Charges of society maintenance that prospective owners should be aware of

Charges of society maintenance that prospective owners should be aware of

Buyers should research the maintenance costs that will be necessary for the property in the future before buying a home because they may be significant.

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Owners of real estate in housing societies are required to pay maintenance fees on a regular basis. Saving money here can help you amass a sizeable sum over time. The monthly expense for maintenance fees can have a considerable impact on your personal finances.

What exactly are maintenance fees and what do they cover?

Even if flat maintenance fees differ, the Cooperative Housing Societies Act specifies the following charges:

               

Property taxes Water charges Common electricity charges Contribution to the repair and maintenance fund Expenses on repair and maintenance of the lift of the society, including Charges for running the lift Contribution to the sinking fund Service charges Car parking charges Non-occupancy charges Insurance charges Leases rent Non-agriculture tax Education and training fund Election fund Any other charges

According to, partner at Nisus Finance, it may also include salaries for office staff, lift attendants, watchmen, etc., society office property tax, electricity, water charges, printing, stationery, and postage, travelling expenses for staff members, and subscriptions to education funds.

How do maintenance charges affect your finances?

According to Col GK Grover, professor emeritus at the School of Real Estate - RICS School of Built Environment, Amity University, society maintenance charges regulations have a direct impact on the life cycle cost of a property.

"While end users may not have the same level of understanding of the impact of maintenance charges as investors, particularly in the case of commercial property. Large and multinational corporations are aware of its importance, therefore when it comes to commercial buildings, maintenance costs have a significant bearing on the choice to purchase. According to Grover, the maintenance fees in the majority of commercial property instances are calculated using actual expenses plus an additional 2%. Commercial homes have higher maintenance costs than residential ones because the former would include features like central air conditioning and bigger common areas.

When it comes to apartment buyers, neither the developers nor many people have a good understanding of how maintenance fees affect apartments. Experts note out that in projects that are still in the planning stages, the maintenance fees may not be originally asked or explicitly covered. The buyer of a ready-to-move-in property, on the other hand, is made aware of all the costs because they must be paid ahead, including society maintenance fees and various deposits. This influences the buyer's choice.

GST applied to maintenance fees According to regulations from the Finance Ministry dated July 22, 2019, flat owners must also pay GST at an 18% rate if their monthly payment to the residents' welfare association (RWA) exceeds Rs 7,500. According to the regulations, RWAs must collect the GST on members' monthly subscription/contributions if they are more than Rs 7,500 per flat each month and the RWA's annual turnover from the sale of goods and services exceeds Rs 20 lakhs.

RERA's regulation of maintenance charges According to Section (4) (d) of the Real Estate (Development and Regulation) Act, 2016, the developer must provide and maintain the necessary services at reasonable costs up to the association of allottee’s takes over project maintenance.

The RERA's Section 6 further states that: Every allottee who has entered into an agreement for sale to purchase an apartment, plot, or building under Section 13 shall be responsible for making all necessary payments in the manner within the time as specified in the said agreement for sale & shall pay at the proper place and time, the share of the registration fees, municipal taxes, electricity and water charges, maintenance fees, ground rent, and other charges.

The developer is required to pay all maintenance costs up until the day he turns over possession to the buyers, according to the RERA's maintenance charges law.

"Thereafter, he must make sure the building is leak-free for five years after it is turned over to the society. As part of the selling agreement, builders typically want a one- or two-year maintenance fee as an advance payment, and they are required to disclose to buyers any expenditure that were anticipated at the time of the sale.

Criteria for charging maintenance Type of maintenance charge Expenses on repair and maintenance of the building Service charges (housekeeping, security, electricity for common areas, equipment, etc.)

Expenses on repair and maintenance of elevators Sinking fund Non-occupancy charges Parking charges Property tax and water charges

Applicability 0.75% per annum of the construction cost of each flat Equally divided among the flats Equally divided among the flats Minimum of 0.25% per annum of the construction cost of each flat For flats which are rented, calculated at 10% of service charges By number of parking slots of each member Actual consumption of each flat, or number of water inlets

Maintenance charges cannot be an income for the builder The builder is unable to transfer revenues or maintenance fees collected from allottee’s to his company's account because they do not in any way constitute his income. The reasoning behind it is that a builder can only serve as a facilitator for a finite period of time, and the residents' welfare organization is responsible for maintaining the apartment and its grounds (RWA).

Depositing maintenance charges into a separate bank account is recommended.

The developer must open a different bank account so that homebuyers' contributions can be deposited there.

Treatment of accumulated interest A lump sum payment would undoubtedly generate some interest. The builder is not permitted to utilize this money for personal expenses. The same account will continue to receive interest payments.

CA's job Profile The money has been spent exclusively for the intended purpose, according to a chartered accountant's certification.

Costs associated with postponed services Now imagine if the developer simply gave the buyer possession of the apartment without making arrangements for an electricity hookup. The Madhya Pradesh RERA guidelines state that in these circumstances, even if the builder claims he will pay the difference between the standard rate for a domestic connection and the rate levied by the state electricity board, those costs cannot be deducted from the separate account used to deposit the maintenance fees. It ought to be funded by the builder's own assets.

Who owns the money is in the separate account?

The builder is required to give the RWA the balance in the bank account, along with information on income and expenses that has been confirmed by a CA, whenever the maintenance is turned over to the RWA.

Are maintenance charges refundable?

While common area maintenance (CAM) fees are required to keep the property in excellent condition, developers may come up with strategies in the event of unanticipated problems.

For instance, statistics indicated that developers were discussing CAM fees with their occupiers when COVID-19 first entered the commercial real estate market. Contract renegotiation became crucial in the commercial market.

In extreme circumstances, maintenance fee waivers may be implemented for residential projects for a predetermined amount of time. This waiver was implemented by numerous housing societies during the Corona virus pandemic.

Most recent information on maintenance charges

Without an OC: NCDRC, builders cannot compel residents to pay maintenance fees.

4 February 2022: According to the National Consumer Disputes Redressal Commission, builders cannot request maintenance fees for housing projects for which they do not yet have an occupancy certificate.

According to a recent decision by the apex consumer body, homeowners who were compelled to take possession of their properties in delayed housing projects without receiving an OC from the relevant civic authority cannot be forced to pay monthly maintenance fees.

It is true that the complainants have physically taken ownership of their separate units, which is relevant to the discussion of maintenance fees. It makes sense that there would be a cost associated with maintaining some popular services. The Occupancy Certificate has not yet been received, which is another reality. It indicates that the project is not yet finished and that not all of the promised services are being delivered. No maintenance fee should be assessed prior to receiving the occupancy certificate, the NCDRC said in response to a petition by a group of 15 Bangalore homebuyers.

Housing societies may assess maintenance fees based on the size of the flat: Consumer Commission of Telangana 22 January 2021 According to the Telangana State Consumer Disputes Redressal Commission, housing societies have the ability to demand maintenance fees based on the size of the apartment. According to the Commission, owners of larger flats have no reason to object if a legally elected body like the RWA (residents' welfare association) decides to collect maintenance fees based on the plinth area of apartments rather than charging the same amount to all residents regardless of the size of the flat.

Homeowners in housing societies must pay maintenance fees each month to cover the upkeep of communal areas inside the development.

When ruling on an appeal brought by India Bulls Centrum Owners Welfare Cooperative Society, which manages a gated community near lower Tank Bund in Hyderabad, the Commission overturned a prior decision of a district forum. The 154 homes in the society range in size from 1,281 square feet to 3,270 square feet.

Residents complained to the district forum in 2018 under Section 12 of the Consumer Protection Act of 1986, asking for a consistent fee for all flats despite the fact that the majority of the housing society's members preferred paying fees on a per-square-foot basis. The district forum had ruled in the applicants' favour and instructed India Bulls Centrum Owners Welfare Cooperative Society to levy the same fees from every flat member, regardless of size. The association then petitioned the state commission.

The state panel, presided over by President Justice MSK Jaiswal & member Meena Ramanathan, stated that larger apartments demand a higher proportion of the consumption of communal resources, such as water, etc. because they can accommodate more people. It was unjust to compel inhabitants of smaller apartments to pay maintenance fees on par with those of owners of larger flats because smaller flats will have fewer residents and a lesser share of common amenities, it claimed.

The bench did clarify, however, that because the group was governed by residents of the same unit, the majority ruling would be upheld. The district commission stated in its order from 2018 that the general body could not enact arbitrary and irrational measures simply because it had a majority.

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