Service charges in Housing Society
By Hemant Agarwal, Legal Consultant
SERVICE & MAINTENANCE CHARGES:
01. Under, “The Maharashtra Co-Operative Societies Act I960”, ONLY a Registered Coop. Society, is entitled to duly levy and recover “Service & Maintenance Charges” from its registered members.
a) The Society CANNOT levy or recover any charges from non-registered members.
b) The Society can levy service charges ONLY WHEN the Society provides “Common Amenities and Services” to its members.
c) IF any Services are NOT provided to members and IF charges are forcefully or misleadingly recovered from members (in which-so-ever manner), THEN the Society can be held liable for “Deficiency & Negligence” under the Consumer Protection Act.
d) Depending on various parameters, the Managing Committee (MC) may also be prosecuted under the Criminal laws, the Coop. Laws and the Consumer laws.
BUDGET PROJECTIONS OF INCOME & EXPENDITURE:
02. A Coop Society, MUST prepare yearly “Budgetary Projections” of its Income & Expenditures.
a) The consolidated & projected Expenditure has to be EQUALLY divided between the number of units (means Flats /Shops /Offices or whatever) AND ONLY then levy a fixed amount of “Service Charges” to each unit, via a duly prepared & duly issued bill.
b) Service Charges MUST be levied Unit-wise and NOT any otherwise.
c) Service Charges are NOT to be levied Unit-area-wise or say square-feet-wise.
d) Budgetary projections MUST be circulated & duly approved by the General Body, in a duly called General Body (GB) meeting.
e) Without GB approval of the Budgetary projections, disputed recovery of any increase in “service charges”, shall not be tenable in a Court of Law.
f) It is not the business of a Coop. Society, to earn .OR. accumulate money. Hence no other funds in any manner can be collected from members.
g) One unit is defined in the BMC approved floor plans, which is irrevocable. BMC approved one unit means one Share Certificate. Each Share Certificate, in turn means one Service Bill, irrespective of anything.
SERVICE & MAINTENANCE BILLS:
03. The Secretary is compulsorily liable to prepare “Service & Maintenance Bills”, on Monthly or Quarterly (or whatever agreed basis) and give it to the member, under due acknowledgement.
a) IF the Secretary fails to prepare “Service & Maintenance Bills” within the pre-determined time frame, THEN the Secretary is liable for his omission and any related loss to the Society (means loss of the Bank-Interest component, that the Society could have necessarily appropriated).
b) Here, the Secretary’s usual consistent RANTING claim of holding a “Honorary Post”, can lawfully be flushed down the sewage drain.
c) The Liability of the member, to pay the Bills, arises only after receiving the Service Bill. There is no concept of automatic billing or automatic payment of bills.
d) The member is not liable to pay Interest, when bills have not been received by him.
Note: RANTING MEANS: To utter in a high-flown, self-important way, with obvious intention to subdue & demoralize other members.
BMC PROPERTY TAXES:
04. The Society has to collect BMC Property Taxes, from the members, on behalf of BMC, and deposit the same, within the BMC bill period.
a) Members BMC Property Tax contributions, cannot be used for any other expense heads, irrespective of whatever reasons .OR. which-so-ever emergency.
b) Mandatory and Statutory Property Taxes are levied by BMC, on square feet area-wise, for each individual flat-owner (member). This is to be determined accurately from the “Property Tax Extract” document, that has to be obtained from BMC, for preserving the same on Society records..
c) To avoid recovery arrears, the Society should first clear off all the pending Property Tax bills and apply to BMC, to individualize each members portion of the Property Tax bills, into the name of individual flat-owner (member), to avoid subsequent defaulter members dues on Society accounts.
d) Property Tax for common areas of the Society building, have to be divided equally and borne by each member.
BMC WATER CHARGES:
05. The Society has to collect “Water Charges”, from its members:
a) On the number of each Inlet-pipe connected and going inside the members flat. This can be determined by Plumbing-Layout diagram, as approved by BMC.
b) Actual Water bill amount must be divided by the total number of Inlets, irrespective of water usage pattern.
c) Society is eligible to duly amend its Bye-Laws, to change the criteria for levy of water charges to members.
d) Common water charges (for Garden, Car washing, Lobby /Staircase washing, Fire-tanks, Rain-dance showers, Swimming pool ….), are to be borne equally by all members, irrespective of anything.
BORE-WELL WATER CHARGES:
06. Bore-well or Open-well or Grey-water or stored Rain-water …., may be supplied to members, vide separate tanks, BUT without any charges.
a) Bore-well Motor-Pump service & maintenance charges and electricity charges, are within the definition of “Common Amenity expenses” and are to be borne equally by all members.
b) Permission to dig Bore-well, in Mumbai, is to be duly sought from BMC (Pest Dept).
c) It would be an offence to mix bore-well water with Municipal supplied water, and can be prosecutable under the Consumer Protection Act, as well as BMC Act.
SINKING FUND & REPAIR FUND:
07. A Society has to mandatorily collect, from its members:
a) Sinking Fund, at the rate of 0.25% of the prevailing construction cost
b) Repair Fund, at the rate of 0.75% of the prevailing construction cost
c) Every alternate year the Society must get a certified Architect’s certificate, for the prevailing construction cost and only then levy appropriate Sinking Fund and Repair Fund.
d) It would be illogical & a fatal error, to statically keep collecting Sinking and Repair Funds, at the buildings original construction cost.
e) It would further be illogical & a fatal error to consider the accumulated bank-interest on such Sinking and Repair Funds deposits, as a substitute for “prevailing construction costs”.
f) The exact amount of Sinking Fund and Repair Fund, collected from members must be deposited in Coop. Dept., approved Banks only, on long-term deposits.
g) It would be highly unwise, for the Society, to utilize the Sinking & Repair funds, for routine or intermediate repairs of the building.
h) In a Flat-Ownership Society, where a membership is voluntary, a member may relinquish his Society membership, and is entitled to claim his contribution of his Sinking and Repair Fund and interest thereon.
i) Due to the latest amendment of the BMC Act, pertaining to mandatory repairs (as required), of 30-Plus year old buildings, majority of the Societies would be in a Stale-Mate situation, since the existing reserves of Sinking and Repair Fund (and interest thereon) are grossly insufficient, more specifically so, since majority of the Society’s are ignorantly collecting Sinking and Repair Funds, at the buildings original construction cost (which may be at 200/- per feet in 1970’s vis-a-vis the present 2000/- per feet in 2013).
j) This Stale-Mate situation further aggravates more so, specifically due to the gross apathy and penny-pinching service-charges being half-heartedly paid by members.
k) Majority of the Society’s Balance Sheets, are apathetic and the Society building also grows more pathetic, with passage of time.
COMMON SERVICE CHARGES:
08. During Budgetary projections and provisions, the Society must decide the “Common Service Charges” that needs to be levied on members.
a) Yearly Expenses of the Society on Lift, Insurance, staff Salaries, Electricity, Security services, Stationery, Legal fees, Billing, Accounts & Audit fees and other common expenses, are to consolidated and divided and are to be borne equally by all members.
b) Levy of “Separate Amenity Charges”, on selective member or members Tenants, are illegal and not tenable for subsequent recovery proceedings.
c) Specific Repair Work (like Mass Plastering and Painting, Replacement of Lifts, Replacing Electrical cabling & wiring, Replacing Plumbing pipes) are not within the ambit of “Common Service Charges”.
d) A separate duly approved Fund needs to be freshly generated, for “Specific Repair Work”. The preserved Sinking & Repair fund (and accumulated interest), may also be used for the “Specific Repair Work”, subject to various parameters.
MAINTENANCE FREE SOCIETY:
09. The false concept of “Maintenance Free Society”, being propagated by few ambitious Society’s, is not tenable under the Law.
a) It is mandatory to collect routine “Service Charges” from members, irrespective of anything.
b) It will be an offence to collect “Deposits” (in any guise of voluntary donations or corpus fund or excess Share Transfer Premium or whatever) from members, (more so specifically from Flat-Owner type Society) and invest such deposits for the sole purpose of earning Interest, for meeting the common expenditure of the Society.
c) The preamble of the Cooperative Movement, would be compromised, since the Member would not be paying anything for the “Common Services and Amenities”, while availing free services.
d) Some nefarious minded MC’s would discontinue selective services, on the pretext that Society is providing “Complimentary Service” to the members. AND the members would not have any legal remedy, in any court of law.
e) Such “Maintenance Free Society”, run on Bank Interest Money, would also circumvent, statutory payments under statutory laws like “Service Tax, Income Tax and so on….
10. The Society has to mandatorily levy a fixed 10% as “Non-Occupancy Charges”, on:
a) Members flats, given out on Rent /Lease to non-family members.
b) Anything beyond 10% as “Non-Occupancy Charges”, shall be illegal.
c) A fixed “10% Non-Occupancy Charges”, is to be levied on the regular Society Service /Maintenance charges, but to the exclusion of Statutory charges (e.g. BMC Property Tax, NA Tax, BMC Water Charges).
d) IF the Mg. Committee (MC), fails to levy the Non-Occupancy Charges to the member (if duly applicable), THEN all the MC has to jointly compensate the Society for the relevant loss, by paying the same from their own pockets.
11. The Society is entitled to levy “Parking Charges”, only if the Society owns the land (means the plot of land should be conveyed in the Society’s name, means the Society should be the Land-Lord of the plot of land, on which the Society building is standing)
a) IF the Balance Sheet, does not reflect the heading “Land” and the value of the same, THEN it would mean that the land is not in the name of the Society.
b) IT also means that the Land is in the name of the original Land-Lord or the Builder /Developer.
c) The Seven Twelve extract (7×12), obtained from the Tehsildars office would also reflect the real land-owners name.
d) In a Flat-Owner type Society, there is no “Privity of Contract” between the landlord/builder and the Society, since the Society is formed /registered only after the flats are constructed.
e) Further, in a Flat-Owner type Society, there is no “Privity of Contract” between the Flat-Owner and the landlord/builder, towards the usage of plot of land, more so since a typical Flat-Purchase agreement, reflects only the absolute rights in the Flat, that is purchased by the Flat-purchaser..
f) There is Latin saying;” Nemo debet quod non habet “. THIS means that no one can give what he does not own. More Simpler it means – You cannot earn from someone else’s property. Here since the Land belongs to the Landlord /Builder, the Society cannot earn “Parking Charges”, without the express written agreement /contract from the Landlord /Builder.
g) IF the plot of land is conveyed in the Society’s name in the Seven Twelve extract (7×12), THEN the Society can levy “Parking Charges”, subject to fixation of Parking Charges and consequent approval from the General Body vide a duly proposed and seconded resolution.
h) The amount of Parking Charges, chargeable per vehicle, per month, may vary from Ten rupees to Ten thousand rupees, which is leviable at the discretion of the General Body’s duly approved resolution.
Note: No GB Resolution is equal to No Parking Charges, which also means “Charge-Free-Parking”, for all members.
i) The Society shall remain liable, by legal default, for any damages to vehicle in the Parking slots, irrespective of the nefarious board, broadcasting “Parking at Owners Risk”. The Car-Owner, shall always have an open option to approach the Consumer Court, for successfully claiming damages and compensation, alleging “deficiency and negligence” by the Society /MC. This is subject to “Parking Charges” being collected from members.
12. A Society is entitled to levy Interest on Society Dues, on its members, subject to various parameters.
a) The Coop. Dept., allows a maximum of 21% simple interest (non-compoundable) on the outstanding dues of the Society.
b) Interest cannot be levied on BMC Property Taxes and BMC Water Charges and NA Taxes or any other statutory taxes or charges.
c) IF the registered and approved bye-laws, do not reflect the relevant Interest Charges, THEN the Society cannot levy any Interest on members outstanding dues.
d) The Society is free to levy Interest from 0% to a maximum 21% Interest on outstanding dues of member, subject to the fixation and approval of the Interest rate, in a duly proposed and seconded General Body resolution. However the relevant courts of law, during disputes, usually refrain from granting exorbitant interest as high as 21%.
13. Majority of the Society’s are under deep hallucination, that the General Body is vested with power to pass resolutions for any charges they deem fit and categorize the said charges, into “Other Charges”.
a) The Society may categorize “Other Charges”, for only those services and amenities, that is proposed to be provided and is not categorized separately in the bye-laws.
b) The Society is not entitled to levy any “Legal Charges” .OR. any other charges to a member, if it does not fall under the broader category defined as “Service and Amenities”.
c) In newly constructed buildings, the developer-builder provides “Sewage Treatment Plants”, which comes under the definition of “Service and Amenities”. Since “Sewage Treatment Plants”, is not covered under the present bye-laws, the service charges can either be collected labeled as “Common Service Charges” .OR. “Other Charges”. Same example applies for “Club House”, “Swimming Pool”, “Recreational Area”, “Community Hall”, Generator and so on…. Subject to various parameters.
d) The Society is not entitled to recover “Legal Fees & Expenses”, from members, towards filing of Recovery Proceedings u/s 101 of the MCS Act. Such costs can be recovered, ONLY subject to written orders of the competent authority.
14. The ONLY objective of a Coop. Housing Society, is to provide “Common Services & Amenities”, to its members, on mutual & equal contributory terms.
a) Penalty can be extorted from ignorant /innocent members, under indirect threats, till the member can be fooled /subdued.
b) A Society is a Service-Provider, under the Consumer Protection Act.
c) A Society has no lawful jurisdiction to levy any type of Penalty on members, since the Society is not a law-implementing .OR. law enforcing authority.
d) The concept of Penalty in a Coop. Society, is dictatorial and breaches the very concept of a “Cooperative Movement”.
e) It would be unlawful to levy Penalty on Flower pots placed outside Main doors or on Window Grills, .OR. levy Penalty on Shoe-Racks kept outside the Flats main doors, .OR. for throwing banana skins outside the Flats window .OR. keeping Gas cylinder /Washing Machine on Window chajjas, AND so on ….
f) It is beyond the jurisdiction of a Society, to levy penalty for “Box Grill”, “Internal Alterations”, “Amalgamations” and so on, since the lawful jurisdiction to do so, rest ONLY with the BMC authorities.
g) It is beyond the jurisdiction of a Society, to levy penalty for “Loud Music”, “Spitting”, “Rude behaviors”, Wife-beating, Pick-pocketing, Drinking & Gambling and so on, since the lawful jurisdiction to do so, rest ONLY with the law-enforcing/ implementing authorities.
15. IT is lawfully essential, for every Coop. Society to:
a) Audit the Accounts and get the Audit Report by a enlisted Coop. Panel Auditor
b) File Income Tax and TDS returns
c) File Service Tax returns (subject to certain parameters)
d) Pay Property Tax, NA Tax, Profession Tax and Water charges, as per Statutory provisions