How to calculate Maintenance Charges for your Apartment Association? OR How to share Common Expenses in a Housing Society?

A seemingly simple but complex issue in every apartment association is on how to arrive at the maintenance charges to be levied on the members. The issue is complex enough that it is impossible to please all the members with a single way of calculating the maintenance charges.

As discussed in the “Popular methods of calculating Maintenance charges” – societies have option of charging Per Square Feet (PSF) or Per Flat (PF) basis. While the regulations in most states is not very clear (or not enforced with necessary rigor), the model bye-laws of Maharashtra state provide a relatively clear answer to this debate. The answer at a high level is simple – follow a combination of per sft and per flat for various heads.

The same can be adopted by societies of all states (as most model bye-laws are derived works of the model bye-laws from Maharashtra State).

Types of Charges

There are quite a few types of charges that can be levied on members. The periodicity of levying these charges can be decided by the General Body of the Association. Usually charges like ‘Sinking Fund’ will be levied once in an year – and Maintenance Dues will be charged once in a month. Brief explanation of various charges is given below.

Service Charges (a.k.a Maintenance Charges in most societies)

This charge needs to be levied on per flat basis. This charge needs to be levied based on the expenses incurred by the society towards procurement of services. This includes all Staff Salaries (including society office staff, maintenance staff, security staff, housekeeping staff, technical staff etc.), Administration Expenses (internet, telephone, printing, stationary etc.), Auditor Expenses, Common Area Electricity Bill (excluding bill for Lift operations), Conveyance / Travel Expenses, Legal Expenses, Membership to local federations / bodies etc.

Expenses on repairs and maintenance of building of Society

These charges may be decided by General Body subject to minimum 0.75 percent (0.75%) of the cost of construction of flat/shop per annum. For example, if the construction cost is Rs. 1200/- per sft, this charge will be Rs. 9,000/- per annum for a 1000 sft flat. This is calculated on per sft basis and can be levied once in a year. This excludes Lift related repair & maintenance.

Expenses for lift repair, maintenance and for running the lift

This charge should be based on expenses incurred for Lift Repair, Lift Maintenance and Running of Lift, including Electricity Charges for Lift oeprations. This needs to be charged equally on all Members of the building where in lift is provided.

Sinking Fund (a.k.a Corpus Fund)

The exact amount may be decided by General Body subject to minimum of 0.25% of the cost of construction of flat per annum. This is calculated on per sft basis and can be levied once in a year. This is to be collected if the builder has not collected this amount at the time of selling the flats and handed over the corpus to the association.

Parking Charges

This charge is to be levied based on number of parking lots in a flat. The fee per parking lot may be as decided by General Body of the Society.

Property Tax

This is applicable only in states where societies are authorized to collect property tax on behalf of Govt. The tax to be collected is determined by the state.

Water charges

This charge is to be levied based on number of water inlets into a flat. The fee per water inlet may be as decided by General Body of the Society. In modern apartments / layouts, this charge can be calculated based on the reading from the water meters that measure consumption of the water by a flat.

Interest on defaulted Charges

This is the late payment penalty. The penalty scheme / amount is as decided by General Body. Most common practice is to levy simple interest not exceeding 21% p.a. But General body can decide a different way of calculating late payment fees that works best for them.

Non Occupancy Charges (NOC)

This is an additional charge on flats that are rented out. As per the law, this charge cannot exceed 10% of the Maintenance / Service Charges levied. You can refer to this article to get more details. The NOC cannot be charged if the licensee(tenant) is family member(Family Members includes husband, wife, father, mother, brother, sister, son, daughter, son in law, daughter in law, sister in law, brother in law, grandson and granddaughter).

Insurance Charges

The expenses spent on insurance of the building and equipment can be levied on the members in proportion to built up area of their flats. Extra premium charged by insurance on account of storage of specified goods in flat/shop should be collected from those flats/ shops whose storage of specific goods was the reason for extra premium.

Lease Rent

This is levied based on per sft for the builtup area of the flat/shop.

Any other charges

As decided by General Body from time to time.

Following is a table indicating a comprehensive list of charges that can be levied by the Society / Apartment Association on the members. All charges levied must be derived from the expenses of the society. The table also indicates the correct way of arriving at these charges from the expenses and if they need to levied on per sft basis or per flat basis – as recommended by Model Bye Laws.

How to Calculate Maintenance Charges?

Conclusion

The article provides a framework for arriving at dues to be levied that is fair to all its members. A Housing Society that is ‘well managed’ needs to avoid taking the easy way out – by charging per flat or per sft basis. This is especially true for societies where there is no uniformity in size of the flats. Though at a first glance, it looks like there is much work and many heads for the amounts to be charged to adopt this, it is not really so. Once you get started you realize that its not as difficult as it appears. If you are new society, you can put this in practice right from day one. if you are an old society, but not following this model – its never too late for you to adopt this.


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Comments
  1. Manoj Kumar Gupta

    I fully agree with this model for calculating the maintenance charges from flat owners.

  2. Aaruni

    Is the society maintenance charges exempted under Income Tax? Should this not be included as part of rent while calculating HRA?

  3. Rajendra Khachane

    Well explained , this is a very transparent and fair method . Overall it is inline with latest byelaws.

  4. Col George Jacob (retd) P6-41

    Despite good intentions by everyone, some issues which are very evident now and can adversely affect the core functioning of the Colony in future are:-
    1. The RWA office bearers finding it difficult to move ahead due to varying views (mostly pertinent) and resultant problems with PD,AWHO since they are unable to resolve / take decisions.
    2. Apprehension that funds are not being used appropriately. Preference to some pockets etc.
    3. Feeling that monthly maintenance charges are too high.
    4. Many not paying maintenance charges since they are not occupying their villas/flats.
    5. The output of those employed such as electrician, plumber, labour etc far below required levels.
    6. The parks and open areas can be much better.
    6. The helplessness being expressed that nothing is being done to improve the pockets. ETC
    Hence, it may be desirable to change the structure of RWA to a Federal Strucure ie, RWA central committee to look after major issues while pockets have freedom to pursue activities to improve the respective pockets.
    1. The maintenance charges to be split into sub funds and maintained separately with two account operators each. The bank can split the money received at their end.
    (a) Central Fund for paying Estate Officer, Office Staff, Electrician( Central electricity supply upto houses/ villas only), Plumber (for water supply upto villas/flats only), security staff and other central issues of common interest. Suggest Rs1000/- per month per resident.
    (b) Pocket maintenance fund. For running the pockets like street lights, water, generator (maintenance& AMC), parks etc and for future maintenance and repair of central assets. Rs 1000/- per month per resident. Those residents not occupying may be charged Rs100/- less for water not being consumed.
    (c) Club House fund. Rs 500/- (may be increased later if deemed necessary).
    2. The above will bring in accountability and ownership. And more importantly RWA office bearers can focus on resolving major issues with AWHO etc.
    3. Each pocket being peculiar can focus on improving the condition of respective pocket, by spending the money collected, wisely.
    4. There will be transparency.
    5. We will have more participation.
    6. Pockets representatives can get those not paying maintenance subscriptions to pay up and there will be fund flow.

    regards,

    Col George Jacob (Retd) P6/41

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