Monday, 13 January 2014

FLAT PURCHASE-By Way Of Share Certificate Method

Co-operative Societies Acts of many states provide for formation of Housing Co-operative housing societies.

Karnataka Co-operative Societies Act also permit the formation of Co-operative housing societies. These societies acquire the land; construct the flats, which are allotted to its members. The society alots shares to its members. Such societies need to be registered with registrar of Co-operative societies.

Members are of different category, the member, associate member, and nominal member. Individuals, Partnership firm, registered company, registered society local authority, State government, central government, public trust, any other corporate body registered under the relevant act, may become member of the co-operative housing society, subject to the rules governing the admission.A minor can also become a member of Housing Society through his guardian; Certain states have put restriction of membership of family trust, Hindu undivided family.

There are different types of Co-operative housing societies.
1. A society purchases the land or takes on lease divide into several plots and allots to its members. The members construct houses, on such allotted lands. In such cases, the land is owned by the societies and the houses on plots to members. Such societies are caller Tenant ownership type housing societies.

2. Societies acquire land by sale or on lease and construct the buildings; flats are allotted to the members. In such cases, both the land and building are owned by the societies. These are called tenant Co-Partnership Co- operative housing societies.

3. Societies are also formed by the persons who purchase the flats from the builders, under agreement as per flats ownership acts of the respective states. In this case also, both the land and building belong to the society after the execution of conveyance by the builder in favour of the society. Such societies are called flat owners Co-operative housing society.
Flat owners co-operative societies issues shares to its members by which the members gets the right to live, reside and enjoy the flat.
Flat owners Co-operative society societies are of more common.These societies are very popular in Maharastra, Gujarat, and West Bengal and not so common in Kamataka.
Flat owners Co-operative societies issues shares to its members by which the members gets to right to live, reside and enjoy the flat. It is to be remembered that the rights and interest of the member in the flat is limited only to reside and enjoy. Member can transfer only such right. He is not the absolute owner of the flat.
On sale of the flat, society transfers the shares to the names of the purchaser, on purchaser complying with the formalities. After the purchaser is admitted, the purchaser becomes a member of the society and acquires right to reside and enjoy, the flat.

4. In case of death of a member the society transfers the shares to the name of the nominee;In the absence of any nomination, the society may transfer the shares to anyone of legal heirs on consent given by other legal heirs. In case of any dispute, the legal heirs may have to obtain letter of administration from a competent court.
The flats are to be required to be occupied by the owners. In case the flats are let out, the members have to pay non- occupancy charges to the society.
In case of transfer of share to the others, the member has to give a notice to the society along with the consent of the proposed purchaser. The member may also obtain no-objective certificate from the society for transfer of share. 

5. Another interesting aspect is the charge created on individual flats/ apartments by the members. The right of the member is limited, to reside and enjoy the flat, but they do not have any ownership right. So the members can mortgage their right to reside, hence such flats cannot be alienated, since the ownership rests with the Housing Co-Operative Society. In case of sale, only the right to reside in the flat is transferred to the purchaser, he will not acquire absolute ownership. So is the case, where the flats are mortgaged to the financial institutions by members. No objection certificate from the Co- Operative society is essential to mortgage the flat.

Generally, the builders/owners sell the flats to the purchasers, but will not convey the land, in such cases the title is not perfect.In case of the transfer of flats by transfer of shares, the Co-Operative societies will not register the flats in individual names, and the entire property stands in the name of the Co-Operative societies; the property is also assessed for tax as a single entry.

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