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10 % it is, says The Supreme Court. Non-occupancy charges.
Apex courts ruling will definitely help to curb the unwarranted NOC’s levied on the owners by the CHS and release vacant flats in the city for being rented, says…
House owners who have let their flats out on rent and those who are contemplating to rent out will now breath a sigh of relief with the latest Supreme Court order upholding the Mumbai high court order on Co-operative Housing Societies (CHS) of not charging more than 10 % of the society’s service charges, excluding the Municipal taxes. The apex Court recently passed a judgement on the controversial issue of non-occupancy charges, which upheld the state governments circular fixing the ceiling charges at 10 percent of maintenance dues.
State Government’s Issue on NOC regulations in 2001, which fixed the ceiling on NOC at 10 percent of the maintenance charges, was challenged recently on 2/3/07, when Mount Blanc CHS at Peddar road filed a special leave petition (SLP no. 7964, 7965, 7966) and demanded interim relief and autonomous authority to decide upon the non-occupancy charges. This petition was called for hearing on 19th June; wherein the Supreme Court upheld the High court ruling but provided interim relief to Mount Blanc to charge 10 % of the rent recovered by the owner as NOC and not 10 % of the maintenance charges.
Earlier, the non-occupancy charges were not regulated and it fluctuated according to the whims and wishes of the societies. Many CHS charged exorbitantly and minted money on it making huge profits. To put a check on it, this ruling will definitely help.
Mr. Alwyn D’souza, Secretary, Alpine Heights, co-operative Housing Society at Baner argued, “For middle class societies wherein the maintenance charges are around 500 Rs per month, a 10 % of it amounts to mere 50 rupees, which is unfair, since the sub-tenants also utilize the same amenities as the society members. Also they claimed that flat owner charged exorbitant rates from the sub tenants and would be paying peanuts to the CHS as per the new law.”
The apex court defended its decision and justified that the disconnect in this argument is that, the sub tenant is in no way dealing directly with the society. The owner of the flat and the CHS thereof settles all the matter concerned. The owner pays the maintenance charges for the flat per se and the sub tenant pays his dues to the owner. So the society is rightly reimbursed for the services provided to the occupant, i.e. the sub tenant. What the flat owner receives as rent is not concerned with the CHS at all.
Mr. Lalit Kumar Jain, Chairman, Promoters and Builders Association of Pune (PBAP) and also the Chairman of Kumar Builders, says, “It is important for societies to know who is coming to stay more then the monetary aspects. In fact by charging more they may be compromising on quality of person coming in the premises. Also the exorbitant charge does not have any logic. Prior to this, (CHS) were charging exorbitant non-occupancy charges (NOC) to the owners, which ultimately reflected in the high rentals and burdening the end user. This also led to many non-occupied vacant flats not being rented for the high NOC's.
This SC ruling will help to curb exorbitant NOC and facilitate the consumer.”
The maintenance charges are funds raised by the society members for maintaining common amenities like elevators, garden, cleaning etc. The flat owner, even if letting out the flat on rent has to pay the maintenance charges and a further NOC for non-occupancy and renting. So the non-occupancy charge is a surplus besides maintenance charge that the society benefits from. Hence the CHS are at no loss.
“Mr. Rohit Gera, Executive Director of Gera Developments Pvt. Limited, says, “Why do the CHS want to put their hands in some one else’s pockets? Why do they want to have a share in some body else’s fortune? If a person, owner is making profit of from his own property, why do the CHS want to have a share in it. It is absolutely irrelevant what does the owner charge as rent as the services which are being provided are already been paid by the owner in terms of the maintenance charges.”
Thus according to the new law if the society maintenance charges are 1000 Rs. Per month, the non occupant flat owner who has rented out his flat, will have to pay a total charge of 1100 Rs, which includes 100 Rs (10 % of 1000) as non occupancy charges, plus 1000 Rs. as the maintenance charges.
If the society levies exorbitant non-occupancy charges then the direct effect of the same will burden the sub tenant ultimately. If the owner has to pay more NOC, he will definitely reimburse it by charging exorbitant rent. Currently, lot many non-occupant owners are not renting out their flat owing to the fact of exorbitant non occupancy charges that the CHS charges. Following the ruling many of the non-occupied vacant flats will be released for licensing and rental. Around 65,000 thousand flats are non-occupied in the state and their availability will reduce the crunch for available flats in the city and will also ensure affordable rental prices for the buyers.