Everything You Need To Know About Maintenance Charges

Everything You Need To Know About Maintenance Charges

Everything You Need To Know About Maintenance Charges

Mrigank Sharma, a first-time home buyer, who invested in a 3BHK flat knew was in for a rude shock when the developer asked for an extra Rs 2.5 lakhs against the original payment plan as part of maintenance charges. Little did he know that to get the complete possession of the flat he had to fufill these formalities.

Sharma’s experience only highlights the fact that property transactions can be tricky, if it is not understood properly.

The homebuyer should not only be cautious about the cost of the property, but also future expenses which the builder can levy. Maintenance charge is one such expense, which can significantly impact the property buying decision of end-users and investors alike, while buying an under-construction or a ready-to-move-in property.

The monthly outgo on maintenance charges can make a big difference to your personal finance and saving money on this can help you accumulate a significant amount in the long-term. This can be particularly useful during challenging times like now, when the world is passing through the Coronavirus pandemic.

What are maintenance charges?

The maintenance fee is an annual fee to be paid by the owners/ tenants for the maintenance, repair, operations, and upkeep of the building. It is the duty of the promoter/ developer to provide essential services like parks, gardens, lobbies, stairs, elevators, fire escapes, community centers, common parking areas, power light, etc, the things that are necessary for the existence, maintenance and safety of the society.

Meaning in context to Real estate

As per Section 11 (4)(g) of the RERA Act, 2016, it is the duty of the promoter, to pay all outgoings until he transfers the physical possession of the real estate project to the allottee or the associations of allottees, as the case may be. The outgoings include payment of local taxes, charges for water or electricity, maintenance charges, including mortgage loan and interest on mortgages or other encumbrances etc

Here is a guide for you that will help you understand every small detail about the maintenance charge and you can keep yourself prepared if you are a first-time buyer. Maintenance charge covers the infrastructure and some amenities:

  • Lifts
  • Emergency exits
  • Fire and security
  • Children’s play area
  • Car Parking facilities
  • Cleaning costs of common areas like the lobby and terrace
  • Centrally controlled facilities like water and electricity
  • Diesel generator cost
  • Landscape maintenance charge
  • Sewage treatment cost
  • Amenities like swimming pool
  • Contribution to the sinking fund
  • Non agriculture tax
  • Any other charges

The maintenance charge amount either depends on the individual flat or calculated on the basis of per square feet of the flat.  In the initial few years, this cost is collected by the builder till an association forms. The newly formed association may change the costs or introduce new rules consistently for improvement of maintenance.

Things to keep in mind before booking a property

Check before booking

The homebuyers are required to pay maintenance charges which may vary from project to project. Buyers must check maintenance charges before booking the flat. This should be calculated before you decide to pay the booking amount to the developer. You must know how much you are supposed to pay as maintenance charges when you actually start living in a project.

Calculation of charges

Usually housing societies levy the maintenance charges as per the area of the flat while others fix it on other variables when all the apartment are of the same size in that society. Also, a homebuyer should know the facilities provided under the charge. There are instances when builders charge advance maintenance cost for one or two years at the time of possession. Once you know how the maintenance charges are calculated, you have a basic idea on how much you are supposed to pay. Buyers should agree for only reasonable charges and not any arbitrary demand.

Time to pay

You will be asked to pay maintenance charges at the time of possession. The charges in all societies vary depending on the amenities and location. Some builders may ask you to pay maintenance charges for two years when you take possession but it depends on the builder and the time taken for forming the RWA. Since maintenance charges are applicable from the time a flat is occupied, its basic motive is to fund operations related to upkeep, maintenance, and upgrade of areas which are not directly under any individual’s ownership. RERA’s provisions enjoin upon the developer to see that residents don’t pay ad hoc charges.

Pay after possession is delivered

Some developers ask you to pay maintenance charges along with the electricity meter and other charges due before giving you the keys. You should not pay maintenance charges if project registry has not been made and you do not have an occupancy certificate from the builder. You should only pay the maintenance charge once possession has bee delivered to you.

Resident right and defaults

Once the RWA of your society is formed, you should take part in the process and make sure that the maintenance charges are reasonable. There should be no exception and you should not pay for housing units retained by builders as investment. You can look at the actual amount spent by the builder on maintenance, along with the break-up. It is the residents’ right to be aware of the amount spent by the builder on maintenance and ensure that he is not paying more than required. Till a society is formed, a builder pays for the maintenance and has to keep his books open for scrutiny by the residents.

Are you queries to know more? Then click here for the available legal remedy under RERA and FAQs related to maintenance charges. In the meantime, please visit our legal help desk page for further legal help.

Legal Provisions Under RERA & FAQs On Maintenance Charges: Part II

Legal Provisions Under RERA & FAQs On Maintenance Charges: Part II

The Real Estate (Regulation and Development) Act, 2016 (RERA) makes it compulsory under Section (4)(d), for the developer to be responsible for providing and maintaining the essential services, on reasonable charges, till it is taken over by the association of the allottees.On possession, the builder makes the buyer enter into a maintenance agreement clearly specifying the actual amount and the frequency. RERA has asked the builders to mandatorily specify the maintenance charges in the agreement so that it does not come as a shock to the buyers. Later, the society association can work it out and charge the buyer’s maintenance costs accordingly. After possession, the payment of maintenance charges is the buyer’s responsibility. Until a tenant has been found for the property, the owner has to pay the maintenance charges. Later, the tenant can pay the maintenance charges, given it is mentioned in the owner and tenant agreement.

Points to keep in mind: 

  1. Till the formation of RWA, the promoter is responsible to take care of the maintenance of the society and thereby collect them from the homebuyers. After that, RWA can charge such charges as per its own rules.
  2. They are generally included in the allotment letter, initially issued to the buyer after the booking amount has been paid.
  3. The RERA Act, 2016, has ensured that the residents don’t have to pay any ad-hoc charges as per the own will of the builder.
  4. It should be properly disclosed by the builder at the time of booking, non-disclosure of such charges can hurt the residents on a later stage.
  5. Many State Governments have provided clear guidelines about the maximum amount of maintenance charges that can be charged by the builder through a proper contractual arrangement.
  6. Not all the societies have the same structure of charging them it varies accordingly. Sometimes it is calculated on the basis of the area of the flat.
  7. The frequency of collection of maintenance charges depends on the builder. He may ask for 12 months, 24 months, in advance at the time of possession.
  8. As per the recent circular of the Finance Ministry, the flat owners have to pay GST @ 18% if their monthly contribution to RWA exceeds Rs. 7500.

Today the increase in the demand of the residential and commercial property has given birth to a number of builders and developers who offer or promise special features to attract prospective allottees. The same has also developed a long ending fight between the homebuyers and the builders with respect to the unfair practices used by the builders and the delay in handling over the possession the allottees in which case the ultimate sufferer is the allottee who suffers mentally as well as financially. It’s always better to have a fair idea of the maintenance charges at the time of booking an apartment as they are recurring monthly charges.

FAQs: 

  1. Are maintenance charges compulsory?

Yes. Maintenance charges are compulsory in every new apartment. It is an integral part of the contract between the builder and the buyer.  After the buyer pays the booking amount for the apartment, the builder issues an allotment letter by mentioning the maintenance charge. Though the exact amount is not revealed, the builder can help the buyer with an average estimate of the maintenance charge if asked when discussing a potential purchase. The homebuyer can insist the builder to tell average estimate of the maintenance charges if not informed by the builder.

  1. How do I calculate the maintenance charges? 

The structure of the maintenance charge differs from one society to another. The maintenance charges range anywhere between Rs.2 to Rs.25 or even higher depending on the city and locality At the time of possession, the builder may ask you to pay the maintenance charge for 12 or 24 months or till the society is handed over to the RWA. After the RWA takes charge of the society, it decides whether to collect the maintenance charge on a monthly or annual basis. Housekeeping and cleaning, maintaining common areas, usage of equipment and other charges are included in the maintenance. An additional charge for repairing services and upkeep of common facilities like lights in the lobby areas and lift maintenance are divided equally between each flat. While electricity and water charges depend on per flat consumption.

  1. Is maintenance charges same in residential and commercial projects?

No. Generally maintenance charge is higher in commercial properties than residential ones. These maintenance costs can be related to any cost of managing and maintaining the commercial property.

  1. Can developers ask for maintenance charges before handing over the property to the homebuyer?

No. The builder will be responsible for maintenance charges till he hands over the possession to the homebuyer. Once the possession is delivered, society can charge such charges as per its own rules.

  1. Is GST applicable on maintenance charges?

Yes. Flat owners also have to pay GST at 18%, if their monthly contribution to the residents’ welfare association exceeds Rs 7,500, as per the Finance Ministry’s orders.

Written by- Ankur Saha, Head- Legal, VOICE 

NCDRC asks Yash Raj Films to compensate for excluding song from movie ”Fan”

NCDRC asks Yash Raj Films to compensate for excluding song from movie ”Fan”

NCDRC asks Yash Raj Films to compensate for excluding song from movie ”Fan”

National Consumer Disputes Redressal Commission or NCDRC directed Yash Raj Films (YRF) to pay Rs 10,000 as compensation to a teacher in Maharashtra”s Aurangabad, who was disappointed by exclusion of a song from Shah Rukh Khan-starrer ‘’Fan”.

The decision of the NCDRC was made after a complaint was registered by a consumer against YRF for promoting the movie ‘Fan’ starring Shahrukh Khan with the song ‘Jabra Fan’ in its promotional campaign, which then never appeared in the actual screening of the movie. The complainant felt cheated as she and her family decided to watch the movie on the basis of the song in the promos but the song did not appear in the movie.

YRF argument that the complainant was not a consumer as defined under CPA 1986 was rejected by the NCDRC. It argued that though the money paid by the teacher was not going directly to the producer, yet the producer, exhibitor and distributor all share the final revenue from ticket sales. Therefore, the NCDRC held that the complainant was in law and infactis a consumer of YRF when the teacher purchased the ticket to watch the movie.

The NCDRC alsodelved into the interpretation of “deficiency” and “unfair trade practice” under the CPA 1986. The Commission noted that the obvious purpose behind such an unfair trade practice is to draw potential viewers to cinema halls by luring them with the song and thereby making a profit at the cost of the viewer.

The presiding member V K Jain stated that he failed to understand the logic behind including the song in the promo but excluding it while exhibiting the movie. He stressed that the intention of the producer was to deceive the viewers by making them believe that the song would form part of the movie while knowing it very well that the said song would not be a part of the movie when it is screened in the cinema halls.

The NCDRC rejected the contention of the YRF that the producer and the actor of the movie had publicly declared the song which forms part of the promo would not be a part of the movie. The commission called it insufficient since it was not necessary that a person who watched the promo would have also seen the said interview.

The NCDRC observed that “When the producer of a movie shows the promos of the said movie on TV Channels, etc. and such promos include a song, any person watching the promo would be justified in believing that the movie would contain the song shown in the said promos, unless the promo itself contains a disclaimer that the song will not be a part of the movie. If a person likes the song shown in the promo and based upon such liking decides to visit a cinema hall for watching the said movie for a consideration, he is bound to feel deceived, disappointed and dejected if the song shown in the promo is not found in the film.” On this basis the NCDRC was of the opinion that the practice of using a song on TV channels to promote a movie and then not showing the song in the actual movie constitutes an unfair trade practice.

The National Consumer Disputes Redressal Commission (NCDRC) held the exclusion of song ”Jabra Fan” as “unfair trade practice” and said the person who decides to watch the movie after seeing the song in promotion is bound to feel “deceived, disappointed and dejected”.

Written by: AnkurSaha, Head- Legal, VOICE

Beneficiary of a statutory welfare scheme entitled to remedies under Consumer Protection Act

Beneficiary of a statutory welfare scheme entitled to remedies under Consumer Protection Act

Beneficiary of a statutory welfare scheme entitled to remedies under Consumer Protection Act

In a recent judgement, the Supreme Court held that that a construction worker who is registered under the Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 1996 is a ‘consumer’ within the ambit of the Consumer Protection Act 1986. This was observed in the case of The Joint Labour Commissioner and Registering Officer and Anr v. Kesar Lal.

This is a landmark judgement of the Supreme Court as more than 2.8 crore registered construction workers will fall under the category of consumers. It means that they can now move to various consumer forums if they are denied any statutory benefits as promised under various welfare schemes especially those implemented with the funds collected as ‘cess’ from builders. The issue gains immense importance as it will determine whether a beneficiary of a statutory welfare scheme is entitled to exact accountability by invoking the remedies under the Consumer Protection Act, 1986.

Parliament enacted the Act of 1996 “to regulate the employment and conditions of service of building and other construction workers and to provide for their safety, health and welfare measures and for other matters connected therewith or with incidental thereto”.

The Union Government has framed the Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Rules, 1998 in pursuance of the rule-making powers conferred by Sections 40 and 62. The State of Rajasthan also framed the Rajasthan Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Rules in 2009.

Keeping in mind the welfare of the beneficiaries, the Welfare Board of Rajasthan formulated a scheme on 1st August 2011 for rendering financial assistance on the occasion of the marriage of a daughter of such beneficiaries, which envisages financial assistance of Rs 51,000 on the occasion of marriage.

Seeking to avail financial aid under the scheme, Kesar Lal submitted an application on 6th November 2012 in anticipation of the marriage of his daughter which was to take place on 24 November 2012. Nine months after the application was submitted, the Joint Commissioner of Labour, Jaipur issued an order of rejection covering such applications, finding technical defects as a ground for the decision. He had a valid Labour Beneficiary Identity Card where he would regularly make an annual contribution of Rs 60.

The National Consumer Disputes Redressal Commission rejected the contention that such a construction worker is not a ‘consumer’ within the meaning of the Consumer Protection Act 1986. In the appeal filed against the NCDRC, the contention raised was that the Act will not cover the services provided by the State in the discharge of its welfare which are highly subsidized or free.

The case was therefore placed before the Supreme Court against the judgement of the National Consumer Disputes Redressal Commission (NCDRC).

The question before the Supreme Court was whether a construction worker who was registered under the 1996 Act and was a beneficiary of the Scheme made under the Rules made in line with the enactment, could qualify as a ‘consumer’ within the meaning of Section 2(d) of the Consumer Protection Act 1986.

Relying on the provisions of the parent Act of 1996, the Court noted that every building worker who was registered as a beneficiary under the enactment was entitled to the benefits provided by the Board. It was also found that the welfare fund was created to meet the expenses of the Board in the discharge of its statutory functions, like towards payment of salaries, allowances and remuneration and for meeting the expenses on objects and for purposes authorised by the Act.

Hence, the Court pointed out that the Board was entrusted with specific functions which fell squarely within the definition of service within the meaning of Section 2(1)(o) of the Consumer Protection Act 1986.

Further, on a reading of various provisions, the Bench added that the services rendered by the Welfare Board to the beneficiaries are not provided free of charge so as to constitute an exclusion from the statutory definitions contained in the Consumer Protection Act 1986.

The point isn’t whether the amount which has been contributed by the beneficiary is adequate to cover the whole cost of the expenditure envisaged under the scheme. So long as the service which has been rendered isn’t rendered free of charge, any deficiency of service is aggreable for redressal constituted under the Consumer Protection Act 1986. The Act does not demand an enquiry into whether the cost of providing the service is entirely pay from the price which is paid for availing of the service. As we have seen from the definition contained in Section 2(1)(d), a ‘consumer’ includes not only a person who has hired or availed of service but even a beneficiary of a service. The registered workers are clearly beneficiaries of the service provided by the Board in a statutory capacity.

In conclusion, the Apex Court held that a construction worker registered under the Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act of 1996 who is a beneficiary of the Scheme made under the Rules framed pursuant to the enactment, is a consumer within the meaning of Section 2(d) of the Consumer Protection Act, 1986.

Written by: Ankur Saha, Head- Legal, VOICE  

FLAT OWNERS’ ASSOCIATION THAT ARE FORMED DUE TO MANDATE OF LAW CANNOT FILE A CONSUMER COMPLAINT: SUPREME COURT

FLAT OWNERS’ ASSOCIATION THAT ARE FORMED DUE TO MANDATE OF LAW CANNOT FILE A CONSUMER COMPLAINT: SUPREME COURT

Flat Owners’ Association That Are Formed Due to Mandate of Law Cannot File a Consumer Complaint: Supreme Court


The Supreme Court in its verdict held that an association which consists of members of flat owners in a building, registered compulsorily under the provisions of Karnataka Apartment Ownership Act, 1972, cannot be said to be a voluntary organisation. Therefore it cannot file a complaint under the Consumer Protection Act against any deficiency in goods or services under the welfare legislation.This order came when two judge bench was considering an appeal against the National Commission order which rejected the complaint filed by the Association on the ground that it has no locus standi to file the complaint since neither it is a ‘consumer’ nor it is a ‘recognised consumer association’ within the meaning of Section 12 of the Act.

A bench of Justices Mohan M Shantanagoudar and R Subhash Reddy passed their judgement while dismissing a civil appeal filed by Sobha Hibiscus Condominium against Managing Director of M/s Sobha Developers Ltd. They explained the term voluntary consumer association as a body formed by a group of persons coming together, of their own will and without any pressure or influence from anyone and without being mandated by any other provisions of law.

In the instant case, the complainant is a statutory body under the provisions of Karnataka Apartment Ownership Act. It consists of members, who are the owners of an apartment called “Shoba Hibiscus”. The Apex Court said that it is clear from the objects of the said Act that it was enacted with a view to provide for the ownership of an individual apartment in a building to make such apartment heritable and transferable property. Once the apartments are registered under this Act, the owners, among other rights, would also get an undivided interest in the common areas and facilities of the apartment complex.

However, the mandatory provision of the law for registration of the flat owners’ association takes away its voluntariness, precluding it to invoke the consumer law. Going through the provisions of the Consumer Protection Act, the court said the statute made it clear that any recognised consumer association could file a complaint but such a group had to be of voluntary nature, registered under the Companies Act, 1956 or any other law.

The Supreme Court said that a voluntary consumer association is a body formed by a group of persons coming together, of their own will and without any pressure or influence from anyone and without being mandated by any other provisions of law.

In the said instance therefore the association formed by the members of the “Shoba Hibiscus” cannot be recognised as a consumer association because it has come into existence pursuant to a declaration which is required to be made compulsorily under the provisions of 1972 Act. Since it is not a ‘consumer’ or a ‘recognised consumer association’ within the meaning of Section 12 of the Act, it cannot file a complaint.

Written by: Ankur Saha, Head- Legal, VOICE

Relief to Star Plus and Bharti Airtel in KBC case

Relief to Star Plus and Bharti Airtel in KBC case

Supreme Court Division Bench, set aside National Commission’s order, in Star India (P) Ltd. v. Society of Catalysts & Anr, directing Star India and Bharti Airtel to collectively pay punitive damages amounting to Rs. 1 crore to the complainant organisation for unfair trade practice in their extremely popular TV game show ‘KBC’ (Kaun banega Crorepati). The Supreme Court has termed as “bad in law” the NCDRC verdict, directing Star India (P) Ltd and Bharti Airtel Ltd to pay punitive damages of Rs 1 crore for alleged “unfair trade practice” in a contest for the “Kaun Banega Crorepati” (KBC)In the instant case, Star India (P) Ltd., used to broadcast the programme ‘Kaun Banega Crorepati’. The programme was sponsored by Bharti Airtel Limited, during the telecast of this programme, a contest called ‘Har Seat Hot Seat’ was conducted, in which the viewers of KBC were invited to participate. There was no entry fee for the HSHS contest. However, it is not disputed that participants in the HSHS contest were required to pay Rs. 2.40 per SMS message to Airtel, which was higher than the normal rate for SMS. . It was alleged that the creators of the show had deceived the viewers by creating an impression that the participation in the contest conducted at the end of each episode of KBC called “Har Seat Hot Seat” was free of cost, whereas the cost of organising the contest as well as the prize money was being reimbursed from the increased SMS rates by the sponsor company Airtel which was being shared with Star India. The complainant company grounded its allegations on a survey which it conducted and it was also published in the national daily “Hindustan Times” where consumers said that they were under the impression that participation to the contest was free of cost.

Respondent which is a consumer society, filed a complaint before the National Commission against Star India and Airtel, contending that they were committing an ‘unfair trade practice’ of the Consumer Protection Act, 1986. The consumer commission in its order observed that the defendant company refused to disclose the show revenue earned by the said contest under confidentiality of proprietary information and they had created an impression that the participation in the contest was free of cost. Star in its defence said that the findings are based on inferences and speculations, and on reliance on a newspaper report without corroboration of its contents, which was impermissible and appealed before the SC.

The bench comprising Justice Mohan M. Shantanagoudar & Justice R. Subhash Reddy found that the complainant has clearly failed to discharge the burden to prove that the prize money was paid out of SMS revenue, and its averments on this aspect appear to be based on pure conjecture and surmise. The Apex Court further said that there is no basis to conclude that the prize money for the HSHS contest was paid directly out of the SMS revenue earned by Airtel, Airtel and Star India had colluded to increase the SMS rates so as to finance the prize money and share the SMS revenue, and the finding of the commission of an “unfair trade practice” rendered by the National Commission on this basis is liable to be set aside.

The court said that the National Commission had no basis to hold Star and Bharti Airtel guilty, although they had not specifically denied that the prize money was paid out of the increased SMS charges, but they had clarified in their submissions that Airtel was merely a  sponsor/advertiser of the program. The commercial arrangement between the parties was that Airtel would pay sponsorship charges, whereas Star India would be independently liable for paying the prize money out of its pocket regardless of the revenue earned by Airtel. Further the court said that reliance on the newspaper report from Hindustan times is unwarranted. The court setting aside the commission’s order and relieving the companies of the punitive damages said “the complainant in the present case had not prayed for punitive damages in the complaint or proved that any actual loss was suffered by consumers.”

 

Written by: Ankur Saha, Head- Legal, VOICE