As per Bye law 5, the object of the Housing Society is:
ü To manage, maintain and administer the property of the Society
ü To raise funds for achieving the objects of the Society
ü To do all things, necessary or expedient for the attainment of the objects of the Society
Thus, Housing Society has to raise funds in the form of monthly maintenance charges and achive it’s objective of managing, maintaining and administering the property of the Society in the interest & benefit of the members.
Monthly Maintenance Charges (As per the Bye Laws)
a) Sinking Fund-Bye Law - 69(a) (5) & 13(c)
b) Repair Fund- 69(a) (5) & 13(c)
c) Property Tax- Bye Law (As fixed by the Local Authority, BMC) - 69(a) (1),
d) Building Insurance -Bye Law - 69(a) (11)
e) Lease Rent Bye Law - 69(a) (12)
f) N. A Tax Bye Law - 69(a) (13)
Equal Contribution (equally for each unit)
a) Water Charges -Bye Law - 69(a) (2) (On the basis of total number and size of inlets provided in each flat)
b) Electricity Charges (For all Common Area)- Bye Law - 69(a) (6 ) & 68 (12)
c) Lift Charges – AMC & Maintenance- Bye Law - 69(a) (11), irrespective of the fact whether they use the lift or not.
d) Election Fund- Bye Law - 69(a) (15)
e) Service Charges Bye Law - 69(a) (6 ) & 68
(Consist of Watchman Salary, Sweeper Salary, Repair & Maintenance, Educational Fund, Garden Expenses, all other routine administration expense etc.)
Additional Charges- per use basis to be fixed at AGM
a) Parking Charges-Bye Law - 69(a) (7 )
b) Non Occupancy Charges( at 10% of monthly maintenance charges, excluding Property Taxes)- Bye Law - 43 (2) (iii ) (c)
c) Interest on Arrears (simple interest at 21% per annum, or, at such lower rate as may be fixed by the General Body)- Bye Law – 72
d) Any other charges approved by the General Body at its Meeting. However such charges should not contradict the provisions of the Act, Rules and Bye-laws of the Society and distributed as may be decided AGM of the Society
These charges have to fixed & decided by members at Society’s AGM. Managing Committee cannot decide arbitrarily any charges at Committee meeting and only AGM is competent to authorise.
Contribution for major repairs
For major increase in charges and for collecting large sum to carry out major repairs, the Committee shall follow the procedure of inviting tenders, placing them before AGM for approval and entering into contract with the Architect (if appointed) and the Contractor only after approval by AGM. For major repairs, the Society has to first incur cost out of Sinking Fund at the recommendation of Architect and approved at AGM. Architect and Committee have to also justify for collecting major contribution and this has to be in the form of recommending note. If members desires at AGM, they can seek 2nd opinion if they are not convinced about necessity for collecting large sum from members.
Use of society funds: A housing society collects charges under various heads highlighted above. There are specific regulations for utilising society funds. The building maintenance fund, for instance, must be utilised only for repairs and maintenance of the building, and for carrying out structural additions and alterations that are essential for the safety of the building. The building maintenance fund of the cooperative housing society, when not required immediately, must be invested as laid down in Section 70. A corpus for replacement fund (called as Sinking Fund) should be created annually through a budget provision duly approved by the general body of members of the society, and should be utilised only for replacement of building in course of time.
Managing Committee shall be competent to incur expenditure on the repairs and maintenance of the Society's property once in a financial year, the onetime expenditure does not exceed:
ü Up to 25 Members Rs. 25.000/-
ü 26 to 50 Members Rs. 50,000/-
ü 51 and above Upto Rs. 1,00,000/
Is your housing society using the maintenance charge for your benefit?
How should you find out as to how the money is being used and ensure that the office bearers of the society do not indulge in corrupt practices as financial dealing is one of the most contentious issues in the functioning of housing societies? Residents pay through their nose for maintenance but don’t know how and where the money is used. For this concerned member should compare major expenses against Budget and last financial year and seek answer for major variance.
Scrutiny of accounts: More importantly, the society’s accounts are to be subjected to third-party audits, scrutiny by the Registrar of societies and should be made available to the members on demand. A society is required to appoint a third-party internal auditor and the account statements should be submitted for audit to the statutory audit by 31 May every year. Auditors can be appointed by the society at its general body meeting from the panel of certified auditors maintained by the Registrar. The auditor is required to file a report for the entire working of the society, its record keeping, compliance of the Act, rules and bye-laws, and the profitability of the society. This should be included in the annual accounts of the society and shared with members during the AGM.
Annual Budget of Housing Society
It is mandatory under Section 75 for Housing Society to present Budget at AGM and seek members; approval. In fact, AGM Notice should contain an agenda item “to place Annual Budget for the next financial Year for consideration” (Bye law 95). Budget of Cooperative housing society has to be presented by Managing Committee at AGM and AGM has to approve it. A budget is a financial plan for a year. A budget is the sum of money allocated for intended expenditures along with proposals for how to meet them. It may include a minor budget surplus in which Income exceed expenditure, or a deficit in which expenses exceed income.
How should CHS prepare the budget?
First Budget should consider expenditure taking in to account amount spent in last year and consider expected inflation in next year. Based on that Income budget has to be prepared taking in to account interest earned and where necessary, increase contribution from members in respective head.
Budget for Revenue Expenses:
• Expenses of recurring nature
• Monthly Society expenses, AMC charges, Annual expenses. List out the expenses of routine nature; consider the normal escalation in prices. Also consider the contingent expenses.
Budget for Income:
• Bank interest and income from Investments
• Contribution from members
• Other income: Mobile tower/ Hoarding Rent.
Budget should list out sources of income of the society such as Contribution from members, Interest income, other sources income etc.
Budget for Capital Expenses:
• Expenses of non-recurring nature
• Fixed assets, Major repairs etc. Highlight proposed capital expenditure with justification of its requirement. Check if this expenses to be met out of Maintenance fund or otherwise.
Usefulness of Budget: Budget is necessary to plan and monitor the income and expenses of the CHS well in advance. Budget provides a guideline to MCM for undertaking financial operations of CHS in next financial year. Budget brings financial discipline in CHS. Budget v/s Actual expenses variances facilitates control over the expenses and this should be presented to members at AGM in the Annual Report.
CHS is required to create various funds such as Repairs and Maintenance Fund, Sinking Fund, Major repairs fund, Education and Training Fund, Corpus fund, General Reserve fund & Other specific fund. The rate at which this has to be collected is indicated in Bye Law 13.
What to do if MC and AGM ignore your objection?
If Managing Committee ignores your objection at AGM without properly justifying the need to substantially increasing the contribution, the aggrieved member can approach Registrar with a complaint letter detaining out his objection and how the same was not addressed by MC at AGM and Registrar would issue notice to MC to seek their response and he may conduct inquiry.