Introduction
The Maharashtra Apartment Ownership Act, 1970 (“the MAOA”) has been enacted to provide for the ownership of an individual apartment in a building and to make such apartment heritable and transferrable property. In the State of Maharashtra, three entities are possible for an association of the unit/flat owners in a building – a cooperative society, a company or a condominium. While the Maharashtra Flat Ownership Act deals with flats in a co-operative society or a company, the MAOA deals with apartments in a condominium, also popularly known as condos. The fundamental difference between the two is that while in the case of MOFA, the title to the land and building vests in the society/company and in the case of MAOA, all the apartment owners have a common undivided interest in the land and building.
Currently, several new projects in and around Mumbai have preferred a condominium structure since it does not involve the hassles associated with a society. Even across India condos are popular. In fact, in several places across India, one finds very few societies. Several Southern States have a practice where the builder conveys interest in land and apartment separately to the buyer. This is done under a condominium structure.
The MAOA applies only to property, the sole owner or all the owners of which submit the same to the provisions of the Act by duly executing and registering a Declaration in the prescribed format. However, no property shall be submitted to the provisions of MAOA, unless it is used for residence, office, practice of any profession or for carrying on any occupation, trade or business or for any other type of independent use. Section 10 of the MOFA expressly provides that it does not apply to property in which the apartment takers propose to submit the apartments to the MAOA. In such cases, a co-operative society or a company cannot be formed.
The owner of the land may submit such land to the provisions of MAOA with a condition that he shall grant a lease of such land to the apartment owners.
Important Definitions
The MAOA lays down certain important definitions.
Apartment
Apartment has been defined to mean a part of the property intended for any type of independent use, including one or more rooms or enclosed spaces located on one or more floors in a building, intended to be used for residence, office, profession, business, other type of independent use, etc., and with a direct exit to a public street, road or highway or to a common area leading to such street, road or highway.
Building has been defined to mean a building containing 5 or more apartments, or 2 or more buildings, each containing 2 or more apartments, with a total of 5 or more apartments for all such buildings, and comprising a part of the property.
Apartment Owner
An apartment owner has been defined to mean the person owning an apartment and an undivided interest in the common areas and facilities. This is one of the important features of a condo that the owner has an undivided interest in the common areas and the facilities. Common areas have been defined to mean:
(a) the land on which the building is located;
(b) the foundations, columns, girders, beams, support, main walls, roofs, halls, corridors, lobbies, stairs, stairways, fire-escapes and entrances and exits of the building;
(c) the basements, cellars, yards, gardens, parking areas and storage spaces ;
(d) the premises for the lodging of janitors or persons employed for the management of the property;
(e) installations of central services, such as power, light, gas, hot and cold water, heating, refrigeration, air conditioning and incinerating;
(f) the elevators, tanks, pumps, motors, fans, compressors, ducts and in general all apparatus and installations existing for common use;
(g) such community and commercial facilities as may be provided for in the Declaration; and
(h) all other parts of the property necessary or convenient to its existence, maintenance and safety, or normally in common use; Thus, the apartment owners are the legal and beneficial owners of their individual flats under the MAOA whilst under a society structure, the flat owners only own shares of the society which entitle them to occupancy rights over the flat.
Thus, the flat is legally owned by the society but beneficially occupied by the flat owner. Although in essence the effect is the same, in Law, there is a difference between the two structures.
Association of Apartment Owners
This is an association of the owners of all the apartments acting as a group in accordance with the bye-laws and Declaration. At least 5 apartments are required to form an association as compared to 10 members to form a society under MOFA.
The Declaration must be in Form A and shall be signed by the apartment owner in the presence of a Magistrate and shall be filed with the Registrar of Co-operative Societies within 30 days from the date of its execution.
The Declaration must contain various clauses, including the following important ones:
(a) Description of the common areas and facilities;
(b) Description of the limited common areas and facilities, if any, stating to which apartments their use is reserved;
(c) Value of the property and of each apartment, and the percentage of undivided interest in the common areas and facilities appertaining to each apartment and its owner for all purposes, including voting; and a statement that the apartment and such percentage of undivided interest are not encumbered in any manner whatsoever on the date of the Declaration;
(d) Statement of the purposes for which the building and each of the apartment are intended and restricted as to use;
(e) Provision as to the percentage of votes by the apartment owners which shall be determinative of whether to rebuild, repair, restore or sell the property in the event of damage or distinction of all or part of the property.
A copy of this Declaration needs to be fled with the Registrar of Co-operative Societies. The association would elect from among the apartment owners a Board of Managers. Subject to the bye-laws of the association, the Board may engage the services of a Secretary, a Manager or Managing Agent.
One difference between this association and a society is that usually the bye-laws of the association do not provide that a transfer of an apartment requires its permission. The bye-laws of a society require its prior permission before any transfer. This coupled with the transfer fees/donations, has been the subject-matter of perennial disputes in the case of cooperative societies. Hence, an association scores over a society in this respect.
Apartment Ownership
Each apartment owner is entitled to the exclusive ownership and possession of his Apartment. Each apartment owner shall execute a Deed of Apartment in relation to his apartment. Deeds of apartments shall include the followings particulars namely:-
(a) Description of the land, including the libber, page and date of executing the Declaration, the date and serial number of its registration and the date and other reference, if any, of its filing with the Registrar of Cooperative Societies.
(b) The apartment number of the apartment.
(c) Use for which the apartment is intended and restrictions on its use, if any.
(d) The percentage of undivided interest appertaining to the apartment in the common areas and facilities. A copy of every Deed of Apartment shall be filed with the Registrar of Co-operative Societies.
The first as well as subsequent transfers of apartments by owners must be by way of a Deed of Apartment only.
Common Areas and Facilities
Each apartment owner is entitled to an undivided interest in the common areas and facilities in the percentage expressed in the declaration. Such percentage shall be computed by taking as a basis the value of the apartment in relation to the value of the property; and such percentage shall reflect the limited common areas and facilities. This is one of the main distinguishing feature of a condominium as compared to a society. In a society, it is the society which has undivided interest over the common areas. The flat occupants only have a right to use them whereas under a condo structure, they have an undivided right over these areas.
The interest of each owner in the common areas and facilities is undivided and no one can claim a partition or division of the same.
However, each apartment and its percentage of un-divided interest in the common areas and facilities appurtenant to such apartment shall be deemed to be separate property for the purpose of assessment to property tax. Neither the building, the property nor any of the common areas and facilities shall be deemed to be separate property for the purposes of the levy of such property tax.
Common Profits and Expenses
The common profits of the property after meeting the common expenses must be distributed among the apartment owners according to their percentage undivided interest in the common area and facilities. Common expenses has been defined to mean:
(a) all sums lawfully assessed against the apartment owners by the Association of Apartment Owners;
(b) expenses of administration, maintenance, repair or replacement of the common areas and facilities ;
(c) expenses agreed upon as common expenses by the Association of Apartment Owners ;
(d) expenses declared as common expenses by the provision of the MAOA, or by the Declaration or the bye–laws.
Encumberances against Apartments
After recording the Declaration, no encumbrance can arise or be effective against the property. During such period encumbrances may be created only against each apartment and the percentage of undivided interest in the common areas and facilities appurtenant to such apartment. However, no apartment and percentage of undivided interest shall be partitioned or sub-divided in interest.
Even if some labour has been performed or material furnished that shall not be the basis for a charge or any encumbrance under the provisions of the Transfer of Property Act, 1882, against the apartment of any other property or any other apartment owner not expressly consenting to or requesting the same, except that such express consent shall be deemed to be given by the owner of any apartment in the case of emergency repairs.
In the event of a charge or any encumbrance against two or more apartments becoming effective, the apartment owners of the separate apartments may remove their apartments and the percentage of undivided interest in the common areas and facilities appurtenant to each apartments from the charge or encumbrance by payment of the fractional or proportional amounts attributable to each of the apartments affected. Such individual payment shall be computed by reference to the percentages appearing in the Declaration.
Damage/Destruction of Property
If within 60 days of the date of damage or destruction to all or part of the property, it is not determined by the Association of Apartment Owners to repair, reconstruct or rebuild, then:
(a) the property shall be deemed to be owned in common by the apartment owners;
(b) the undivided interest in the property owned in common which shall appertain to each apartment owner shall be the percentage of the undivided interest previously owned by such owner in the common areas and facilities;
(c) any encumbrances affecting any of the apartments shall be deemed to be transferred in accordance with the existing priority to the percentage of the undivided interest of the apartment owner in the property;
(d) the property shall be subject to an action for partition at the suit of any apartment owner, in which event the net proceeds of sale together with the net proceeds of the insurance on the property, if any, shall be considered as one fund and shall be divided among all the apartment owners in percentage after first paying out, all the respective shares of the apartment owners to the extent sufficient for the purpose and all charges on the undivided interest in the property owned by each apartment owner.
Conclusion
The MAOA is a noble concept since more and more flat owners are feeling that the co-operative society is actually a noncooperative entity. The time has come for an increasing number of buildings to consider the MAOA as a worthy alternative to the MOFA.
