When a builder completes a residential project and transfers the possession of the flats or apartments to the homebuyers, the homebuyers not only receive the ownership rights and other interests in such property, but also certain responsibilities towards the management of the residential building itself.
For ensuring the long and quiet enjoyment of the residential building and the supporting amenities, the homeowners need to ensure the building is maintained and the amenities are managed efficiently. However, one homeowner cannot be saddled with these responsibilities and for this reason, the homeowners form a cooperative society that manages the building property. With the formation of a cooperative society general body and a managing committee, the homeowners ensure that these bodies manage the building affairs and property on a day to day basis.
The cooperative society general body and committees ensure the timely supply and functioning of the amenities, the undertaking of periodic repairs and maintenance activities to maintain the building, ensure the protection of the building property, look after the interests of the members of the cooperative society, ensure the building members comply with statutory requirements, etc. This article seeks to highlight the difference between a cooperative society and an apartment owners’ association.
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What is a flat owners’ association?
The Cooperative Societies Model of managing the building is a popular method of management and is regulated by the various Cooperative Societies Acts legislated by the different State Governments in India. As an alternative to this, the concept of the apartment owners’ association was created which is also under regulation by reason of statutory enactments on the State level.
An apartment owners’ association is a concept that is dependent on the concept of condominiums. A Condominium is a complex of buildings or a building that contains individually owned apartments. In the cooperative society model, homebuyers come together to purchase the building property from the builder or the previous owner. As such, when the homeowners form a cooperative society to manage the building property, this newly formed society has ownership rights in the building property, with the members of the society having rights in the property by the status of being the cooperative society’s member.
Thus, it is a form of ownership where the ownership interest of the building property vests in the cooperative society and the members have access to this property by the status of being members of the cooperative society. However, in the case of apartment owners’ association, every member of such association owns his or her respective apartment individually and enjoys the interests therein. It means that though the building is owned jointly, every apartment owner has a separate individual ownership right and interest in his or her apartment which is exclusive only to such owner.
The common areas in the building are under joint ownership. The flat owner in a cooperative society, on the other hand, enjoys the right to occupy and use the flat but is not the owner of the flat in the real sense as the real ownership rights vest in the cooperative society as a whole.
Differences between an apartment owners’ association and cooperative society
- The cooperative society of a residential building requires 10 people, each of one who belongs to a different family and who represents the interests of such family. However, in an apartment owners’ association, the apartment owners are not bound by such a restriction. All that is required is the existence of five or more apartments in the building.
- The conveyance deed of the building property is transferred from the builder to the cooperative society directly, making the society the owner of the property. Instead, members of the cooperative society have share certificates indicating their status and rights in the building property. The share certificate is the title deed for a society member. But in the case of an apartment owners’ association, every apartment owner has the conveyance deed as the real owner of his or her property.
- For the management of the building affairs, the society generally elects a Chairman, Treasurer, Secretary of the society. These officers and a few other committee members make the managing committee of the society. For an apartment owners’ association, instead of the managing committee, there is a Board of Managers.
- If a member of a cooperative society wants to sell or rent out his or her flat to someone else, s/he will need to take the permission of the society’s managing committee and would also require police verification. However, for apartment owners, no such restriction applies. S/he can sell the apartment without permission from the Board of Managers.
- The managing committee of the society according to the model bye-laws adopted with or without modification can charge a share transfer fee of Rs. 500 and a maximum premium of Rs. 25000. Then there are the bye-laws of apartment owners’ associations that are more flexible.
- In a cooperative society, every member’s voting rights are equal irrespective of their share in society. However, in an apartment owners’ association, the value of the apartment owner’s premises make a difference when it comes to voting rights, for the one with larger premises has greater voting rights.
- In Maharashtra in the case of a cooperative society, dispute resolution is done before the Registrar appointed under the Maharashtra Cooperative Societies Act or to a Cooperative Court, depending on the nature of the dispute. Also, in extreme cases, a society member can be expelled by society. However, under the case of an apartment owners’ association, the dispute resolution is conducted in the Court in whose jurisdictional area the building or condominium falls. And an apartment member cannot be expelled, but damages can be sought from the owner or an injunction can be passed against him or her for violation of the building or condominium bye-laws.
- A cooperative society member can nominate a person to transfer his or her share certificate, thereby vesting the property rights in such a flat. But in the case of an apartment owner, the owner bequeaths the property upon the beneficiary by will or legal heir or representative in case of intestate disposition.
An association or cooperative society can be taxed under the Income Tax Act of India for it is an Association of Persons (AOI) which have a legal entity and a common purpose.
Be it a cooperative society or an apartment owners’ association, the respective models have their advantages and disadvantages. In a cooperative society where decision-making powers and management lies with the managing committee, in an association, the Board of Managers is tasked with ensuring a degree of cooperation between apartment owners to prevent disputes. The Cooperative society’s decision is final, whereas until each and every apartment owner’s consent is not taken, the matter in discussion drags on for an association.
However, every apartment owner has ownership and greater autonomy than a society member. Whatever the advantages or disadvantages, knowledge about the respective arrangements is a must to ensure that you comply with the necessary statutory requirements and are aware of your rights and obligations under the respective arrangement.