815, please advice if its the correct way.

    Regards,

  2. Dear Sir, I have given my house on rent in Valsad ,Gujarat . I pay 100% ( is 1200 Rs.) more and reguler  maintenance charges is 600 Rs. The law of maximum 10% non occupancy charges enforceable or not .
    please advice if its the correctway.

  3. I have aflat in a regisrered chs in MUMBAI. I have let it out . now my sciety is charging me 10%nocharges and Rs 2200 as additional charges as it is passed by the agm. society says that these are the charges leveied on those members who have given their flat on rent to bechelors. i would like to ask you wheather AGM has the right to pass such regulations.

  4. I have purchased a flat in a new society in June11,Society was formed in september-11.As I have not rented my flat and the flat is still vacant. Do i need to pay the maintenance charges.Society is charging maintenance for the last six months Sept- Feb-12

  5. Dear Sir , i have two flats in my apartments and these two flats we are using conjointly to break the wall from inside. society charges towards the member is 450 Rs but society imposed a charge 700 Rs towards us. but i have only single family using the two flats conjointly. so i want to know, is there any government law in respect of society or should i take a legal action against the unnecessary increment happened toward us. please reply

  6. SIR, I HAVE GIVEN MY FLAT ON LL WHERE AS I AM PARKING MY CAR IN THE SAID SOCIETY BUT OSCIETY IS NOT ALLOWING ME TO PARK MY CAR WITH THE REAASONG THAT I HAVE GIVEN THE FLAT ON LL I AM MEMBER BUT NON OCCUPYING MEMEBRS . CAN I PARK MY CAR OR NOT ? PLEASE ADVISE THANKS SHIRISH RAJANI

  7. I can understand that SC has ruled that a max of 10% NOC can be charged on service charges. However there is no clear defination of service charges. Our society has all the necessary charges i.e. Admin Chgs, Water Chgs, common lighting, bldg Main,sinking fund, garbage removal, couirer/postage, Land revenue, property tax, and now a new one called Major repair fund – @ Rs 2 per sw ft. ( which is being used to carry out major repairs to member flats irrespective of the quantum or work.). We charged NOC on all this carges except Property tax and land revenue. now some members saythat even the major repair fund is to be excluded… HOW correct is this ?

  8. I am staying on rent 5000 p.m. and since august 2011. The owner at the time of agreement told me the maintenance charge are 300 to be paid by me but after a month the soc demanded 100 Rs extra. After reading the article above I came to know, the NOC are 10% service charge.
    Kindly let me know, 1.  The NOC charges should be paid by the owner or the tenants on rent?
    2. How do I get to know the service charges? they are levied on flat or society, plz clear
    3. Currently all the owners are charged 300 Rs. p.m. maintenance charge and rentals are charged 400 Rs. p.m.
    Please let me know, what all things are included in this maintenance charges, are the NOC charges included in them?
    Please revert back asap, as I havent paid the maintenance as I am unsure of been looted by the owner or society.

  9. I have let out my flat at Chembur, Mumbai. The society is charging me 10% (Rs. 1,700/-) of the rent that i recieve (Rs. 17,000/-). Is it right on the part of the society to charge me. Could you please let me know under what laws of co-operative societies act I can fight out my case.

    Thanks……….Sundar

  10. Could someone clarify whether non-occupancy charges are payable for vacant flats ? similary if a flst is given on rent can a society charges additional amount under any head such as lift usage charges by a tenant ?

  11. I read an article on the service charge.. We need further clarification on what we mean by a “Service charges”. What does the service charge inclusive of.

  12. I have let out my shop at vasai, Maharashtra. The society is charging me 10% (Rs. 1,500/-) of the rent that i recieve (Rs. 15,000/-). Is it right on the part of the society to charge me & they says we have taken permission from high court. Could you please let me know under what laws of co-operative societies act I can fight out my case. Thanks———- Pramesh Rathod.

    1. It is totally illegal. You can ask for copy of High court permission. As per bye law only 10% of service charges can be charged by Society.

  13. I have flat in “Apartment Association” and not in CHS. The association proposes to increase non-occu charges to 25% stating that Govt rule of 10% is applicable only to CHS and not Apt Association.
    Kindly clarify whether the above contention is correct and oblige

  14. I’m residing in cooperative housing society as a Tenat. My Landlord & his family members has 3 flats in the Society. He & his family members are residing in 2 flats and given a flat to me on lease and licence basis. My Landlord does not have any Car. I own a Car. In the last AGM society has passed a rule where in the non members / tenants have to pay parking charges of Rs 1500/- p.m. while the members have to pay parking charges of Rs 100/- p.m. There is no shortage of parking. All the cars in the society are parked easily. And parking space can accommodate minimum 5-6 more cars.
    My Landlord is ready to help but wanted some legal grounds to challenge the rule passed by the society.
    Request you all to let me know
    Whether society can Charge differential rate from members and non members for parking vehicles.
    If not, then what steps my landlord should take to challenge society.

  15. I m facing same problem of noc( non occupancy charge). I rent my flat in ahmedabad gujarat, soceity charge 50% more maintance charge becoz i rent my flat. As per Rule which amount charge as Noc(non occupancy charge). Plz. rep. me & send me copy of rules.Can i fight against soceity by law & rules.

  16. I have an apartment in Cochin bought from a private builder. I have leased it out to a tenant ( family ) for the past two years. In the recent AGM , the association is contemplating levying charges amount to a percentage of the rent collected. I wish to know whether it is legal and valid in Kerala. Also I was reading about Non occupancy chargeswhich is a percentage of maintenance charges in Maharashtra. Is is applicable to flats by private builders or only for cooperatinve housing in Kerala?

  17. I have a Flat in Andheri (E).since 30years, I am in Australia since 1991.My Nephew( Sister Son)is staying in my Flat since last 7 years with my Mother,Dec 2009 my mother passed away. Since that time my Nephew is staying in my Flat, some time my Siter & brother in law( who leaves in Gujrat)also come & stay with him . I am not taking any money from him. Even, all society rates/ charges & Municipal Taxes paid by me.( Just to help my Nephew to get settle in Mumbai)
    Since December 2014 suddenly society started charging extra RS 500 as Adhoc charges,saying it is a Non occupational charges, Because my Flat is occupied by My nephew. I have already explained to the society Chairman & other committee members that, my nephew is my family member
    the Non occupancy charges not applicable.( I am not taking any money from My Nephew as well) The committee members saying he is not the Blood relation & my sister is not staying all the time in this flat, since My sister is not staying all the time with my Nephew there fore as per by Law society has right to charge NON Occupancy Charges.
    I have read few articles & it says the close relatives are excempted from N O C & it clearly says that N O C should not be more than 10 %.
    Can some one please guide me on this matter.

    Thanks.

    With Regards,

    Anil Panchal

  18. I own a shop and the Society charges me maintenence as under. The area of my shop is 300 sq ft.
    Sinking Fund 22
    Maintenance charges 450
    Service charges 76
    Insurance charges 68
    Non Occupancy charges 200

    Is the amount of Non Occupancy charges justified?

  19. In a newly formed Godrej Garden City Cooperative society in Ahmedabad, Guajarat. The Maintenance charges has been taken in tune of 45% more than regular maintenance charges. Is the rule of 10% cap of Maintenance Charges is applicable in Gujarat ?
    I have seen many questions but not got any answer for Gujarat. Can you please provide your inputs on the same.

    1. It is non Occupancy Charges. 10% of the Service / Maintenance charges . Maintenance charges has to be reasonable and if builder is taking then it cannot take more than what is there in Agreement for Sale.

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