The apartment law you must know

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When an apartment is built and it is eventually occupied, a few questions do the rounds within the new community. There are always common issues to be coordinated with the builder regarding teething troubles, maintenance, handover and several such issues.

Normally, a group of owners comes together to coordinate on behalf of the community. For a period, I was one of them in our large apartment located near Marathahalli in Bengaluru. Among the various challenges we faced, one of the toughest questions to answer was on registering the owner’s association.

Today, if a community is lucky, the builder registers the association. If that does not happen, the owners get together and do something about it themselves with the help of a lawyer. We spent years on this problem. Most lawyers in Bengaluru we approached recommend the registration of the owners association under the Karnataka Societies Act.

However, it turns out that the societies act is not the right law to register an apartment association. Section 3 of the societies act defines the various types of societies that can be registered under the act and none of them meet the definition of an apartment association.

We determined that the Karnataka Apartment Ownership Act is the correct law. In fact, our agreement for sale with builder and registered sale deed contained copious references to the Apartment Ownership Act. However, the registration process seemed so complex and convoluted that it seemed like a very daunting task.

As part of this process, I did a lot of research and reading and received inputs from several people who had looked into this issue themselves. What I learnt surprised and shocked me and those are briefly summarised in the rest of this article.

As stated earlier, the societies act is the wrong law for registering an association. Take the case of this apartment complex on Sarjapur road which is now in the midst of a legal battle with the builder.

The builder had the apartment association registered under the societies act. Subsequently, the residents discovered that the builder was carving out 20,000 sq. ft. from the original bounds of their property for a commercial venture. The matter is now in court where the builder now contended that the owner’s association was not qualified to fight the case since it was formed under the societies act and not the Karnataka Apartment Ownership Act (KAOA) as required.

It turns out that if the correct process as required by the law is followed, KAOA registration will flow smoothly. An apartment as defined in Karnataka is a property of a residential nature where the owner owns the apartment and holds a percentage share in the land and common areas and amenities. There are two laws that govern this process in Karnataka.

One is the Karnataka Ownership Flats Act (KOFA) and the other is the KAOA. KOFA regulates the process of promotion, construction, sale, management and transfer of the apartment. KAOA was written with the view to make apartments heritable, transferable and mortgageable and to address aspects related to management of the property.

 

In Karnataka, there are three types of apartment communities that can be formed. A promoter can float a company or cooperative society under KOFA. These are two options. Alternatively, the third option envisaged in KOFA is for the builder/promoter to form an association of owners under the KAOA. Forming a company is a pretty rare approach. In a cooperative society setup, the building, common area and land is vested with the cooperative society and the allottees of the flat are deemed as “tenants”.

Please note that the word tenant in this context has a more expansive legal meaning as compared to regular usage. The member has all rights to occupy his or her flat, but does not own an undivided share as is commonly understood since all common property is vested with the society. Naturally, this raises issues when securing a mortgage for an individual unit – how does a bank give mortgage for something you do not strictly own?

So the only solution is for all members to take loan from the same bank in which case the risk for the lender goes up substantially. It is to remedy this situation that the KAOA was passed. (Actually, Karnataka adapted Maharashtra’s laws. Maharashtra has been a pioneer of apartment laws in India).

Key features of KAOA

In India, the sale and purchase of immovable property is governed by the Transfer of Property act of 1882. The 1882 act does not cover the concept of an apartment along with its undivided share in land and common areas. So a fundamental step that KAOA does is that it equates the purchase of an apartment with its proportional undivided share as equivalent to an immovable property bought under the transfer of property act.

The purchaser is the absolute owner with a clear title to the apartment and its proportional undivided share.

How is the clear title ensured?

The KAOA requires the builder/promoter/owner of the apartment to execute a document known as the Deed of Declaration. The Deed of Declaration (DoD) is a document that describes the property, i.e., the building, all of its apartments, the common facilities such as lifts, generators, fire fighting equipment, pool, gym etc., along with the ownership scheme giving the percentage share of each apartment. Along with the DoD, copies of plan approvals from local authorities and bye-laws of the association of owners is to be registered.

Now, when individual apartment owners go to register their Deed of Apartment to complete their sale, the KAOA requires that the Deed of Apartment refers to the DoD (along with information regarding registration of the DoD, such as registration number, date, sub registrar’s office etc.) so that the ownership scheme is fully traceable and the title clear.

There are also special requirements on the Registrars and Sub-Registrars to maintain this information in an organised fashion. In addition to the Deed of Apartment, the purchasers also execute a Declaration known as Form–B where they agree to abide by the rules of the KAOA.

Once the apartments are sold and registered, the builder is to approach the Registrar of Cooperative Societies (identified as the competent authority by KAOA) with copies of the Registered DoD, bye-laws, Deeds of Apartment, and Form-B declarations to register the association.

If there are unsold apartments, the builder/promoter is allowed to represent those unsold apartments. This process completes the formation of the association. The bye-laws registered with the DoD become the by-laws of the association and everything is set for smooth operation.

Office bearers and duties

The KAOA also has additional provisions regarding duties of office bearers, process of voting, regarding charges and encumbrances against individual apartments, and even on steps to be taken in the event of destruction of the property – say by fire or earthquake.

For the local governments such as BBMP, there are additional hidden gems. The KAOA says that each apartment owner is liable to pay local taxes for his or her apartment and proportional undivided share. So that resolves the question of who pays property tax on the common areas. That is not to say the KAOA is perfect. It is a 40 year old law to which many improvements can be made. However, the key point is that a very logical framework already exists.

Reality

Unfortunately, the ground reality today is that very few builders do things the right way. Most apartments have associations registered under the societies act. Banks continue to give mortgages despite the fact that clear title is not passed on to the buyers due to the manner in which transactions are conducted. The registrars and sub-registrars continue to register any document that purports to be an apartment sale deed without paying heed to the requirements placed on them by the KAOA.

The government, as per their answers in the Karnataka information commission to an RTI request filed by a well known RTI activist C N Kumar was not even sure which department is responsible for a law such as the KOFA (and by extension, the KAOA). A copy of the RTI response is with Citizen Matters.

Urban Development Department order dated 08/03/2012 appointing BBMP and BDA officers Click here

 

Urban Development Department order dated 08/03/2012 appointing Sub-Registrars Click here

 

It turns out the Urban Development Department is. Could we hope that the state will begin to ensure adherence to the law, educate its citizens as well as builders and maybe even amend these acts soon to make them modern and more functional? Can buyers get together and force the builders to do things in the right way?

Apartment sale process including formation 

Step No.

Document

Comment

1

Agreement of Sale: Finalise an apartment purchase, pay an advance and sign an Agreement of Sale, which is to be registered under registration act of 1908.

Under KOFA 1972, section 3, subsection 2(h), and KOFA Rules 1975, section 5(d) the builder/promoter is obligated to state the “precise nature of the organization to be constituted of the persons who have taken or are to take the flats or apartments”.

2

Deed of Declaration: At some point, while construction is in progress and before a final deed of apartment is executed and registered; the builder/promoter is to register a document known as Deed of Declaration under registration act 1908.

The Deed of Declaration is to be provided in a format known as Form A, which is described in KAOA Rules 1974. The DoD will detail the extent of property, all the common areas, limited common areas and facilities, description of buildings and all apartments. It will also specify the percentage undivided ownership share for each apartment. Along with Form A, a copy of the by-laws of the association and a set of floor plans of the buildings are to be appended. It has to be certified by an architect that the plans are accurate as per what is approved by the local body and what has been built. All registration offices are obligated to keep a book called “Register of Declarations and Deeds of Apartments under KAOA 1972” and an Index thereto

3

Deed of Apartment: Conveyance of the apartment is done by executing a Deed of Apartment

Under section 12(a) of the KAOA, 1972, the Deed of Apartment is to include the book, page and date of executing the Deed of Declaration and the date and serial number of its registration.

4

Inform the competent authority: To finish the formation of the association, true copies of the Deed of Declaration, by-laws and Deeds of Apartment have to be filed in the office of the competent authority – identified by the act as the registrar of cooperative societies,

The KAOA rules require that true copies of all amendments to the DoD, by-laws etc. should also be filed in the office of the competent authority. A copy of a Deed of Apartment is to be filed within 30 days of registration.

5

Declaration under Form B: A declaration by the owner(s) of each apartment under Form B is also to be executed and submitted to the competent authority

The declaration under Form-B is a commitment by the owners(s) that they will comply with the KAOA, and that any person who purchases or inherits the apartment subsequently from them will also do so.

About Sanjay Vijayaraghavan 8 Articles
Sanjay is a mechanical engineer working for one of the city's MNC firms. He lives in BBMP ward 85 (Doddanekkundi).

25 Comments

  1. Dear Sanjay or other fellow citizens, I live in an apartment unit where I am facing water seepage issue due to faulty nanny trap underneath kitchen and bath of the unit from the above. The apartment was built 20 years ago and there are no statutory registrations made for registering apartment association as such. I am facing the brunt for owner’s (who stay’s above my unit) failure to rectify the matter by fixing it. In such situations, are there any regulations/ laws applicable wherein I could legally compel the other owner to fix the problem at his expense? I am facing problems for no fault of mine. Please advise.

  2. Dear all,
    The state of apartment law in Karnataka is very pathetic right now. The biggest problem is the non implementation of the law on the books and the second is the fact that the laws on the books are 40 years old and crying for improvement.

    The Urban Development Department is finally started on reviewing existing laws and amending it. I had the opportunity to give some input on this recently. I would strongly recommend that people (a) Write in to UDD – http://www.uddkar.gov.in/ContactUs and request that they move fast and help so many apartment owners struggling to run their communities.

    Please also log your comments on this blog site – http://praja.in/en/projects/4448/announcement/suggestions-udd-amendments-kaoa

    It helps us consolidate the issues.

  3. we are in a process of forming Adhoc committee to kick start this process. Any help from any experts would be greatly appreciated.

  4. Hello Sanjay,
    Thanks for details of the ACT. We are in a similar situation in our newly formed apartment. Builder has not completed the pending work still, so we wanted to take this opportunity to form the association. As mentioned, we also want to register under KAOA. We were told by the builder at the very end when 90% of flats were sold that he will not be getting Occupation certificate from BBMP. So will that be an issue to form the association under KAOA. As mentioned by many previous posts, most buyers do not know of nitty gritties in buying a house in bangalore. Can you provide some guidance, your experiences in forming association, we may not get full cooperation from builder, so like minded residents would have to take this task. Is there any way we could contact you for any help?
    Regards,
    Dr.Ramanujam Venugopalan

  5. Dear Sanjay (or anyone else), can you help me understand the correct authority that governs Office building associations? Is there a competent Registrar who looks after the affairs of Commercial Complex / office complex association in Bangalore? I am finding many discrepancies in our Managing Commitee and hence want to know who is the right authority to compliant. We also have adopted Bye-laws for the associations. What is the significance of these bye-laws and how to stop / amend them?
    Nitin

  6. Vinay, parking is not covered in any of these acts. The Chief Engineer’s identified are to be approached only for disputes under section 7 of KOFA which is specific to quality of construction and any defects.

    Other violations of the act will I imagine have to go to court.

    Mr.Gupta – An apartment under KAOA needs to have more than 4 units. I guess there is no bar to construction on 60×40 site in Bangalore as long as you can meet FAR and setback requirements. Of course, to do things illegally as is rampant in Bangalore, you need not post a question here!

  7. Dear All,
    We as group of friends would like to construct an apartment on 60×40 plot and each take one floor. We would like to know whether this is a feasible approach?
    Is there any constraint on the land size for constructing an apartment and getting the required authorities clearance?
    If anybody has done the same, please share your experiences.
    Thanks and Regards,
    Gupta

  8. Sorry, me again. I’m a little confused after reading the discussion – if there is any violation of the KOFA or KAOA act, are these the people to approach –
    Chief Engineer, BBMP ( Vigilance, Project Planning and Evaluation) for BBMP areas and Chief Engineer ( Engineer Member) BDA for BDA areas excluding BBMP areas have been appointed.

    If not who should be approached for any violations ofn the act?

  9. Dear All,

    Is parking in apartments also covered by the The Karnataka Apartment Ownership Act, 1972 ? if not, does anyone know whcih law it is covered under?

  10. 26 July(contd)>

    For more useful clues, especially to those who have, for own reason, no time or mind to strive thinking of or venturing to do any ‘home work’,here is some ‘fast food'(links – for inspiring a line of self-improving thoughts):

    >http://www.commonfloor.com/articles/bangalore-apartment-owners-association-123.html

    >>Responsibilities of a real estate developer

    KEY NOTE: Need to do so , to begin with, by those RWAs who have unwittingly or otherwise chosen to get diverted to a wrong ‘track’, mindless of the disastrous consequences that undoubtedly has in store. How long it is going to take to realise the folly, and, if feasible, to try and change over to a right track even at this LATE HOUR IS the one and only vexing question left to be diligently answered!

  11. @Ganesh Pai
    The information posted is prima facie too vague and sketchy, to expect any well meaning reply that could be of any help in this or other like cases.
    One fact is quite obvious. This is one of those innumerable instances where because of non-compliance with the mandates of the law by the promoter/seller, the buyers have come to grief, and been ‘left in limbo’.

    One can think of or suggest no real solution to remedy or salvage such situations. Except, perhaps, the State government, if could be successfully persuaded, can come out,in the larger public interest, with a suitably framed scheme(ideally speaking, by promulgating an Ordinance, and on a war footing) with the objective of ‘regularising’ all such past transactions; and stop anymore irregular / illegal transactions.

    It is startling to notice that the so naned ’welfare associations” still continue to be registered by the Registrar of Societies ;despite his, as repeatedly pointed out/urged in several quarters,having no inherent authority /competence, or powers whatsoever, to do so, under the Societies Registration Act, of which he is a creature.

    In this context, attention might be drawn to a tax case holding that,- “Resident welfare societies cannot be granted sec.12A registration”(link). The view the court as taken goes to adequately, though indirectly, support/reinforce the said indisputable legal position.

  12. As i understood (when we were registering our association in 2011), registrar of societies does not accept KAOA Act due to lack of ownership to registrars defined in the act. They only accept 1960 Act & bylaws which conforms with it) by putting Suffix of “Welfare”in the name to de-mark housing societies and other societies.

    Regards
    Ganesh

  13. Dear Mr. Kishalay, Sorry for the delayed response. My experience with various lawyers has not been good. We used a lawyer whose name I am very hesistant to recommend. Submitting your property to KAOA outside the process defined above is extremely cumbersome since every owner has to sign the deed of declaration. In our 500 odd owner apartment complex, we are painstakingly plodding through this. It also loses some of its meaning since much of the original intent is compromised. Along with some other people, we have been trying to find contacts in the government to correct this whole situation. We have met with bureaucrats and even the UDD minister, Shri Suresh Kumar. While all meeting are nice and feel good, actual progress has been limited. I feel what we need is to spread the word and have all impacted apartment owners in Bangalore push the government to rectify this situation. They have to put provisions in the law for (a) Currently existing apartments who are in limbi and (b) New apartments coming up. There ia also a need for buyer education so that the process and law is crystal clear to everybody. For a fraction of the amount the government spends on advertizing its “achievements”, this can be accomplished. I think individual apartment communities should push their MLA to rectify this situation. Concerted pressure will bring this issue to the front burner (or at least on a burner). I will send out an email if you want to continue this discussion.

  14. Dear Mr. Sanjay,

    Thanks a lot for sharing such wonderful information.

    We are a 10 year old apartment complex in Bangalore, registered to Karnataka Societies Registration Act, 1960.

    Is it possible for you to shed some
    light on the procedure if we want to register to KAOA? Obviously, there is no builder in the picture now, after 10 years. I guess the current owners have to execute the DoD themselves.

    You must have consulted many lawyers in you quest for the right procedure. We will really appreciate if you can mention the most competent one (hopefully the one you used to get your complex registered). If there is any issue in disclosing his name here, I would be greatful if you can send the contact to kishalay.haldar@gmail.com

    As you wished in your posting, we want to take the right step. For that we hope to get some help from you.

    With Best Regards,
    Kishalay

  15. Vswami sir, The original order for section 5 simply said – THe District Registrar of Companies – for Companies and Deputy Registrar of Co-op Societies of concerned district – for cooperative societies. That was vague because one was not sure whether apartment associations under KAOA would come under cooperative societies. It was subsequently amended and the amended notice is what is posted in the box. As you correctly point out, this still does not resolve the issue formation of a society or association. THe good news, I guess, for the optimistically inclined is that the government is stirring?

  16. 1. As made quite clear in the STATEMENT OF OBJECTS AND REASONS, purchaser enjoys ‘exclusive ownership of his Flat. Further, his rights and interests in Flat, same way as in apartment, are transferable and heritable. Thereby enables him to take loan by mortgaging his rights and interests.
    2. Re. property tax on apartment, one remembers, there are 2 ordinances. The first requires property tax payment by owner or occupier, on the apartment value inclusive of the undivided interest in common areas and facilities. The revised ordinance, issued later in pursuance of representations made, however, provides for an option for owners’ association, instead of owner, to pay tax separately for the common areas, etc. (e.g. swimming pool). For knowing more, one may have to refer those ordinances. Though, obviously there being no advantage, the second ordinance may not have been taken a serious note of and followed.
    This aspect may, however, assume significance/importance in cases where a final conveyance of property in an apartment building has, for any reason, remained to be effected in favour of a duly formed and registered ‘owners’ association’. For clinching clues, one may look up the Blog >Final Conveyance of Property in Apartment Building … – swamilook

  17. The 2 recent Orders since posted (see box alongside), issued in pursuance of the Gazette Notification tom-tom-med about,do not seem to suffer from any ‘vagueness’. Albeit, if read carefully, wprt the section/sub-section of the Flats Act specified therein,they are seen to be for very limited / different purposes. As such,they provide no answer or solution to the vexing problems faced in regard to ‘registration’ of a ‘Society’ for flats or ‘Association’ for apartments.
    I am open to correction should my above understanding be faulty in any respect.

  18. Please upload the files I sent. Part I of the order has been subsequently modified.

  19. The notification referred to by Mr. Kumar can be found in the Karnataka Gazette here, on page 1314: http://gazette.kar.nic.in/22-03-2012/Part-EOG-(Page-1305-1424).pdf

    There is still some vagueness in the notification. Officials are identified under section 5 of KOFA, 1972 for (a) Companies and (b) Co-operative societies. This raises 2 questions
    (a) How many apartments in Bangalore are registered as either companies or cooperative societies. Please nkep in mind that a society under the Societies act is NOT a cooperative society.
    and (b) What about apartments that are formed under KAOA. The KOFA has been written to regulate those apartments as well. Who will be the officer responsible under section 5 of KOFA for those?

  20. I have copies of the notifications. I can scan and upload them if someone can tell me how.

  21. The Urban Development Department has finally been identified as the department responsible.

    UDD in March 2012 following a High Court direction issued GO No UDD 466 MNY 2005 designating officers under Sec 5 and Sec 7 of the KOFA Act 1972.

    Under Sec 5 the Dy Registrar of Co-Op Societies, Bangalore Central for Bangalore Urban and Dy Registrar of Co-Op Societies, Bangalore Rural for Bangalore Rural have been designated.

    Under Sec 7, Chief Engineer, BBMP ( Vigilance, Project Planning and Evaluation) for BBMP areas and Chief Engineer ( Engineer Member) BDA for BDA areas excluding BBMP areas have been appointed.

    This is a big step forward.

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