Before purchasing a house in a gated community, it is important to know about certain bylaws, charges, rules, and regulations. These are inevitable and failing to pay these charges or not abiding by these rules can cost you dearly.

If you are reading this blog, then surely you must have an idea about maintenance charges (add link). Like maintenance charges, societies also levy non-occupancy charges on flat-owners if their flat is unoccupied and vacant for a while.

In this article, we’ll explore more about non-occupancy charges, the criterias, and what the law says about them.

Criteria for non-occupancy charges

If a flat-owner and his family live in the unit, or if the unit is rented out, the flat-owner does not have to pay non-occupancy charges since the RWA (Resident Welfare Association) will receive the monthly maintenance amount from that unit.

Likewise, the flat is exempted from non-occupancy charges if the said flat is occupied by the flat owner’s immediate family members, given that they bear the maintenance charges.  

Calculation of non-occupancy charges

In 2001, the Maharastra government issued a circular under Section 79A of the Maharashtra Cooperative Societies Act, 1960, capping the non-occupancy charges at 10% of the society’s maintenance charges.

For example, if monthly maintenance charges are ₹4000, the non-occupancy cannot be more than ₹400 a month. Service charges include maintenance charges, common area electricity, lift and security excluding municipal taxes.

The need for pegging the non-occupancy charges rate

Before the circular from the Maharashtra government came into effect, societies charged exorbitant rates as non-occupancy charges. This drained the non-occupying flat owners financially, negatively impacting rentals, and particularly affected the NRIs (non-residential Indians) who actively invest in the Indian real estate.

Additionally, several cases came to light where the non-occupancy charges were disproportionate. They were so high that societies were collecting lakhs per annum as non-occupancy charges.  

Bhartiya Friends Cooperative Housing Society and Mont Blanc Cooperative Housing Society were classic cases of this.

In the first society, that is Bhartiya Friends, among 49 flats, owners of two flats had paid ₹2,50,000 per annum as non-occupancy charges. However, it was found that a major portion of the amount had been used for paying the property tax of the other 47 houses.

Similarly, the Bombay High Court observed that out of the 51 flats in the Mont Blanc Cooperative Housing Society, only a maximum of six houses were rented or vacant at any given time. However, a whopping ₹3,00,000 to ₹24,00,00 per annum were collected as non-occupancy charges. On the contrary, the property tax of the building was only ₹16,00,000 per annum, showing a stark difference between the money collected and spent.

From these two cases, it is clear that non-occupancy charges had become a tormenting tool instead of being a marginal and negligible mount. It was also evident that the excess amount collected was misused to pay the dues of other members who were defaulting.

Consequences of levying high non-occupancy charges

Charging an additional amount under pretence apart from the fixed 10% is illegal. If a society is caught overcharging, under the Consumer Protect Act, the RWA members can be prosecuted for negligence, inadequate service, harassment, and abuse of power by overcharging. The flat owner must submit relevant proofs and documents while taking legal action.

When a flat-owner fails to pay non-occupancy charges

If a flat-owner continuously fails to pay the non-occupancy charges, the committee can send them reminder notices and declare them a defaulter. Additionally, the committee can deny providing the no-dues certificate when the owner is looking to rent or sell the property.    

Flat-owners must know their rights and committee members should discharge their duties with honesty and integrity. The Indian Cooperative Society Acts were framed and brought into effect keeping in mind the welfare of all the residents. A person looking to buy a resale property should also check if the previous owner has any arrears, know the society rules and charges, and laws pertaining to housing societies.

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