The builder has completed the building project and the homebuyers are to receive possession of the property. It has been an expensive decision where you have considered several factors like finances, the locality where the property is situated, the amenities the property has to provide, Its proximity to hospitals, schools, markets etc. You have spent a large amount of money and finally, the flat is yours.
But, the financial outlay has not ended. There is not just the present maintenance cost that has to be considered, but also the future maintenance costs. For long term enjoyment of possession and ownership of the property, the property has to be maintained and repaired periodically. Usually, in a residential cooperative society, the managing committee of the society levies charges on society members/flat owners that are used for repairing and maintaining flats and the building property as and when the need arises.
This article seeks to explain the maintenance costs on a flat and the building property and the arrangements made to meet these expenses.
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How do societies calculate maintenance cost?
Maintenance charges are not simply the maintenance expenditure incurred on the property, but they included several other charges that are listed in the Cooperative Housing Societies Act.
- These charges include water charges, property taxes, common electricity charges, contribution toward repair and maintenance fund, contribution towards sinking fund, service charges, car parking charges, non-occupancy charges, insurance charges, lift repair and maintenance charges, etc. They are formulated by the cooperative society general body.
- You get the idea now that maintenance charges are not simply maintenance costs levied on the society members to bear the expenses of the society building or property’s maintenance.
- It contains several other charges which include contributions towards funds, water, and electricity supply amenities, lift’s repair and maintenance. Every member’s payment towards these charges and funds are apportioned appropriately towards these charges.
- The society calculates maintenance by taking into consideration the number of flats in the society, the occupancy of the flats (for non-occupancy charges), the property tax rates, the water charges levied by the municipal authorities and the occasional tanker water suppliers, the charges levied by the electricity company, etc.
- Some charges require to be apportioned equally among the members/flats of the society like the lift repair charges and the service charges (includes housekeeping, electricity for common areas, etc.)
- Some charges depend on the consumption of the amenity by each flat like the water charges.
- The repairs expenses of the building are charged as a fixed percentage on the construction cost or value of each flat subject to a minimum of 0.75% of the construction cost of each flat
How do you calculate the maintenance cost of a flat?
The cooperative society calculates the maintenance cost for each flat according to particular methods adopted by society. These methods may be based on:
In this case, society calculates the maintenance cost of the building property and divides the charges to be borne equally among all the flat owners in the cooperative society. This basis is used to divide the costs among flats that are usually equal in size and are considered fair in this case.
Under this basis, the society calculates the maintenance cost and apportions this cost to be borne based on the area per square feet owned by a flat owner. This generally means that the owners who own a larger flat end up earning a greater portion of the cost. The cost for the common areas is divided equally with a fixed rate per square feet.
In some cases, State enactments like the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management, and transfer) Act, 1963, provide for cooperative societies to charge maintenance on a combination of per flat and area-wise (per square feet) basis.
Can a builder charge maintenance without a completion certificate?
A builder can transfer possession of the property to the homebuyers only after the completion certificate otherwise known as occupancy certificate (OC) has been issued by the municipal authorities. Once this is done, the homebuyers can take possession of the property and move in.
- The Maharashtra Real Estate Regulatory Authority (MahaRERA) has ruled that builders cannot charge maintenance fees to the buildings which do not have an occupancy certificate and to the buyers who have not taken possession of the flats.
- The order of the authority is legally binding and shall take effect as per the provisions of RERA.
Thus, for instance, if you purchased a flat in a building and you entered into an agreement with the builder to take possession in the year 2020. However, you find that the building has not received an occupancy certificate, and you decided not to take possession as a result. The builder asks you for maintenance charges but you refuse to do so. In this case, you are entitled not to pay the maintenance costs until the OC is received by the building and the possession of the flat is taken by you.
The acceptable range of maintenance per square feet is Rs 2 to Rs 25 per square feet. This range is due to the value of the property, amenities available and location of the property. The maintenance sum paid by homebuyers is accumulated in the sinking fund. The sinking fund is an accumulation of monetary contributions from the members of the society to meet any future expenses or pay off long term debts on assets. It can be used to pay the repair and maintenance costs or meet any unforeseen expenses of the society. It is mandatory to generate such a fund according to the laws in force governing cooperative societies.
Purchasing a house is an expensive decision. When you make this decision you need to make sure that you have provided not only for the present but also for future maintenance costs. Maintenance costs are a significant portion of these future costs that will be levied on you by the cooperative society, of which you are a member. These costs are towards several expenses like the water charges, lift repair and maintenance changes, contributions towards the repair and maintenance fund, contribution towards the sinking fund, property taxes, common electricity charges, services charges lie for housekeeping, etc.
The cooperative society general body fixes the maintenance charges levied on the members and thus you are part of the decision-making process due to your membership. You need to make sure that the break-up of the maintenance charges is reflected in the bill with every charge and expense clearly shown in such a maintenance bill.