NOC (Non occupancy) charges in cooperative housing societies In Maharashtra
Non occupancy charges (NOC) are levied by Housing Societies when member, who is the flat-owners do not reside in their flat. Such non-residence may be on account of the flat being vacant or rented out. If a flat owner chooses not to reside in his flat and gives the same on rent or keeps it vacant, then, the society can impose non occupancy charges (NOC) upon him. If a flat owner is himself residing in the flat, then, he is not liable to pay non-occupancy charges. In case the flat is occupied by members of his immediate family, namely, son, daughter (married or unmarried) or grandchildren, then, they will also be exempt from the payment of non-occupancy charges.
Bye Law 43 specifies the process and limit of 10% of monthly service charges. As per the bye-law number 68 of the new model bye-laws, service charges constitute salary and allowances to staff, sitting fees to committee members, common electricity and outgoings for society office.
Under a circular issued by the government of Maharashtra, under Section 79A of the Maharashtra Cooperative Societies Act, 1960, the amount of non-occupancy charges cannot exceed 10% of the service charges of the society (excluding municipal taxes).
For example, suppose the total maintenance bill of a society for a member amounts to Rs 3,000 and it includes service charges of Rs 2,000. Then, the society will levy an amount of Rs 200 as non-occupancy charges.
Government resolution on non-occupancy charges
Housing societies in Maharashtra are governed by the Maharashtra Cooperative Housing Societies Act, 1960 (MCS Act 1960). Section 79A of the MCS Act 1960, empowers the state government to issue circulars prescribing guidelines for the functioning of societies. Circulars issued under Section 79A are binding in nature. Section 79A was invoked by the government of Maharashtra, to curb the levy of exorbitant non occupancy charges by housing societies upon their members.
The circular under 79A was issued on August 13, 2001 which capped the quantum of non-occupancy charges at 10% of the standard service charges of the society. The service charges of a society include lift, common area electricity, security and maintenance charges but exclude municipal taxes. Compliance with the circular was mandatory and any violation would merit penal action, which would include removal of society office bearers.
The said 79A circular came to be challenged by Mont Blanc Cooperative Housing Society in the Bombay High Court. The society challenged the cap on non-occupancy charges as unconstitutional and violating Article 19 of the Constitution of India. It also argued that the circular was an unwarranted interference into the internal affairs of housing societies. But the state of Maharashtra argued that its circular protected minority members from oppression by the majority. The circular also protected the right to property under Article 300A of the Constitution, because a member’s flat is his personal property and the society has no right to interfere with his use or enjoyment of the same. The state further argued that levy of exorbitant non occupancy charges ran counter to the spirit of the cooperative movement and would escalate property rentals, thereby, undermining the rental housing market.
In a landmark judgment, a division bench upheld the 79A circular that capped non occupancy charges at 10% of the basic service charges of the society. It represented a bona fide exercise by the state to avoid litigation and disputes, by imposing a uniform rate for the levy of non-occupancy charges and delinking them from the rental income earned from the flat. The judgment of the High Court did come with a modification and reduced the scope of exemption for members exempt from paying non occupancy charges only to the flat-owner and members of his immediate family, namely, his son, daughter or grandchildren. Members of his extended family, if they resided in the flat, could not claim any exemption in this regard and would have to pay the non-occupancy charges as prescribed.
CA Harshad Shah, Mumbai email@example.com