Real Estate Basics: Condominium v. Society

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Condominium

Condominium can be defined as a group of housing units where each home owner owns a separate and individual unit space whereas common area is shared by all. Every unit is termed as the ‘apartment’ and the owner of that unit is called ‘apartment owner’.

In India, concept of condominium came first with the enactment of Maharashtra Apartment Ownership Act, 1970 as it was necessary due to the complexity of co-operative societies in regulating day to day affairs.

The main objective of Maharashtra Apartment Ownership Act, 1970[i] can be derived from the Preamble of the act which can be read as “An act to provide ownership of an individual apartment in a building and to make such apartment heritable and transferrable property”. So, basically this act was enacted to emphasis on condominium i.e individual ownership rather thanco-operative societies.

Therefore, condominium is a group of housing units where each owner has an exclusive and separate right over his separate unit and common area which is shared by all. Each apartment owner has a claim over a specific percentage of undivided land.

In order to understand the concept of condominium it is pertinent to note some relevant provision of Maharashtra Apartment Ownership Act,1970.

Important provisions of Maharashtra Apartment Ownership Act, 1970

The term ‘apartment’ is defined in section 3(a) of MAO Act,1970 which basically says that apartment is the part of property intended for any type of independent use which may include one or more rooms or enclosed space one a floor or more floors or any portion of property in a building which is intended to be used for residence, office, practice of any profession, carrying out any business, occupation or trade or for any kind of independent use which must have a direct exit to a public street, highways, or common area leading to such. [ii]

As per the provision of section 2 of this act, to submit any property to the provision of this act, it is required to declare by the apartment owner that this property is used or proposed to be used for residence, office , practicing or carrying any business, occupation or trade or for any other type of independent use.[iii] So basically, this act is putting emphasis on the independent and separate interest in an apartment and a portion of land. And, after this declaration each apartment owner will be entitled to exclusive ownership and possession of his apartment in accordance with the declaration executed and registered as required by the law.

The main objective of enactment of this act is to make apartment heritable and transferrable property and to generate individual interest in it. So, section 4 of this act says that the apartment owner may transfer his apartment and portion of an undivided interest in common areas and all other facilities apparent to the owner. Such transfer can be done by the way of sale, mortgage, lease, gift and exchange.[iv]

Cooperative Housing Society:

Cooperative Housing society is a member based legal entity made out of one or more building. One can become the member of that society by buying a share in the housing corporation and in return of the consideration paid buyer get the right to occupy a housing unit be it house or apartment.

In India, the idea was first introduced by the establishment of Cooperative Societies Act,1904[v]. The first housing society was formed in Bangalore in 1909 named as ‘The Bangalore Building Cooperative Society’ followed by the establishment of Bombay Cooperative Houses in 1913. In between central government formulated the Cooperative Societies Act in 1912[vi] in order to lay down the provisions and constitutional mandate for Cooperative society.[vii]

Today, most of the state have their own state cooperative societies act to regulate the cooperative societies within the respective state like Maharashtra Cooperative society Act, 1960[viii].

Working of Society:

• Minimum of 10 persons are required to form a society and each person must be from different family who resides in that area of operation of society and must have purchased premises in the building.
• In a cooperative society the title of the land and building is transferred to the society who in turn become the owner of all the property.
• Buyers who have purchased the flat becomes the member of that society and altogether elect a managing committee by election and the elected member choose their office bearer like chairman, secretary, treasurer etc., to manage all the day to day affairs of the society.
• To regulate the affairs of the society, it adopts  model by-laws which consist of rules and regulation to followed by the members of the society and under the provision of such by-laws society gives a share certificate of allotment of premises to the buyer which in turn become their title deed.
•  Member can nominate a person to whom share of society can be transferred after his death.
• Under model by-laws, society can charge a transfer fee of Rs. 500 with a maximum amount of Rs. 25,000 as the premium.
• Flat owner can let his house only with the prior permission of committee.
• Society can also expel someone if any such extreme circumstances arise.

Advantages of living in Cooperative Housing Societies:

• Affordable- Housing societies are affordable since all the member share the cost of maintenance. So, expenditure per head of maintenance is minimal.
• Safe and Secure- Living in such society is totally safe and secure as each member is verified and vetoed before granting membership of society. No person with criminal record is entertained by the society.
• No outside intervention- No one from the outside of society can interfere with the affairs of society.
• Tax Deduction- Living in society can save the tax as portion of the real estate tax is paid by the society.
• Stability- Cooperative societies are stable and reliable as it has own legal existence and means to sustain itself.

Difference between Condominium and Society

	Condominium	Society
Formation	There must be at least 5 apartments in a building and the group of owners of each apartment forms condominium.	At least 10 members are required to form society. Each member must be from different family.
Management	Member of apartment owner elect ‘board of manager’ which in turn elect President, Vice-President, Secretaries, &treasurer	Member of society elect ‘managing committee’. Member of managing committee elect the office bearer i.e. chairman, secretary, treasurer etc.
Title	Each owner of the apartment has separate and independent interest in the apartment, portion of common areas and percentage of undivided land.	Title of the property is conveyed to the society. Buyer of flat are the shareholder of that property.
Voting Rights	Each apartment owner has voting right and the value of votes is proportional to the value of his premises.	Each member has voting right for the election of committee member and each vote has equal value.
Letting out	Apartment owner can let out his premises without taking permission of the board.	One cannot let his premises without the permission of the managing committee.
Jurisdiction	Civil court have jurisdiction over any disputes.	Disputes are referred to the Registrar appointed under the act or the cooperative court
Transfer of Property	Property can be transferred to the person as the apartment owner bequeath. No transfer fee is to be paid to board of manager.	A member can nominate anyone to whom the shares of society can be transferred. Society can charge a transfer fee of Rs. 500 and maximum amount of Rs.25,000 as the premium.
Expulsion	No such provision.	In extreme condition on the discretion of committee.

 

Zorosastrian Society v. District Registrar co-operative [Appeal (civil) 1551 of 2000]

In this case, court observed that once a person becomes the member of the cooperative society, he loses his individuality qua the society and he has no independent right left out except those given by model by-laws and statute. Whereas, apartment owner in condominium has their individual right and they can take their own decision.

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[i]The Maharashtra Apartment Ownership Act,1970 (Act no. 15 of 1971)

[ii]Id., section-3(a)

[iii]Id, section 2

[iv]Id., section 4

[v]The Co-operative Societies Act,1904

[vi]The Co-operative Societies Act,1912

[vii]History of Cooperative Housing Society and group housing in India-Shodganga, Ch-2, available at:  www.shodganda.inflibnet,ac.in

[viii]The Maharashtra Co-operative Societies Act,1960 (Act no. 24 of 1961)

 

This article is authored by Mr. Pranav Prasoon, currently he is pursuing his BA LLB (Hons.) from Jamia Millia Islamia. You can reach out to him at  pranavprasoon23@gmail.com.