The Maharashtra government recently raised the stamp tax by 1%, which applies to sales, donations, and transfers. Additional increases in stamp duty and registration fees are conceivable. The issue of society transfers charges for the sales and transfers of shares and rights to flats in a building by a cooperative housing society, however, affects property owners and buyers slightly closer to home. The society transfer charges that cooperative housing societies levy on the sale and transfer of shares and rights to apartments in a building are just one of the many costs that house buyers must pay. Societies require the payment of a society transfer charge premium when a member sells shares and rights in an apartment.
Things we covered for you
Maximum Transfer Charges Permitted Under the Law
In most cases, the property owner and buyer who ask the societies association for society share certificate transfer charges to change the buyer’s name on the shareholding certificate are left with little alternative but to comply with its requests. However, it is unclear if the law permits a society to demand an unreasonable transfer fee. The resolution is contained in By-law No. 38 of the 2013 By-laws of the Maharashtra Model Society, 1960, which the Maharashtra government released via a circular dated August 9, 2001.
Read: Everything You Need to Know About Title Deed – Meaning, Registration and Types of Deeds
It is clearly stated in the aforementioned by-law No. 38 and the circular dated August 9, 2001, that the premium transfer fee in the housing society cannot exceed Rs 25,000.
Many societies frequently require the property owner/purchaser to make the requested payment through a “voluntary donation” to avoid violating the cap on transfer costs noted earlier.
However, Bye Law No. 38 goes one step further to ensure that no excess donation or gift to any other funds or under any other pretext shall be reclaimed from the transferor or transferee.
Legal Rulings Relating to the Transfer Costs
The legality of paying transfer fees of society has recently been put to the test by the courts on multiple occasions. For example, in the matter of Bhartiya Bhavan Cooperative Housing Society Limited and the others vs Krishna H Bajaj and Others, the Bombay High Court upheld the society’s appeal (Writ Petition No. 1094 of 2004, decided on February 17, 2010), disqualifying the flat buyer from receiving a refund of the Rs 9,63,000 voluntary contribution they paid to the society at the time the apartment was sold.
During the appeal hearing before the Bombay High Court, the unit buyer argued that the voluntary contribution was nothing more than the transfer fees of society had asked and that the flat owner was obligated to pay. However, the Bombay High Court noted that the buyer of the unit, in that case, knowing their exact legal status, agreed to pay the society Rs 9,63,000 in transfer fees under the guise of a voluntary donation.
Read: Declaration Deed: A Detailed Look at the Deed of Declaration in India
The apartment purchaser complained to the Supreme Court of India against the previous ruling (SLP No 11266 of 2010, the order decided on November 9, 2011). According to the SC, it did not entirely concur with the justifications provided in the previous judgement rendered by the Bombay High Court. However, the SC could not reverse the Bombay High Court’s judgement because the flat purchaser had not disputed the society’s resolution setting the transfer charge amount. Their challenge came more than two years after the voluntary donation.
Furthermore, the Bombay High Court acknowledged in the Alankar Shakari case that society holds a strong position when a flat buyer demands a seamless transaction and transfer of the share certificate into his name. In these situations, society demands outrageous payments from the apartment buyer under the guise of “voluntary gifts.”
The Bombay High Court ruled that society may only raise money by legally acceptable charges or fees and is not permitted to make money from its members. While making gifts to society is not prohibited, it should be done freely and without compulsion. Additionally, society should never collect transfer fees while claiming the money was donated.
Read: Circle Rates Gurgaon 2023: A Guide to Property Registration Process in Gurgaon 2023
Effect of The Bombay High Court’s Decision on Transfer Costs on Property Purchasers and Sellers.
The decision of the Bombay High Court in the matter of Alankar Sahkari established the legal framework for any property owner or buyer to challenge the excessive demands of society transfer charges, regardless of whether it is referred to as a voluntary donation.
Whether a property buyer is prepared to start bitter litigation with a community where they want to reside for the foreseeable future remains, even though the legal remedies and the legislation have been fairly decided for transfer premiums in a housing society.
Members should protest against any such resolution being enacted in societies where there are presently no housing society transfer charges rules on paying the transfer charges as voluntary gifts or in any other way because it goes against the spirit of the legislation. Members can only stop such measures if they voice their concerns appropriately.
What are the Requirements or Guidelines for Transferring Flats?
● Before the flat can be transferred to another member, the member must have owned it for an entire year.
Read: Everything You Need to Know About Maharashtra Land Records
● Members who obtain ownership through a court order are exempt from the abovementioned condition.
● Anyone planning to move out of their apartment must provide the society with a written 15-day notice.
● The application must include good cause for the flat transfer (explained succinctly).
● The transfer premium (if applicable), admission price, and transfer fee are all required, along with documentation from both the transferor and the transferee.
What Steps Must be Taken for a Flat Transfer?
It’s always advisable to consult a legal professional or real estate expert to guide you through the specific requirements and legalities involved in a flat transfer in your jurisdiction. With that in mind, here are some pointers on the steps that must be taken for a flat transfer
Gather all the necessary documents related to the flat transfer, such as the sale agreement, property title deeds, and identification proofs of the buyer and seller.
Conduct a thorough verification of the property documents to ensure their authenticity and legality. This step helps in preventing any potential legal issues or disputes later on.
3. Agreement Execution:
Prepare the transfer agreement and get it duly executed by both the buyer andseller. The agreement should outline the terms and conditions of the transfer, including the sale price, payment schedule, and any other relevant clauses.
4. No Objection Certificate (NOC):
Obtain a No Objection Certificate from the society or housing society where the flat is located. This certificate verifies that there are no outstanding dues, pending litigation, or objections regarding the transfer.
5. Clearances and Permissions:
Seek necessary clearances and permissions from local authorities, such as the municipal corporation or development authority, if required for the flat transfer.
6. Stamp Duty and Registration:
Pay the applicable stamp duty and get the transfer deed registered with the relevant authority as per the local regulations. This step is crucial for legally transferring the ownership rights of the flat.
7. Financial Settlement:
Ensure that all financial obligations, such as outstanding dues, pending maintenance charges, and property taxes, are settled before the transfer takes place. This step avoids any financial liabilities being transferred to the buyer.
8. Handover and Possession:
Arrange for the physical handover of the flat to the buyer after completing all the legal and financial formalities. The buyer should inspect the flat to ensure its condition aligns with the agreed-upon terms.
Can a Cooperative Housing Society’s Board of Directors Be Dismiss?
The deputy district registrar of Maharashtra’s Katraj cooperative housing society disbanded its board of directors in 2020. (Pune). To grant a NOC for a flat transfer into a home buyer’s name, the board had issued a resolution by the general body imposing a fee of Rs. 1.25 lakhs as society charges.
The Cooperative Societies Act specifies a sum of Rs 25,000 for the property transfer charges, as was already mentioned. The board was disbanded because it had broken society transfer fee rules in its behaviour. The deputy registrar further prohibited the society’s directors from running in elections for the following six years. This emphasises how charging a high transfer cost is unlawful and punitive.
Society transfer charges in Pune are fees that apply to second sales rather than first sales. So, you don’t have to pay transfer fees while purchasing from the builder, but you do when you sell.
According to current regulations and notifications, society transfer charges in Mumbai are 2 per cent, which is illegal. A society may only request a transfer fee up to a maximum of Rs.25,000; it may not want more. Request that the society provides the transfer fees in writing before filing a complaint with the registrar of societies about the excessive amount requested by the society.
Is the Builder’s Transfer Fees Legal?
Although housing society transfer charges and service societies are permitted to collect transfer fees, a builder is not permitted to do so if it does not violate the rules. You may, however, be aware of some dishonest developers who demand society transfer charges. When a buyer approaches a builder for a NOC and a builder can use their influence to sway the home buyer, most complaints against the developer in such a situation arise. However, for the following reasons, it is unlawful to do this:
● The Transfer of Property Act of 1882 prohibits such behaviour. It states that “a transfer of property passes instantaneously to the transferee, all the interest which the transferor is then capable of passing in the property and the legal occurrences thereof.”
● The Indian Contract Act of 1872 is violated since it infringes on a buyer’s ownership rights over the property.
● It differs from cooperative transfer charges by society. While the purchaser is a shareholder, a cooperative society owns the structure and the surrounding property. No such rights exist for builders.
● Buyers should investigate whether developers who claim to be collecting the transfer fee on behalf of a cooperative housing society are attempting to prevent the society from being formed in the first place.
● Under Sections 384 and 385 of the Indian Penal Code, a builder who tries to deceive a property buyer and induce them to pay the transfer fee may be held accountable (IPC). The Competition Act of 2007 forbids it as well and defines it as “abuse of dominant position.”
● GST on society transfer fees is If the CHS is not otherwise exempt from GST registration, GST is applied to transfer fees at a rate of 18 per cent.
Understand Society Transfer Charges With NoBroker:
The State government has lowered the fee assessed on the society transfer charges and sale of flats in cooperative housing societies located on leased government land in response to lobbying from prominent housing societies owned by serving/retired officials and police officers. There is no distinction between whether a requirement is for residential or commercial use based on a cursory reading of this provision and the provision relating to the bonafide requirement, which shows that the landlord need only demonstrate that the premises are needed reasonably and legitimately for himself or his family. If you need any professional help in understanding various property taxes and legalities involved in buying and selling real estate, do book a free consultation with experts at NoBroker. If you’re interested, do comment below; our executive will be in touch with you soon.
Answer: Depending on the city you live in, society transfer charges require payment of a transfer premium when a member sells shares and rights in a flat. This premium can be anywhere from Rs 25,000 to even a percentage of the buying consideration for selling the flat.
Answer: The owner must pay a transfer charge of about Rs 200 to Rs 1,000 per square foot to obtain the NOC. In rare situations, this can bring the total price due to the builder up to Rs 15 lakh.
Answer: In society transfer fees, in the case of a gift deed, you must give the society Rs. 500 as a transfer “fee.” The bye-law is very clear in this regard: If the transfer is within the family (defined by the bye-law as including mother, father, brothers, sisters, sons, daughters, sons-in-law, and daughters-in-law), then society CANNOT demand the transfer “fees/premium,” not even as “donation” or under any other pretext.
Answer: The difference between the book value of the apartment and the price the transferor paid might be used by society to calculate transfer fees, which are set at 2.5 per cent. Before one year has passed since joining, a member cannot transfer their apartment ownership to someone else.
Answer: According to Bye-Law No. 40(d)(vii), the society must collect transfer fees equal to 2.5 per cent of the difference between the apartment’s book value and the price the transferor paid for it, or a maximum of Rs. 25,000—whichever is less.