Owners Association

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Investment option for Apartment Owners Association

Thursday, July 29th, 2010

Apartment owners’ associations were put into effect to help neighborhoods maintain a look of uniformity and keep property values at their highest possible levels. The associations generally collect monthly dues in an amount barely sufficient to pay for common area maintenance and other expense. Traditionally, investment strategy was simple as interest rates were good and outflow in the form of expenses were manageable. Today, an Apartment owners association or RWA has numerous investment options to choose from, depending on its risk profile and expectation of returns.

Types of Investment Options

In the last few years, the money management has been challenging because of diverse trends in income and expenditure. Today choosing a best investment plan is difficult because there are so many investment options available. Here are some popular investment options for Apartment Owners Association.

Fixed Deposit: This is considered to be a safe investment because all banks operated under the guidelines of Reserve Bank of India. The ideal investment time for bank Fixed Deposit (FDs) is 6 to 12 months as normally interest on bank less than 6 months bank FDs is likely to be lower than money market fund returns.

Mutual Funds: Mutual Fund is a type of collective investment method by which many people pool their money in a fund and invest in various securities like stock, bonds or cash investments. Depending on the objective of the funds like long term growth and low risk factor or high income growth with high risk factor or low growth rate and stability of principal, fund manager invests in respective fields on behalf of shareholders.

Bonds: A bond issuer may be the government or corporate bodies. While corporate bonds typically offer greater returns, they also represent higher risk. Those with low risk appetites should opt for government bonds, which offer assured returns and regular income.

Monthly Income Plans (MIPs): MIPs are suitable for conservative investors who want to earn marginally better returns than a debt-only portfolio. MIPs are launched with the objective of giving a monthly income to investors, but the periodicity depends upon the option chosen by the investor. These are generally monthly, quarterly, half-yearly and annual options. The associations need to bear in mind the fact that MIPs carry an element of risk. The best thing to do would be to opt for monthly or quarterly dividend payout, depending on fund needs. A growth option is also available, where the investors do not receive regular dividends, but gains in the form of capital appreciation. The payout will be in the form of dividend and hence it is tax free in the hands of investors. Still, it offers a better tax advantage for the investors.

Fixed Maturity Plans: Fixed Maturity Plans (FMPs) are a common form of debt investment offered by mutual funds. As the name suggests, these come with a fixed tenure and are a good alternative for short-term and medium-term needs. Unlike MIPs, fixed maturity plans don’t have any exposure to stock market and hence don’t carry any risk.

An Association or RWA can hire the services of a professional investment manager to organize their investments and update the portfolio. Today choosing a best investment plan is difficult because there are so many investment options available. Besides Banks, companies too mobilize deposits and offer higher interest than a bank deposits. To meet the short-term needs, experts advise investors or RWA to invest in short-term debt funds to an extent of 10% of their portfolio. Having a diversified asset portfolio is always advisable for an association or investors.

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Tags: apartment communities, Apartment Maintenance, apartment owners association, Association, Bonds, choosing a best investment plan, Fixed Deposit, Fixed Maturity Plans, investment manager, Investment option, Investment option for Association, Investment option for RWA, Monthly Income Plans, Mutual Funds
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Guide for Registering Khata in Bangalore

Monday, July 12th, 2010

Khata is important when you apply for any license of building or for trade, applying for loan from any banks or financial institution. Khata is an account which consist all the details of property like name of owner, size of buildings, location of property and all other details that helps to file property tax. Following is guide for registering Khata.

Application for Khata: Get a Khata application form (costs Rs. 10) plus copies of 5 documents (betterment charges receipt, Receipt of latest Property Tax paid, building sanction letters, title certificate, sketch of layout). It is available either online or at any BBMP office.

Application for Encumbrance certificate (EC): Get an EC application (Form-22) available free of cost at sub-registrar office. It should be for a period of at least a year. The cost of EC is Rs. 35 for one year. You will need to go back after a day or two to collect the EC. While applying for EC, one has to carry copy of sales deed.

Obtain Notarized copy of documents: Get Notarized of the following Sale deed, Form II (if you have), Possession Certificate (if you have), GPA (if used), and fill up the form - green and pink.

Submit the Application: Tag the application to the notarized documents, EC, latest property tax receipt, plan of the flat along with the common documents and submit to the local ARO Office. Get the pink acknowledgement with submission number, stamped and signed by respective officer.

Follow up: Go back after 15 days to check the status. Keep doing this till you get the demand note. Demand note indicates the amount you need to pay as Khata registration fee.

Assessment of Property: Once you submit the Khata application, the BBMP Revenue In-charge and Assistant Revenue Officer personally visits the property to assess the property. After the property is assessed BBMP formally communicates this mentioning the property dimensions (in sq feet), its value as per BBMP assessment and the tax liability thereon.

Pay registration fee: Submit the DDs as per the demand note to ARO Office and get a stamped acknowledgement. Once you get acknowledgement, it means the process has begun. The administration fee or demand note amount is two per cent on the stamp paper value. Most people confuse this to be two per cent of the property value mentioned in the sale deed. The demand note is issued in batches. So do co-ordinate with others in your building whose names are in the demand note to get all the DDs.

Follow up: Go back after 15 days to check the status.

Khata notification: Check the notification to see that your name is spelt correctly and other information like area of flat, car park, and so on are correct. Take the Khata notification to the ARO office with an application requesting issue of Khata certificate (pay Rs. 25) and Khata extract (pay Rs. 100).

Khata Registration: Once you pay the Khata Registration fee, in about 1-2 weeks, one receives the notice for paying the pending property tax. Without this the Khata Extract will not be issued in your name. But if you have reached this point it means Khata has been technically registered on your name.

Follow up is important for successfully registering your Khata and getting your Khata Certificate. In case any BBMP official demands money apart from the Khata registration fee and cost of application form, you can lodge a complaint with the concerned Revenue Officer. Do not involve middle men for Khata registration. Approach senior BBMP officials at the zonal level if you counter any problems.

If you don’t get any response from BBMP after 2-3 months, file “Right to Information (RTI) application” to seek information on status of Khata registration. There is no prescribed form for application seeking information. However, the application should have name and complete postal address of the applicant. The application can be made on plain paper. The applicant is not required to give any reason for seeking information. In case of rejection of your application, applicant would be informed the reasons for rejection.

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Checklist for Handover from Builder to Owners Association

Friday, June 18th, 2010

Each apartment complex has its own apartment owners association for maintenance of apartment and its amenities. But before formation of apartment owners association, it is duty of builder to maintain the apartment and its amenities. Most developers provide a corpus fund for maintenance of apartment and its amenities. The maintenance will be carried out by the Builders till the formation of Apartment Owners Association. After completion of project and formation of apartment owners association, builder need to handover left over money, audited accounts of the maintenance fund and interest earned and builder has to handover apartment and its amenities to apartment owners association.

Checklist for Handover from builder

Apartment owners association need to get documents and audited accounts from builder during handover of apartment. Following are list of items builder has to handover apartment owners association during handover of apartment and its amenities.

Proof of approved floor plans: Builder has to handover documents and proof of approved floor plans to apartment owners association during handover of apartment and its amenities.

Copy of Building plan and approval plan: All building plans need to be approved by the local authority. Builder has to handover copy of building plan and approval plan to association to prove the apartment and all its amenities are constructed as per plan approved by concerned authority.

NOC from local authority: No objection Certificate or NOC is issued only to apartment or building that does not object to the covenant of the certificate. Builder has to handover NOC from pollution board, electricity, water and fire department needed to apartment owners association.

Completion certificate (CC): An apartment or building cannot be occupied without completion certificate. Issuing of Completion Certificate will ensure that the owner has constructed the building as per approved plan. Builder has to handover completion certificate to association.

Transfer utility connection: It is duty of builder to transfer utility connection to association name during handover of apartment and its amenities. In case builder fails to transfer utility connection, builder has to give NOC to apartment owners association for transferring utility connections such as electricity, water connection to association.

Handover of documents: Handover of documents such as original registration documents, parental documents, drawings, concerned authority approvals etc. to the association.

Electing Managing Committee for an Apartment Complex

Thursday, April 29th, 2010

Managing Committee of an apartment complex maintains common areas, amenities and attends complaints from apartment owners or residents of apartment complex. The Management committee is typically composed of a President, a Vice President, a Secretary, a Treasurer (together known as the Executive Committee) and 8 other members. Management Committee represents apartment owners association before all official and non-official bodies concerning building and other member’s rights and interests.

Formation of Apartment owners association

Before electing Managing Committee, an association of apartment owners should be formed. An apartment owners association in any state may be registered under - the Societies Registration Act. Apartment owners association may or may not be registered but the registered association can enjoy all the legal benefits. Registered association can sue or defend any legal action against the association on behalf of the association.

An apartment owners association can be formed and registered with minimum seven members and later more members can be added to association. All persons who have signed the application for registration of association shall be deemed to be the original members. Registration of apartment owners association can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).The procedure varies from state to state. However generally the application should be submitted together with Bye-laws and Memorandum of association, declaration by the members of association and prescribed registration fee.

It is mandatory for all owners of apartment to become a member of association. On becoming member of association, each apartment owners shall receive a copy of bye law of association. If apartment owner is a firm or company, membership of association shall stand in name of firm or company and person authorized by firm or company shall be entitled to vote and attend meeting on behalf of company. In case of Joint ownership, the membership of association shall stand in joint names but the person whose name stands first in sale deed shall alone be entitled to vote.

Electing Managing Committee of association

First General Meeting of members elects Managing Committee of association. Only one member from a family can be a member of the Managing Committee and no Office Bearer of the Managing Committee can continue to be an office bearer of the Managing Committee for more than five terms with not more than two terms consecutively. Elections of all the Members of the Managing Committee shall be held once in two years. The meeting of Managing Committee meets at least once in 30 days at Office of Association. Special Meetings of Managing Committee shall also be called on written request of at least 50% of members of association stating clearly the purpose of the meeting.

Procedure for election of member of the Managing Committee

The first General Meeting of members of apartment owners association elects Managing Committee typically composed of a President, a Vice President, a Secretary, a Treasurer (together known as the Executive Committee) and 8 other members. Elections of all the Members of the Managing Committee shall be held once in two years. The term of office will commence from Annual General Meeting date till the next Management Committee takes charge. Following are the procedure for election of member of the Managing Committee.

Appointment of Election Officer: The Election Officer or Returning Officer would be elected in the Annual General Meeting one year before the Managing Committee gets dissolved. The election officer shall have the powers and responsibility to conduct the elections.

Publication of list of members: It is duty of election officer to prepare list of members in Association and publication of list of members on the notice board in the registered office of the Association.

Nomination from members: The Election Officer invites nomination for Managing Committee from members of association. If an association member is in arrears of maintenance or contribution to any common expense he/she shall not be eligible to contest the election.

Scrutiny of Nominees: After receiving nomination from members of association, all nominations received are scrutinized and shall be placed in a sealed envelope and handover to the Election Officer by Secretary.

Election Program: Not less than 90 days before expiry of the term of the existing Managing Committee the said Committee shall prepare election program. The Election Officer will draw program accordingly so that his report including election results can be placed before the Annual General Meeting. The Election program shall formally be notified by the Election Officer.

Date of voting: Date, time and place for voting etc shall formally be notified by the Election Officer. Voting shall be by raising of hands or by secret ballot as the case may be. The Election Officer will draw program accordingly so that his report including election results can be placed before the Annual General Meeting.

Handover of Office and accounts: The date of voting shall synchronize with the date of the Annual General Meeting or be within a week after the elections. The Election Officer would after the elections invite the elected members and President of the Managing Committee to take office. The outgoing Managing Committee would have the responsibility to complete all accounting procedures and finalize the accounts within the date of remission of office. He would also get all the elected members of the Managing Committee including the President to sign a Code of Conduct which would guide their actions during their term.

The outgoing Managing Committee would have the responsibility to get the accounts audited within the next three months after remitting of office. If after two years of the term of the Managing Committee the new committee is not elected, the Board of Trustees would create a Care Taker Committee (CTC). The CTC would not have any financial decision making capacity other than carrying out routine expenditure.

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Formation of Apartment Owners Association in Hyderabad

Saturday, March 6th, 2010

Hyderabad is the most populous city of the South Indian state of Andhra Pradesh. The city is regarded as a blend of traditionality with modernity.The city is administered by a nagar nigam called Greater Hyderabad Municipal Corporation (GHMC). The apartment owners in India can voluntarily form an apartment owners association for the maintenance of apartment and its amenities. The association may or may not be registered. The registered association can enjoy all the legal benefits.

Apartment owners association

Apartment owners association plays vital role in maintaining apartment and its amenities. Each apartment complex has its own apartment owners association. Today apartment is a buzz word. An apartment is residential unit or place with basic amenities such as lift, laundry, security, car parking, Gym, playground, house keeping etc. In an apartment, there are common area that is not owned by any one person, but serves a common, useful purpose for a group of owners or residents. Common maintenance charge has to be meet proportionately by all flat owners. The main objective of formation of apartment owners association is to collect maintenance charge and work for welfare of apartment owners. The association may or may not be registered. The registered association can enjoy all the legal benefits.

Act for Registration of Apartment Owners Association

Societies Registration Act 1860: An apartment owners association in any state may be registered under - the Societies Registration Act 1860. Societies Registration Act is a Central Act. Societies Registration Act was passed in 1860, though the Act is still in force, it has been specifically repealed in many States and those States have their own Acts.

A.P.Societies Registration Act 2001: Andhra Pradesh Societies Registration Act , 2001 extends to the whole of the state of Andhra Pradesh. Any seven or more persons forming a society which has for its object the promotion of art, fine art, charity,crafts, religion, sports (excluding games of chance), literature, culture, science , political education,philosophy or diffusion of any knowledge or any public purpose may be registered under this Act. Any apartment owners association in Hyderabad or societies situated in Andhra Pradesh can be registered under this Act.

Formation of Apartment Owners Association

An apartment owners association may or may not be registered. The registered association can sue or defend any legal action against the association on behalf of the association. The registered association can enjoy all the legal benefits. Any seven or more persons associated for apartment owners association can register a society under A.P.Societies Registration Act 2001 by subscribing their names to memorandum of association.

Every owner of the apartment complex is a member of the Association. To register apartment owners association, enclose the Bye-laws (rules and regulations) of association and a memorandum with following details: desired name of the Association, aims and objectives of the association, and who in the association will be authorized to correspond with the Registrar of Societies (typically the President of the Association). All applicants need to sign on the application, along with a witness’ signature.

If the memorandum and bye-laws are in accordance with the legal requirements, then the same can be registered. The memorandum and bye-laws have to be printed or typewritten and have to be signed by the members. Registration of apartment owners association can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies).The procedure varies from state to state. However generally the application should be submitted together with Bye-laws and Memorandum of association, declaration by the members of association and prescribed registration fee.

Roles in association

General body or Member of Association: All apartment owners in an apartment complex is memmber of association and form a general body. The general body can alter, amend or add the bye-laws, with the approval and consent of at least 13 members voting in general body. All members of the association are bound by the bye-laws.

Management Committee: General body elects members by and from general body as Management committee.The Management committee is typically composed of a President, a Vice President, a Secretary, a Treasurer (together known as the Executive Committee) and 8 other members. The period of office of the elected members is typically 12 months.Management committee represents association before all official and non-official bodies concerning building and other member’s rights and interests.

Associate Members: The Associate members are residents or persons, other than the owner, who is wholly residing, occupying or otherwise in lawful possession of any apartment.The Associate member pays maintenance charges to use common facilities, but does not have right to vote, unless authorized by the owner in writing.

Any apartment owners association in Hyderabad or societies situated in Andhra Pradesh can be registered under A.P.Societies Registration Act 2001. A member of association has right to vote and attend all General Body meeting. All members of the association are bound by the bye-laws of association. The work of the Management committee is reviewed by the General Body or member of Association at the annual general body meeting or any other meeting. Managing Committee can organize social, cultural events, recreational facilities for the resident. Join hand with any other association for common and mutual benefits. It is the duty of managing committee to keep in custody of all original documents connected to the land and building, licenses issued by any authorities relating to apartment complex.

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Handover from builder and Corpus fund for Apartment maintenance

Friday, February 5th, 2010

The apartment owners association plays vital role in maintaining apartment and its amenities. But before the formation of apartment owners association, it is duty of builder to maintain the apartment and its amenities. Most developers provide a corpus fund for maintenance of apartment and its amenities. The builder collects maintenance fund from each buyer which will not be shown in basic sales price of an apartment. The maintenance fund collected from each apartment owners is deposited as corpus fund.

Corpus Fund for apartment maintenance

Corpus fund is also known as maintenance fund. The term “Corpus” literally means main part or organ of body. It is also known as capital of organization. Normally corpus fund or maintenance fund denotes a permanent fund kept for the basic expenditure needed for survival of organization. Corpus fund is generally not allowed to be utilized for the attainment of the purpose but interest or dividend on such fund can be utilized.

An amount of say for example Rs 1.5 lakhs for 2 years will be collected from each Apartment buyer as Building Corpus Fund and the interest earned on this Fund will be utilized for payments to the Facilities Management company. Many mid size builders collect fund to manage the maintenance fund till the society is formed. The Builder shall transfer the corpus fund to the Association after its formation.

Handover from builder

The builder completes project within 24 moths or 2 yrs from the date of booking or allotment of apartment. The buyer pays the apartment price in installment depending on the progress of project. When the contractual obligations of the builder have been completed, buyer will receive a notice of completion and a final payment claim. In case possession of the flat is not offered to the Buyer within a period, the Buyer shall be entitled to receive compensation. In case the Buyer fails to clear his account and take possession of the apartment, the Buyer shall be liable to pay holding charges.

Before handover of the flat, builder has to get completion certificate and No objection certificate from concerned department. The certificate is issued by the municipality only if the project complies with the approved plan. A completion certificate is necessary to register your house, get utility connections and even resell the flat. However, while handing over the possession of the apartment, complete list of fitting & fixture shall be handed over to the Buyer. Once payment has been made the builder will give the client possession together with keys and warranties.

Documents required for handover from builder

Following are important list of documents required for handover from builder to Apartment Owners Association

Copy of Building plan and approval plan
NOC from pollution board, electricity, water and fire department
Completion certificate
Proof of approved floor plans
Transfer utility connection (electricity, water connection from builder to apartment owners association)
Handover of Office room, departmental stores, function hall etc. to the association.
Handover of original registration documents, parental documents, drawings, CMDA/BBMP or concerned authority approvals etc. to the association.

Apartment owners association

The maintenance will be carried out by the Builders till the formation of Apartment Owners Association. Apartment owner’s association is voluntary association of apartment owners residing in apartment. All the owners of apartment complex are members of the association forming general body. General body elects members by and from general body as Management committee. Management committee represents association before all official and non-official bodies concerning building and other member’s rights and interests.

In many cases, builder keeps all income generating areas with themselves though the flat owners have paid for these areas. The builder has to handover the corpus fund and all common facilities to apartment owners association. The Act gives apartment owners alone the right to generate income from common areas and facilities in apartment. After formation of RWA or apartment owners association, builder has to handover maintenance fund or corpus fund to apartment owners association. Please contribute your knowledge of handling corpus fund at your apartment.

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Rainwater Harvesting- An Efficient Water Solution for Apartment

Thursday, January 28th, 2010

The demand for water is increasing day-by-day and government fails to supply water and meet the increasing demand. Rainwater harvesting is not a new concept or technique, it is practiced by our ancestors for irrigation and feeding cattle or livestock. Apartments are mushrooming all over our cities with the boom in the housing sector. By designing systems carefully and investing in sustainable technologies, apartments can provide supplementary water requirement. Apartment owners association can play vital role in setting up or installing rainwater harvesting in apartment.

Rain water harvesting in apartment complexes

Role of Apartment Owners Association

Apartment owners can put pressure to builder while constructing apartment to implement rainwater harvesting either for direst use or for recharging groundwater. Apartment owners can form an association for implementing rainwater harvesting system in the apartment. The cost can be divided equally by all owners. The cost of installing a rainwater harvesting is high but when comparing the amount saved on water bill for future, this cost is cheaper or nothing. There must be a separate pipeline for rainwater and for groundwater. Nowadays each apartment will have its own apartment owners association who play vital role in managing properties and working for welfare of residents of apartment. An active apartment owners association can easily implement rainwater harvesting and your association can become role model for apartments in your neighborhood or in your city.

Rainwater Harvesting System

Rainwater harvesting system is collection of rainwater from the surface which directly receives rainfall. It can be a paved area like a terrace or courtyard of a building, or an unpaved area like a lawn or open ground. A channel or gutters are required to transfer rainwater collected from rooftops to storage tanks or recharge pit. One or more down-pipes are connected to gutters to transfer rainwater from rooftops or terrace. The size of the gutter should be according to the flow during the highest intensity rain.

When collecting rainwater it is very important to keep the water clean and safe. The first spell of rain carries a relatively larger amount of pollutants from the air and catchments surface. Without a first- flush system this will be washed off the roof and directly into your rainwater tanks causing the water to become dirty and possibly dangerous. The First- Flush Diverter is installed anywhere before the inlet of the water tank and the runoff from the first spell of rain is flushed out by using a first-flush before rainwater entering to the system or storage tank. There are several possible choices to selectively collect clean water for the storage tanks. The most common is the down-pipe flap. With this flap it is possible to direct the first flush of water flow through the down-pipe, while later rainfall is diverted into a storage tank. The filter is used to remove suspended pollutants from rainwater collected over roof. A filter unit is a chamber filled with filtering media such as fiber, coarse sand and gravel layers to remove debris and dirt from water before it enters the storage tank or recharge pit.

Working of Rainwater Harvesting

Rainwater harvesting system can be broadly classified as rooftop rainwater harvesting and artificial groundwater recharging.

Rooftop Rainwater harvesting system (Source: wikipedia)

Rooftop rainwater harvesting is quite popular since it is quite easy to collect rainwater falling on rooftops and terrace. In rooftop harvesting, the roof becomes the catchments, and the rainwater is collected from the roof of the house/building. It can either be stored in a tank or diverted to artificial recharge system. Rainwater from roof or trace is transported using PVC gutters. These gutters will be connected to filter using down-pipes. A filter unit is a chamber filled with filtering media to remove debris and dirt from water. Rainwater storage tanks collect all filtered rainwater and keep it for future use. The tank is placed on a small platform about 18 inches high and a tap is attached to it at the bottom. This makes it easy to collect water in a bucket.

Find companies to help setup Rain Water Harvesting in your Community. . CommonFloor Vendor Connect

Help desk for Rainwater Harvesting (BWSSB): 080-2334 1652, 23348848, 2334 8849 Working hours: 9 am to 6 pm

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Income Tax and Rebate for Apartment Owners Association

Thursday, November 12th, 2009

Apartment owners association plays vital role in maintenance of apartment and works for welfare of its members. Apartment owners association may or may not be registered but it is always recommended to register the association to sue or defend any legal action. Apartment owners association collects maintenance charges from its members and earns revenue from advertising, distributing brochure, pamphlets etc. The apartment owners association has obligation to pay income tax as applicable in the case of an individual. Apartment owners association is also eligible for deduction and tax rebate as in case of individual.

Association of Persons

Under Income Tax Law, apartment owners association is categorized as Association of Persons (AOP). An association of persons (AOP) under the Income Tax Act is an entity or unit of assessment. But, an AOP does not mean any and every combination of persons. It is only when, they associate themselves in an income-producing activity that they become an association of persons. An AOP implies a voluntary getting together for a common design or combined will to engage in an income producing activity.

Income Tax exempt on mutuality basis

Associations such as apartment owners’ association or any mutual association run on subscriptions obtained from members for maintenance, mutual help, and recreations, whether periodically made or received as entrance fee or as ad hoc contributions from time to time are all exempt on mutuality basis in the view that no one can make income out of himself. The principle of mutuality derives from the concept that income earned by a person from external sources is taxable. Thus income derived from oneself cannot be treated as income thus cannot be taxed.

Exemption of Income Tax

The concept of mutuality means that there is no scope for individual profits or gains. Complete tax exemption is given for funds or surplus where the concept of mutuality applies. There are incomes which does not attract tax for apartment owners association. Following are income not subject to tax.

Interest Earned from Co-operative Banks: Apartment owners association has to pay income tax on interest earned on any investment made in banks or other financial institutes except co-operative banks. Interest earned from investment made in co-operative bank qualifies for 100 per cent deduction under Sec 80P (d).

Income earned from its member’s contribution: Apartment owners association collects fee for maintenance of apartment, electricity charges, maintenance of common area, interest or fines received from defaulting members etc. The contribution or any surplus fund is carried forward to next fiscal year and no income tax is charged on such contributions.

Rentals received from members: The apartment owners association can rent out common facilities in apartment to its members for a fee. Common facilities can be community hall, open terrace and other facilities available in apartment. The rental or fee received from members is not taxable under the concept of mutuality.

Dividend from Indian Companies: Under Sec 10 (33), Dividend from Indian Companies, Income from units of Unit Trust of India and Mutual Funds, and income from Venture Capital Company/fund are exempted from income tax. Divided received from Co-operative banks are qualified for 100 per cent tax exemption under Sec 80P (d).

Exemption on donations made: Apartment owners association can enjoy 100 per cent tax deduction on donations made for medical relief set up by state government, donations made to national sports fund, prime minister’s national relief fund, for approved educational institution of national importance etc.

Tax Rebates (Sec 88 and 88B)

Certain payments which qualify for such tax rebate are:-

Subscription to the National Savings Scheme of the Government.
Contribution to a statutory or recognized provident fund, approved superannuation fund or public provident fund.
Payment in a ten year or fifteen year account under the Post Office (Cumulative Time Deposit) Scheme.
Subscription to the National Savings Certificate (VIII issue).
Subscription to equity shares or debentures or to units of any mutual fund approved by the Board.

Apartment owners association has to get PAN in the name of association. Concept of mutuality helps apartment owners association to get 100 per cent tax relief on income earned from contribution and rentals paid by its members. But apartment owners association will have to pay income tax for rent received from non-members, advertisement of hoardings, rents from mobile or cable tower etc. Interest earned from deposits or interest on investments other than co-operative bank will attract income tax. If an apartment owners association does not have taxable income after deduction available, it should be proved and association has to file income tax return. It is always recommended to audit the books of accounts and maintain books of record for smooth functioning of association’s day-to-day affairs.

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Guide to Apartment Owners Association: Formation and Functioning

Thursday, October 1st, 2009

Today apartment owners association is vital part of a community living. Apartment owners association is association where all owners of the apartment are members and association maintains facilities or amenities available in apartment. Apartment owners association works for welfare of residents in apartment, conduct events or awareness program and protects the right of apartment owners. Apartment owners association may or may not be registered but registered association can sue or defend any legal action and enjoy legal benefits.

Apartment owners association is not only have right to maintain facilities available in apartment but also legal powers to protect its members and defend legal action raised against association.

Apartment Owners Association as Arbitrator

Arbitration is a technique of resolution of disputes among members of association or residents in apartment. There may be internal matters in apartment or apartment owners association which may end in dispute or approaching court. In this case, apartment owners association can act as arbitrator between members or residents in apartment and association can help to solve disputes outside the court. Approaching court is not always recommended as it may take months or even years for resolution of dispute. Association can either hire a legal advisor or appoint an advocate for affairs of association.

Power to Recover the Maintenance Fee

Provisions are made in the by-laws of the association for collecting the maintenance charges. The builders allow the apartment owners to form their own association and fix the charges. The cost of maintaining the amenities needs to be shared by the apartment owners and residents in apartment. There exists a convenient misconception among residents that the price they pay for the apartment is all-inclusive. Maintenance is a fee charged for services and maintenance of equipment.

In most association meetings, the issue of maintenance charges is often debated in overstretched sessions. The maintenance charges are calculated either on the basis of provisions made in the bye-laws of the association or on the basis of method agreed by majority of members of apartment owners association. Acceptance of maintenance charges can at least help maintain peace and harmony. In the event of default by any member, the apartment owners association has right to charge interest and penalty from the defaulter and the power to recover this amount. The apartment owners association has right to sue defaulting members but the apartment owners association cannot cut or terminate any facility enjoyed by the owner. The apartment owners association can only initiate legal proceedings for recovery of the outstanding and can seek other relief as may be permissible under the law.

Legal action against members guilty of offense

Apartment owners association consist general body consisting of all the members of association who are owners of apartment complex. General body elects members by and from general body as Management committee. Management committee represents association before all official and non-official bodies concerning building and other member’s rights and interests. Any members in apartment owners association, who steal, forge or make any loss to association shall be liable to be punished and association has right to take legal action against the members guilty of offence.

File case against Builder

Today demand for residential property is increasing and number of builders who come up with attractive price also increasing. There are number of property buyers who often complaints that their builder has cheated by offering low quality work, not responding for property buyers query and fails to keep their promise. Apartment owners association can file case against builder for compensation of losses, lodge police case and even file criminal case against builder.

Notice to builder: It is always recommended to issue notice to builder before approaching the court or taking any legal action. Apartment owners association can issue notice to builder for delay in project, compensation of losses and in case of poor quality construction. Send the notice by registered post or Under Postal certificate. Retain the proof of sending.

Lodge Police case: If builder fails to respond the notice, apartment owners association can lodge police complaint against builder. The police authorities to begin with call upon the parties to remain physically present at the Police Station. The Police authorities invoke Section 107 (Security for keeping the peace in other cases) of the Code of Criminal Procedure, 1973. Proceedings under this section may be taken before any executive magistrate.

Consumer Case: It is observed that that the builders do not comply with their statutory obligations. In such circumstances the options available to the flat purchasers / society include filing a complaint in the Consumer Court. Apartment owners association can file single case against builder on behalf of all its members as consumers having the same problem. Write your complaint with preferably date-wise facts. Refer to the page numbers of the attached documents where ever required (like bill, agreement, service report, etc). Mention what relief you are looking for against your complaint. You can either file your case in direct or send registered post.

Criminal case: A builder can be sued for cheating, breach of contract, not responding the grievance and delivery of poor quality construction. While drafting the criminal complaint, the Society should high-light specifically the violation of the various provisions. The Society should also emphasize that violation of the provisions is criminal in nature. Attention of the criminal court should be drawn to offenses of various sections of Indian Penal Code – Sections 406, 407 read with sections 415 and 420.

Section 406 Punishment for criminal breach of trust

Section 407 Criminal breach of trust by carrier, etc

Section 415 Cheating

Section 420 Cheating and dishonestly inducing delivery of property

The complainant should also bring out irregularities committed by the builders while executing the constructions of the building. Once a complaint is lodged, the matter is kept for verification wherein the statement of the Complainant is taken. On the basis of the evidences either of the both the parties Honorable Metropolitan Magistrate’s Court office passes proper order. Builder has to prefer an appeal in the Sessions Court. In the event the accused is aggrieved by the order as passed by Sessions Court then in that circumstances either of the parties can approach High Court.

Apartment owners association can be sued by members or parties if association fails to meet its statutory obligation. A well-drafted bye-law should enable any flat owner to raise issues and mandatory require the managing (or executive) committee to address these issues in one form or the other. The common problems complained of by many flat owners pertain to the association to be unresponsive to their concerns. Some find that the association is actively working against their interests. The member of apartment owners association has right to raise the issue and demand the meeting for the same. If the association still fails to take action, then, member can, as a last resort, approach the courts for relief. If an association persistently commits default in fulfilling its statutory obligations or if there are huge disputes over the management of the association the member can consider complaining to the concerned Registrar of Societies in this behalf. The registrar has right to cancel registration of the apartment owners association which fails to meet statutory obligation and there are huge disputes over the management of the association.

References:

How to register Apartment Owners Association
Methods to Calculate Maintenance in Apartments

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Tags: apartment owner association, apartment owners association, filing a case against property builder, flat owners association, legal action against builder, Resident welfare association, RWA
Posted in Civic and Governance, Legal, Owners Association | 33 Comments »

Joint Home Insurance by Owners Association

Thursday, September 3rd, 2009

Home owners association is association formed for maintenance of apartment and welfare of residents in the apartment. Homeowners association collects maintenance charge for common area and amenities in apartment. It is also the duty of the homeowners association or apartment owners association to provide the option of home insurance to its members.

Home Owners Association Insurance vs. Individual Homeowners Insurance

Homeowners’ association insurance generally designed to cover risk or damage for common area and amenities in the apartment. In individual homeowner’s insurance, insurance mainly covers one’s residential home with all of its contents.

1. Homeowners’ association insurance policies cover:

Damage for building, amenities or common area
Structure coverage (your roof, gutters, pool, etc.)
Employee dishonesty and
Theft errors

2. An individual homeowner’s insurance policy on the other hand covers:

All structural aspects of your unit
Personal liability against injuries/accidents occurring inside the residence
Theft of personal property (jewelry, antiques, heirlooms, appliances, electronics)
Residential home with all of its contents

Why Homeowners Association Insurance?

Homeowners’ association insurance covers damage for property or building due to fire, theft or any other natural calamities. The scheme also covers risk of employee dishonesty and theft. In case, any member in management committee shows fraud, theft and cause financial liability for the association, insurance company will help association to overcome the situation under the scheme.

For individual homeowners who are member of association, the scheme help to repair or replace the damage caused to building or building structure such as roof, gutters, pool, etc. But individual homeowners also need to take individual home insurance for covering their residential home with all of its contents.

Working of Homeowners Association insurance

Homeowners association is association for maintaining neighborhood standards and keep property value as high as possible. Homeowners’ association insurance works for minimize damage for building or structure and minimize any possibility of financial loss from an event, peril or single activity. Association insurance works much like business liability insurance because the policy works to cover against overall liability of the financial operations of the association. Homeowners association insurance policies will work for as long as the association is active and pays its premiums. Because of this fact, any damage to association property is covered and the association can collect reimbursement from the unit owner or owners.

How an insurance policy works depends on the different parts of the policy. These parts sometimes include following.

Commercial general liability, which works to protect against a range of business liabilities
Property insurance, which covers damage to common areas and personal property owned by the association
Auto insurance which is needed when an association owns vehicles used for maintenance and security.
Also work to cover parkland, wooded lots, pools or recreation areas.

Features that are a part of an Homeowners Association insurance policy work together as part of a simple package or a master package policy. Master polices work to cover more areas including interior and exterior walls, installed appliances, floors, ceilings and often all improvements made since the initial construction of the building. Other coverage included in a policy can be used to protect fences, gatehouses, garages, landscape, signs or antennas.

How an HOA insurance policy works depends on the association by-laws and the policy wording. Most often a policy can cover reconstruction of buildings, wiring, plumbing and bare walls. HOA policies can also work against a unit owner in some cases. This is a possibility when an association requires a unit owner to carry home insurance for their own unit while also paying for HOA insurance as part of the association membership.

What you can do before you make the decision.

Rates charged by home insurance companies generally differ from one to another. Find different rates charged by various home insurance companies and schemes available for your association. Before you make decision consult an agent or broker.

Consult home insurance brokers: Home insurance brokers generally act as a medium between the ultimate customers and the home insurance companies. Consult a homeowner’s association insurance agent. They will be able to explain what the policies cover, advise you on what kinds of coverage and limits to get. Get detailed information on home insurance coverage.

Get homeowners insurance quotes: If you want to save money when paying for two different home insurances obtain several quotes. Just be sure to compare similar plans and pricing.

Homeowners’ association insurance policy works depends on the association by-laws and the policy wording. The prima payable in respect of every such insurance shall be common expenses. In today’s economy, you can’t put any of your financial assets at risk. Consult home insurance brokers and Get detailed information on home insurance coverage. Just be sure to compare similar plans and pricing before you get one for you.

So, is your Apartment Owners Association having a combined insurance?

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Tags: combined house insurance, home insurance by apartment owners association, home insurance by rwa, house insurance, Resident welfare association, RWA
Posted in Legal, Owners Association, Property Insurance | 6 Comments »

Archive for the ‘Owners Association’ Category

Types of Investment Options

Checklist for Handover from builder

Other documents or items to handover

Formation of Apartment owners association

Electing Managing Committee of association

Procedure for election of member of the Managing Committee

Apartment owners association

Act for Registration of Apartment Owners Association

Formation of Apartment Owners Association

Roles in association

Corpus Fund for apartment maintenance

Handover from builder

Documents required for handover from builder

Role of Apartment Owners Association

Rainwater Harvesting System

Working of Rainwater Harvesting

Association of Persons

Income Tax exempt on mutuality basis

Exemption of Income Tax

Tax Rebates (Sec 88 and 88B)

Apartment Owners Association as Arbitrator

Power to Recover the Maintenance Fee

Legal action against members guilty of offense

File case against Builder

Home Owners Association Insurance vs. Individual Homeowners Insurance

Why Homeowners Association Insurance?

What you can do before you make the decision.

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