FAQs for Acquisition of a Flat in a Co-operative Society

Q1.      What are the steps involved for acquisition of a flat in Mumbai?

A1.      In Mumbai, most of the flats are situated in a co-operative housing society. Hence, we will give the check list for acquisition of a flat in Mumbai in a co-operative housing society.  The steps enumerated below are general in nature and may vary depending upon the facts and circumstances of each case and the understanding of the parties concerned.

Further, the sequence of the steps enumerated below may also change/ vary depending upon the facts and circumstances of each case and the understanding of the parties concerned.

(a)        Identify the flat to be purchased, the furniture and fixtures lying in the flat, etc.

(b)        Check whether there is a clear understanding on the commercial aspects of the transaction, such as the following:

(1)     The consideration amount

(2)     The manner and time line of payment of the consideration amount

(3)     Payment of the token amount/ earnest money deposit

(4)     When will the possession of the flat be handed over/ given to the purchaser? Whether the possession of the flat will be given in vacant, quiet and peaceful condition?

(5)     When will the seller hand over the originals of the documents of title to the purchaser?

(6)     Date of completion of the transaction

(7)     Who will bear the society transfer charges, Collector’s transfer charges, stamp duty on the agreement/ conveyance, registration charges, etc.?  Whether the purchaser will alone bear or whether the purchaser and seller will bear, and if yes, then in what proportion?

(8)     Who will bear the professional fees, such as fees of chartered accountants and lawyers for preparing the documents, etc? Whether each party will bear their respective professional fees?

(9)     Whether the seller will be responsible to clear/ bear the society maintenance charges up to the date of handing over of the possession of the flat to the purchaser?  Usually, it is the seller who is responsible for the same since he has enjoyed those utilities.

(10)   Who will clear/ bear the past dues, if any, of the society?  Usually, it is the seller who is responsible to clear the past dues of the society.

(11)   Whether the seller will be responsible to clear/ bear the utility dues, such as electricity charges, water charges, telephone expenses, etc., up to the date of handing over of the possession of the flat to the purchaser?  Usually, it is the seller who is responsible for the same since he has enjoyed those utilities.

(12)   Conditions precedents, if any, to be fulfilled or complied with either by the seller or the purchaser before the completion of the transaction

(13)   Whether the flat is to be purchased free of any charge or encumbrance or subject to any charge, encumbrance, etc.

(c)        Check whether the flat is mortgaged with any bank/ financial institution/ creditor for availing of any loan or financial facility by the seller or his predecessor?

(d)       If the flat is mortgaged, then obtain from the seller, the name and address of the bank/ financial institution/ person to whom the flat is mortgaged, the amount outstanding (principal plus the interest, if any) and such other details which are relevant for completing the transaction.

(e)        Check with the lending bank/ financial institution/ person, the modalities for repayment/ discharge of the entire loan (principal plus the interest, if any), modalities for taking the possession of the originals of the documents of title, modalities for releasing of the charge of the bank/ financial institution/ person on the flat, etc.

(f)        Obtain copies of all the documents of title. 

(g)        Verify whether the copies of the documents of title are copies of the originals of the documents of title?  This is necessary:

•        To see that the copies are the same as the originals.  In other words, the copies are not tampered to suit the seller.

•        To see that all the originals of the documents of title are in fact in possession of the seller and that they not lying with any bank/ financial institution or any creditor of the seller from whom the seller may have obtained loan/ financial facility and which is not disclosed by the seller to the purchaser.

(h)        Check the documents of title whether they are in order.  In other words, check whether the past documents of title are properly executed and confers a clear, perfect and marketable to the seller.

(i)         Check whether proper stamp duty is paid on every document of title.  If proper amount of stamp duty is not paid on any document, then quantify the stamp duty liability on such improperly stamped document and arrive at an understanding with the seller for its payment.  Alternatively, the seller may indemnify the purchaser for the same.  However, this should not be a preferred option.

(j)         Check whether documents of title are registered.  If no, then take steps for registering the unregistered document.

(k)        Check whether the land on which the flat is situated is freehold or leasehold.

If the land on which the flat is situated is freehold, check whether the conveyance of the land is executed by the owner/ builder in favour of the society. If no such conveyance is executed, then the purchaser should consider the stamp duty liability, if any, which may arise whenever the conveyance is executed by the owner/ builder in favour of the society.  This is so because the purchaser will have to proportionately share/ contribute to such extra cost.  Further, this aspect would also affect the present and future market valuation of the flat, future salability, etc. 

If the land on which the flat is situated is leasehold, check whether the Lease Deed of the land is executed by the owner/ lessor in favour of the society. If no such lease is executed, then the purchaser should consider the stamp duty liability which will arise whenever the lease is executed by the owner/ lessor in favour of the society.  This is so because the purchaser will have to proportionately share/ contribute to such extra cost.  Further this aspect would also affect the present and future market valuation of the flat, future salability, etc.

(l)         If the land on which the flat is situated is leasehold, check the unexpired period of lease. Also check whether there is any renewal clause in the lease. 

If the lease is going to expire in a few years and if there is no renewal clause in the Lease Deed, then this fact may affect the very decision of the purchaser to buy the flat.

Further, if the lease is going to expire in a few years and if there is a renewal clause, then this would involve additional stamp duty cost etc. These factors affect the present and future valuation of the flat, future salability, etc., of the flat, and hence, the purchaser should consider these before making a decision to buy the flat.

(m)       Check whether the land on which the flat is situated is Collector’s land.  If yes, then obtain the permission of the Collector for the transfer of the flat and pay the prescribed amount of transfer charges to the Collector.

(n)        Verify the title of the seller to the flat by taking searches in the Registrar’s office, giving public notice, etc.

(o)        Check whether the society dues are fully paid. If no, then clear the dues of the society.

(p)        Check whether all the utility bills, such as for electricity, telephone, water, etc., are fully paid and discharged.

(q)        Obtain society’s no-objection to the proposed transfer of the flat.

(r)        Check the society’s byelaws for transfer procedure.

(s)        Prepare the following documents for transfer of the flat as may be appropriate:

•        Agreement of Sale/ Memorandum of Understanding

•        Transfer Deed/ Conveyance Deed

•        Receipt/s for payment of the consideration amount

•        Possession Letter for handing over of the possession of the flat and originals of the documents of title

•        Declaration of the seller

•        Indemnity of the seller in favour of the purchaser for non-payment of stamp duty on earlier title documents, non-registration of earlier title documents, etc.

•        Letter to the society requesting for the transfer of the flat

•        Society Transfer Forms

(t)        Compute the market value of the flat in the manner laid down by the Ready Reckoner published by the Stamp Duty Authorities every year.

(u)        Pay the stamp duty at the rates prescribed under the appropriate Article of Schedule I to the Bombay Stamp Act, 1958.

(v)        Purchaser to pay the balance/ entire consideration to the seller. Simultaneously execute the above documents.  Further, the purchaser to simultaneously take possession of the following documents and things: 

•        Originals of all the documents executed

•        Originals of all the documents of title

•        Possession of the flat along with the all the keys

•        Original of the no-objection letter/ certificate of the society

•        Original of the Collector’s no-objection certificate

•        Original receipt from the society evidencing discharge of all the society dues till the date of handing over of the possession

•        Original of the utility bills duly paid and discharged

Seller to keep copies of the above documents

(w)       Register the relevant documents and pay registration charges.

(x)        Change the lock/ locking system of the entrance to the flat.

(y)        Submission of various forms, share certificates, etc., to the society for the transfer of the flat in the name of the purchaser and for admitting the purchaser as a member of the society.

(z)        Payment of the transfer fees to the society.

(ai)       Follow-up with the society for transfer of the flat in the name of the purchaser, and for admitting the purchaser as a member of the society.