FORMATION OF APARTMENT OWNER'S ASSOCIATION
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FORMATION OF APARTMENT OWNER’S ASSOCIATION
Though there are many apartment societies are formed under the Karnataka Societies Registration Act, 1960, it cannot be considered as a legally valid option for formation of apartment Societies as it does not support the apartment owner’s interest over the property. The very purpose of the Act is the formation of welfare and religious societies. This article is a comparative study of both the Acts and we strongly recommend our clients to form their association under KAOA, 1972 (The Apartment Ownership Act, 1972) for the following reasons:
1. KAOA, 1972(The Apartment Ownership Act, 1972) is a Special Enactment solely directed towards matters related to apartments and formation of apartment owners association. The very objective and preamble of the Act states: An act to “provide for the ownership of an individual apartment in a building and to make such apartment heritable and transferable property and for matters connected there in’’. KAOA clearly prescribes the mode and
manner in which the maintenance and management of the apartment complex has to be done.
2. KSRA Act is intended for charitable, scientific, literary and religious purposes. KSRA is enacted under item No 28 in the concurrent List in Seventh Schedule of the Constitution of India. Item No 28 is for : “Charities and charitable institutions, charitable and religious endowments and religious institutions”. KSRA is suitable for NGO’s, but not suitable for an Apartment owners association, where the property rights of the apartment unit owners has to be upheld than their religious, scientific and social welfare. Property management and governance is expressly excluded from the objective clause of the KSRA in section 3 of the Act. The whole objective of KSRA is different and not at all related to the management of an apartment complex.
3. Registration under KAOA requires consent from all the apartment owners to bring their property under the Act, whereas a society under KSRA can be formed with any 7 members. This being the case, there can be a number of societies in the same complex, which can ultimately lead to disputes with the societies (let’s say representation in a court of law or transfer of title/original documents and funds by the builder to the association). While the KAOA is an Act made with the very objective of dealing with the apartment units, the related aspects and the very requirement of taking the consent as per section 2, will safeguard the property rights of unit owners in the long run.
4. Why 90% of apartments in Karnataka have formed their associations under KSRA even though it is not legally correct? The reason behind this repeated mistake is the procedure which is not that strict and time-consuming. The KSRA only requires a minimum of 7 Members to form a society. Further, the documents to be submitted need not be strictly verified. A mistake is a mistake and does not get rectified by its observance by a larger population. Though the KAOA involves a time-consuming process an association formed under the Act is legally binding to all and is totally enforceable.
5. KAOA 1972 mentions heritable and transferable rights. Is such a transferable right is not available by virtue of sale deed executed in favor of the unit owners? Yes. You get a transferable and heritable right to the property by executing the sale deed. Since the apartment complex contains many units constructed on a composite property there are practical difficulties in the transfer of units along with an undivided share. The objective of KAOA is to reduce such complications. Transfer of Property Act 1882 is the parent Act that deals with property rights and obligations. Sale being the absolute transfer of ownership, the buyer gets the right to transfer his property. But KAOA being the special legislation for the apartment owners exclusively, further strengthens this concept of transfer of property ownership in all practical purpose by specifically mentioning it in the objective of the Act and provides options for forming a collective body for the property management.
6. There are owners taken possession of their respective units or else entered into agreements for purchase, but the sale deed is not yet registered, how can they participate in formation of association under KAOA? At present the builder being the owner can sign the documents required for registration on behalf of unsold/unregistered apartment units.
7. In 2018, the Government of Karnataka after realizing the issues created by the 1960 societies formed in apartments issued a notification stating that “no association/societies governed under the provisions of the Karnataka Apartment Ownership Act, 1972 shall be registered under the Karnataka Societies Registration Act, 1960.” In addition to that, the High Court of Karnataka has recently passed an order quashing the Certificate of Registration issued by the Society’s Registrar with an observation to form the association under the KAOA, 1972. NL: KAOA 1972 (Karnataka Apartment Ownership Act 1972) is the appropriate Act for the formation of an apartment owners association.