Registration of our society under the Karnataka Apartment Ownership Act, 1972

[Santosh Biradar]

Dear Owners of the Silver County Apartment,

Now it is time to us to move for registration of our society under the Karnataka Apartment Ownership Act, 1972 to have our individual unit becomes a transferable and heritable property with separate khata and specific undivided interest in land.

Below are the some of the compared distinguish features of Karnataka Apartment Ownership Act, 1972 and Karnataka Societies Registration Act, 1960

 

1.       Karnataka Apartment Ownership Act, 1972

The Act exclusively deals with residential apartments in Karnataka. If an association is formed under the Act, then each apartment becomes a transferable and heritable property with separate khata and specific undivided interest in land. The apartment buyers need to submit their apartments to this Act by executing a deed of execution.

2.       Karnataka Societies Registration Act 1960

The societies formed under this Act are for the promotion of charity, educational, science, art, literature or for the promotion of sports. The Act does not bind anybody who is not a member.

Section 3 of the Societies Act defines the various types of societies that can be registered under the Act and none of them meet the definition of an apartment association.

The flat owners society formed under this Act can be effective for the limited purpose of managing the day to day affairs of maintenance.

3.      Legal aspects of Karnataka Apartment Ownership Act, 1972.

Apartments in Bangalore seem to be following the route to register themselves under the Karnataka Societies Registration Act, 1960. However, as has been witnessed, the Societies Registration Act is unlikely to safeguard the owners’ rights. Section 3 of the Societies Act defines the various types of societies that can be registered under the Act and none of them meet the definition of an apartment association.

Due to this, many legal tussles have been going on between builders and apartment owners in Bangalore. An apartment association can be formed under the Karnataka Apartment Owners Association (KAOA). KAOA was created with a view to make apartments heritable, transferable and mortgage able and to address issues related to management of the property.

In a Society setup, the building, common area and land is vested with the Society and the allottees of the flat are deemed as “tenants” in legal parlance. It implies that a member has all rights to occupy his or her flat, but does not own an undivided share as is commonly understood. This is because all common property is vested with the Society. Hence, if your Society is registered under the Societies Act, 1960, then you would not be able to claim a mortgaged loan against the apartment you own. The reason being that banks may not be willing to sanction a loan against a mortgaged property (the flat) which you do not wholly own.

It was under these circumstances that the Karnataka Apartment Owners’ Association came up in 1972. In India, the sale and purchase of immovable property is governed by the Transfer of Property Act of 1882, which does not cover apartments. The KAOA equates the ownership of an apartment with undivided share in land and common areas with ownership of immovable properties under the Transfer of Property Act.

4.      Annual Compliance Under Karnataka Societies Registration Act 1960 –

a)      General meeting: Every society registered under this Act shall hold every year a general meeting called the annual general meeting at which: report of the management of the society for the previous year, audited copy of the balance sheet, income and expenditure and account and the auditor’s report shall be submitted for approval.

b)      The first annual general meeting shall be held by a society within 18 months of its registration. The next annual general meeting of the society shall be held within 9 months after the expiry of the first annual general meeting.

c)      Balance sheet and annual list of governing body to be filed with Registrar: On or before the 14th day succeeding the day on which the annual general meeting of a society is held.

d)     To be filed with the Registrar names, addresses and occupations of the members of the governing body then entrusted with the management of the affairs of the society copy of the balance sheet and income and expenditure account audited by a person who under section 226 of the Companies Act, 1956 (Central Act 1 of 1956), can act as an auditor of companies.

e)      Accounts: The governing body of every society registered under this Act shall keep at the registered office of the society or at such other place in the State as the governing body thinks fit, proper books of account with respect to
(1) all sums of money received and expended by the society and the matters in respect of which the receipt and expenditure takes place;
(2) all sales and purchases of goods by the society; and
(3) the assets and liabilities of the society.

5.      Karnataka Apartment Ownership Act, 1972.

a)      No Annual Compliances mandatory under the Act. However, governing powers need to be captured under the Bye-laws of the association.

 

Thanks & Regards

S. B. Biradar

Advocate

A007