Why Conveyance is compulsory on society’s name?
By Harish Mehta, Adv
Q. What are the major difficulties faced by the builders which hinder him for not executing conveyance ?
A. Some of the major difficulties areas under ;
(1) The original owner of the land finds it difficult to get certificate under section 230 (A) of the IT Act, as he has not cleared his liabilities.
(2) Internal disputes between the members of the family, Board of Directors in case of limited companies, or among trustees in case of trust.
(3) Difficulty in getting a certificate under Urban Land (Ceiling & Regulation) Act, 1976 also creates difficulty in executing conveyance.
(4) The promoter delays or avoids the work of executing conveyance as he wants to retain control over ownership of land and building.
(a) Directly or indirectly the promoter is benefited if there is an additional FSI as well as Transfer of Development Right (T.D.R) due to change in Law from time to time for the purpose of construction.
(b) When the flats are transferred from one purchaser to the other he gets transfer money or a share in the second sale.
Q. Are conveyance and registration of the property are accompanied by huge amount of stamp duty ?
A. The stamp duty payable on the conveyance of building and the land thereunder in favor of a co-operative society by the builder and/or the owner of the land shall be paid on the true market value of each unit. All non-resident units will attract stamp duty at 10 percent of the true market value and each resident unit will be require to pay stamp duty at the concessional rate as provided under Article 25(d) of Schedule –I to the Bombay Stamp Act, 1958. The Stamp Duty already paid on purchase of units by the members will be adjusted towards total stamp duty leviable on the conveyance as per explanation – 1 to the Article 25 of Bombay Stamp Act, 1958. Provided further that, where subsequently a conveyance, shall be adjusted towards the total duty leviable on the conveyance.
It is economical to pay stamp duty on individual agreements an get it registered, rather than the payment of stamp duty on conveyance deed at the future date as per then market of the whole property.
Q. What remedies are available to a society if the builder refuses to execute the conveyance in favour of a society ?
A. According to rule 9 of MOF Rule, it is mandatory to take necessary steps to execute the conveyance within a period of four months of registration of the society or limited company. If builder does not comply with these provisions.
(1) He can be prosecuted u/s. 13 of MOF Act.
(2) If builder is found guilty, the criminal court may punish the builder.
(3) If the builder is still adamant a civil suit under the Specific Relief Act can be executed.
Q. Which are the document required for conveyance of land to the building society ?
A. Transferring the title of the land and the building if favour of society is one of the main objects of its formation. The following documents are required for land conveyance of co-operative housing society,.
(1) Co-operative Housing society Registration Certificate : It is issued by the Registrar of Co-operative Societies.
(2) 7/12 land Record Ledger Extract : It is issued by Talathi (Village Accountant) of the concern land authorities issue this documents giving details of survey number, area, date of which current owner registered.
(3) Form No. 6 extract of the Property Register : This document is giving details of survey numbers, are, date of current registration and also gives how the name of present owner has appeared in the revenue records.
(4) Search report and title Certificate : This title certificate is issued by an advocate after conducting a search on the title of the property, which is intended to be purchased.
(5) Index-II record copy : The sub-registrar of assurances issues this document. It means the name of the sellers and purchasers and description of the property.
(6) Conveyance Deed (Land Transfer Agreement) : This is a deed documents by which the title of the property is conveyed by the seller to the purchaser. This is the document of the land, which belong to the society.
(7) N.A. Order of Tahsildar / Collector : Order by Collector of the district for the grant of permission to use the land concerned for non-agricultural purpose.
(8) Development Agreement between Landlord and Builder : This is agreement generally accompanied by a power of attorney in favour of the developer.
(9) Approved Plan of the building : The plan approved by the Municipal Corporation permitting the developer to begin construction of the society building.
(10) Occupation Certificate or Completion Certificate : The certificate is given by the Municipal or concerned authority to the developer, once the building is complete and fit for occupation.
(11) Agreement for the Sale with the Purchaser : A copy of the agreement between the promoter or developer and the buyer with details of the consideration.
(12) Stamp Duty paid Proof by the Flat Purchases : Each flat owner or shop buyer needs to provide to the society the proof of having registered the agreement that is the registration receipt.
Q. What are the consequences of non-execution of conveyance in the form of the society ?
A. The consequences of non-execution of conveyance can be disastrous in the long run/. If conveyance is not executed, it means that the society does not have legal rights or ownership of the land on which the society’s building stands.
If the Society does not have ownership of land, it may not be possible to reconstruct the building. Even for using additional F.S.I. or for carrying out major repairs, municipal authorities will insist on NOC from the land-owner. In such cases, losses to the members will be huge.
Q. What are the legal provisions in the existing laws to enable housing Society to obtain the conveyance ?
A. Section 1 of MOG Act casts a statutory obligation on the promoters to execute a deed of conveyance in favour of housing societies within the prescribe period if the promoter fails to comply with the provision, the Society can file a suit in the civil court and obtain a decree against the promoter.
Usually, when a civil suit is filed, the party who files the suit has to pay court fees on the basis of valuation of property. However, in a judgement which is very beneficial to housing societies, Bombay High Court held that in a suit filed by a Co-operative Society against the promoters for conveyance, it is not necessary to calculate the value of property for the purpose of court fees. (Reported in 1982 Maharashtra Law Journal, page 607).
In view, the housing societies can file suits against the promoters for conveyance by paying a nominal amount of court fees, which otherwise would have been in lakhs.
Secondly under chapter-II of the Specific Relief Act. The purchaser of the flat can file suit for specific performance of the contract. The housing society can apply to the court for directions to the promoter / landowner to executive the deed of conveyance in favour of the society.
The provision of Rules 21 and 34 of the Civil Procedure Code provides the remedy to face a situation when a landowner / promoter does not execute the conveyance even after a decree is passed by a court. In such a situation the society which filed the suit should prepare a draft of conveyance and submit it to court. The court will issue a notice to a landowner/promoter along with a copy of the conveyance deed. After considering the objection if any raised by the landowner/promoter, the court will finalise the conveyance deed. If the land owner/promoter still fails to executive the document, the court will authorise and officer of the court to executive the deed of conveyance in favour of the society.
It may be noted that civil suits are likely to take few years to conclude but delay is better than never.
Q. What about the conveyance in case of a society more than 20 years old and the building firm as well as the builders are not more existing/traceable ?
A. The society can file a case in the Consumer Court or in the Civil Court and obtain ex-parte decree in favour of the Society. The same decree can be registered with Sub-registrar as conveyance and the property card can be changed in the name of the society thereafter.
Q. In a project of 8 buildings, 4 buildings are completed and their 4 societies are registered. The builder when asked about conveyance says that it will be hand over only when all the 8 buildings are completed and their respective society are registered. What is the correct position ?
A. the builder can give the conveyance to individual societies and need not to wait for the project’s to complete.
Q. If a member is not having any documents regarding his flat i.e. agreement stamp duty, registration fee receipt etc. then what is the solution if the society is going for conveyance ?
A. At the time of conveyance the concerned member will have to pay Stamp duty at the market value and the rate applicable on the date of executing the conveyance.
Abstract from book “ Master key to Co.op. Housing Society” by Harish A. Mehta, Chartered Accountant.