Difference between housing society and apartments owners association and condominium

The meaning of Condominium is a Building or Complex of Buildings containing a number of individually owned Apartments or houses. Though this concept isvery old one of ownership for buildings in Mumbai, it is the Co-operative Housing Society model which has been and even today, is the most popular and preferred so far. Buyers who purchase premises on an 'ownership' basis require to come together to manage the building and for that purpose, one of the ways is to form a Co-operative Society, which is regulated by the Maharashtra Co-operative Societies Act, 1960.

An alternative to a Co-operative Housing Society was introduced by the Maharashtra Apartment Ownership Act, 1970, which provides for the formation of a Condominium. The buyers of premises in a Condominium are called Apartment owners who form an association known as an 'Association of Apartment Owners' in case of both i.e. residential as well as non-residential premises.

The meaning of an Apartment means an part of property intended for any type of independent use, including one or more rooms or enclosed spaces located on one or more floors in a building intended to be used for residence, office, practice of any profession or for carrying on any occupation, trade, or business or for any other type of independent use and with a direct exit to a public street, road or highway or to a common area leading to such street, road or highway.

The distinction between Apartment and Flat is that in respect of Apartment ownership, the legal title of the flat as an object, along with a proportionate share in the common areas of the building and also proportionate share in the land on which the building stands, vests in the Apartment owner. That means, the building belongs to jointly but each Apartment owner has an independent right to his Apartment to the exclusion of others. Whereas, in the case of ownership flat, the title to the building and the land vests with Co-operative Housing Society or a Limited Company and the flat owner is not an owner of the flat in real sense but he has only a right to occupy the flat. This is a species of property, which is heritable and transferable.

Although the basic purpose of both the formation is similar, there are many differences between a Society and Condominium. Some of the differentiations are as under and we advise our patrons to read carefully and understand:

1. Generally to form a Society, 10 persons would be required and each of them is to be from a different family who reside in the area of operation of the Society (within the same city) and who have purchased premises in the building. However, in case of Condominium, even one person who owns the entire building can form a Condominium provided there are at least five Apartments in the building.

2. In the case of a Society, the title of the land and the building is transferred and conveyed to the Society, which becomes the owner thereof. Buyers, upon purchase of flats, become members of the Society. In the case of a Condominium, the title of each Apartment rests with the Apartment owner, who also has a proportionate undivided interest in the land on which the building stands the common areas and facilities of the building.

3. A Society adopts the Model Bylaws periodically with changes if required but with subsequent approval from Dy. Registrar of respective ward. Similarly, while adopting the Bylaws in a Condominium, suitable changes can be made so long as the provisions of the Act are not contravened.

4. A Society issues certain shares to its members as per the Bylaws and the Share Certificate becomes an important title deed, since the allotment of the premises are related thereto. This is not so in a Condominium of Apartments/Buildings.

5. The affairs of the Society are managed by the Managing Committee which is elected by the members of the Society. The Managing Committee elects a Chairman, Secretary and a Treasurer. Similarly, the affairs of a Condominium are managed by the Board of Managers who is elected by the members of the Apartment Owners Association. The Board also elects a President, Vice-President, Secretary and a Treasurer.

6. Under the Model Bylaws, a Society can charge only Rs. 500/- as Transfer Fee with a maximum of Rs 25,000/- as a premium. In case of a Condominium, the Bylaws can be more flexible and the amount of Transfer Fee can be provided therein.

7. In a Condominium, the owner can give his Apartment on lease or leave and license basis without the approval of the Board of Managers. While in a Society, permission of Managing Committee including ‘Police Verification’ is required.

8. In a Society, every member has one vote, irrespective of the area of his premises. In a Condominium, every Apartment owner has a voting right in proportion to the value of his premises which is generally as per the area of the Apartment owned by him and which is defined while forming the Condominium.

9. In a Society, disputes are generally referred to the Registrar appointed under the Act or to a Co-operative Court, depending on the nature of the dispute. In the case of a Condominium, the Court having jurisdiction over the area in which the Condominium is located, hears the disputes.

10. A Society can expel its member under certain extreme circumstances. In case of a Condominium, there is no such provision. However, if an Apartment owner fails to comply with the Bylaws or the Rules and Regulations, either damages or injunctive relief or both can be claimed against him.

11. In a Society, a member can nominate a person in whose favour shares of the Society should be transferred upon the member's death. No such facility is available in a Condominium. An Apartment can be transferred to a person to whom the Apartment owner bequeaths the same by his will or to the legal representative of the Apartment owner's estate.

12. The difference between Maharashtra Ownership Flat Act, 1963 and Maharashtra Ownership Apartment Act, 1970 is that in case of Maharashtra Ownership Flat Act there should be atleast 10 members for forming Co-operative Housing Society and in Apartment ownership there should be 5 Apartments in one or more building. In case of Ownership Flat Act or Co-operative Societies Act the assessment of the flats will be in the name of owner of the land or builder or the Society and in case of Apartment Ownership Act there will be separate assessment in respect of each Apartment and its percentage of undivided interest in common areas and facilities. In case of Ownership Flat Act, there will be registration of Co-Op Society or Pvt. Ltd Company as contemplated under Section 10 of Maharashtra Ownership Flat and in case of Apartment Ownership Act, a declaration is required to be made in prescribed form before the Magistrate as required under the Act. (See Rule 2)

A significant question here is that why the builders always tend to go for 'Apartment' formation and always try to avoid ‘Society’? The reason is that the builders have lot of vested interests in doing so which are listed below:

1) The builder is interested in using the increased FSI which will be awarded by the govt. for that area at any time in future. If the 'Society' is formed, then upon the transfer and conveyance of land in favour of the Society, the increased FSI will be owned by the Society and the builder shall not have any right over it. But if it is an Apartment, then the builder owns that increased FSI and can use it anywhere. Thus, the builder will keep taking advantage of every increase in FSI throughout in the future.

2) In an Apartment, the builder retains the ownership of the open spaces which are not included in the saleable area. Example - Terrace or any open parking/stairs space which is not included in the saleable area. But in case of Society, the builder cannot retain any right on any of these areas and has to hand over everything to the Society. The Maharashtra Apartment Ownership Act also provides for the ownership of an individual Apartment in a building and to make such Apartment heritable and transferable property.

3) Bye-laws and Rules of 'Society' are binding on all the residents and nobody can act as per his/her whims. Hence, if the Society decides to ban any objectionable commercial activities in the flats such as noise-making music classes or using the flat for catering or courier activities etc or not to rent out to bachelors etc, then all the residents have to abide by it. But if it is an Apartment, then owners can violate the Apartment Rules and the Apartment Body can just file a case in the Civil Court. However, while the Society disputes are resolved in a separate Court i.e. Co-operative Court dealing with Society matters and hence they are fast resolved whereas, the Apartment matters have to be taken to the normal Civil Court and hence they typically take years and decades to resolve.

4) When the building contemplates redevelopment after 25-30 years, the Society’s decision will be final and hence the Society members will have negotiation power with the builder at that time. But if in case of an Apartment, the consent of every Apartment-owner is required and hence it goes into an endless delay due to lack of a common decision acceptable to everybody. There are many instances in Mumbai wherein finally the dilapidated buildings had to be forcefully vacated by an eviction order from Court since they became unliveable. Thus, while the decisions are taken on a 'majority' basis in Society, the Apartment goes with rule of 'Acceptable by Everybody'. So if the builder has retained even one flat in an Apartment, he will play a veto card in his favour at the time of redevelopment.

5) Refer to a Judgment of Supreme Court of India in the Case of Zoroastrian Co-Operative v/s District Registrar Co Operative - Appeal (civil) 1551 of 2000 on 15 April, 2005 wherein regarding the rights of an individual member, the Lordships have stated: "Once a person becomes a member of a Co-operative Society, he loses his individuality qua the Society and he has no independent rights except those given to him by the Statute and the Bye-Laws". However, in case of the Apartment, the decision taking always rests with each Apartment-owner

In case of conveyance of the Apartments, all transfers of Apartments by the sole owner or all the owners of the property (being an owner or owners who have or have executed and registered a declaration in form “A”) to an Apartment owner and subsequent transfers from an Apartment owner to his Transferee.

With regard to the parties of the Deeds of Apartments,

in the case of the first Deed of Apartment the party of the first part shall be either the sole owner or all the owners of the property who has or have executed and registered the Declaration in form “A” and the party of the second part shall be the Apartment owner. In the case of subsequent Deeds of Apartment, the party of the first part shall be the Apartment owner and the party of the second part shall be his Transferee.

Hence, it is recommended to impress upon the Developers to form a Co-operative Housing Society only under the Provisions of MOFA, 1963.

Dilip Shah

Senior Counselor and Analyst for Redevelopment of Housing Societies andSociety Laws

www.redevelopmentofhousingsocieties.com &

www.redevelopmentofhousingsociety.com