India: Formation Of Flat Owner’s Association

The common maintenance charges of an apartment is borne proportionally by all the flat owners. An association has to be registered for this purpose. There are different types of Associations or Societies that may be formed under different acts.

1. Karnataka Apartment Ownership Act: This act deals exclusively with residential apartments. If an association is formed under this act, the law makes each apartment a transferable and heritable property with separate katha and specific undivided interest in land. All first apartment owners have to submit their apartments to this act by executing a deed of declaration which has to be registered. This will bind all subsequent apartment owners automatically. The disadvantage of the act is that it is often difficult gather all the flat owners at the same time to register the association. Registering separate deeds if declarations over time is time consuming. If the builder collects power of attorneys from all the owners at the time of registering the apartments, he can submit the entire property to this act after all the flats are sold.
2. The Societies Registration Act: This act deals with registering societies for educational, charitable and literary purposes. To form a flat owners society under this act can be effective for the limited purpose of managing the day to day affairs of maintenance. The act does not bind anybody who does not become a member. The advantages are that seven people are sufficient to form the society. The society may be formed for both residential and commercial buildings. A large number of such societies are formed in Bangalore.
3. The Ownership Flats Act and The Companies Act: A private limited company may be formed for the purposes of maintenance of a residential or commercial building. All owners may be issued shares and rules may be made governing the allotment and transfer of the shares. In Bombay, where the lands on which the buildings are built are owned by the company or co-operative society, this scheme is very powerful and effective. In Bangalore where undivided interest in land is sold routinely, this may be an adequate procedure, though not as powerful. Another reason why co-operative societies are not popular in Karnataka is because Co-operative societies may not have companies as its members.

Any type of association has to hold Annual General Body meetings and elect it office bearers. It also has to file audited balance sheet before the appropriate authorities every year. The problem of dealing with defaulting members are common to all types of associations. The recourse open to the association are to sue the defaulting member in a court of law, to publish his name in the newspaper or put it up in the notice board of the Association and to collect interest in case of delayed payment. Cutting off essential services like water and electricity may not be done without just an sufficient cause.