FAQs on “Flat owners do not require NOC for sale of property” .. by CA Aarchana Chirrawawala (CHS expert)

On 12th April, 2022, Shri. Jitendra Awhad, state housing minister of
Maharashtra reminded that flat owner does not require NOC (no objection
certificate) from managing committee (MC) to sell his/her property.

It raised several questions and concerns among citizens of Maharashtra who
reside in housing societies. Let’s understand the following concerns:

Q1: What is the intent of the provision?
Ans:
To eliminate illegal and inappropriate decisions taken by some MC to
refuse Membership based on creed, caste, community, food intake and many
other reasons related to the prospective buyer. This type of decision leads to
discrimination, internal disputes and disparity among society members.

Q2: If the above provision needs Circular, Notification or Gazette?
Ans:
The mentioned statement by Shri. Jitendra Awhad is a reminder of the
existing provision in MCS Act 1960 and Rules 1961 and bye-laws. Thus, no
circular, notification and/or gazette is required.

Q3: What happens to the dues from outgoing member?
Ans:
There is clear and distinct difference between property ownership rights
and membership rights of the members in MCS Act, 1960. Outgoing flat owner
does not remain the property owner once sold by him/her. The rights on
property is transferred to the buyer by the way of registration of the property.

The bye laws provide that intimation has to be sent to society, by both seller
and buyer, of intention to sell/buy.

If there are any dues, society will notify both buyer and seller and inform buyer
of his liability in case dues are not cleared prior to the transaction. Also inform
the potential buyer that the membership may not be transferred in case dues
are pending.

Sec 154B-7: Restriction on transfer of share or interest of a Member – no transfer
of share or interest of a member or the occupancy right, except the transfer of
his heir or a nominee, shall be effective unless-
(a) the dues of housing society are paid;
(b) the transferee applies and acquires Membership of the co- operative
housing society in due course of time.

Explanation- For the purpose of this section, occupancy right shall not include right of a tenant or a licensee on leave and license basis.

Read it along with Sec 22 and Rule 24- “Procedure for transfer of shares” and Rule 25 – “Nomination of persons”, of MCS Act 1960 and Rules, 1961.

In case, the outgoing member does not discharge all his liabilities to the society at the time of transfer of property, such charge or liabilities in favour of the society on the share so transferred will continue unless discharged. No transfer of shares shall be effective unless liabilities discharged otherwise as stated in Rule 24 of MCS Rules, 1961.

Thus, the flat owner is still treated as defaulter u/s 154B (1)-11 for owing dues u/s 154B(1) -12.

Sec 154B (1)-11 “Defaulter” means a Member or flat owner or occupier who fails to pay the dues of the society within three months from the date of service of bill or notice or due date of payment, whichever is later;

Sec 154B(1)-12 “Dues” means the amount payable by a Member or flat owner to the society and demanded by the society by issuing bill or notice in writing and such demand is based on the provisions of this Act, rules and bye-laws of the society ;

Thus, Sec 154B -29 Recovery of certain sums and arears due to housing societies as arrears of land revenue will be applicable to the said defaulter to recover the dues.

Q4: Doesn’t financial institutions/ banks require NOC if property purchased by the new buyer is on mortgage loan?

Ans: For the loan purpose bank seeks clarity mainly on:

a) Is the seller existing member of the society?

b) Is there any dues from the member to the society? (Mention the dues, if any, in the letter)

c) Title clearance on the property by the seller?

d) Lien on property as per society records.


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