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Jyoti Dialani

Imagine you want to sell your apartment. At long last, you manage to zero in on a buyer who is ready to offer what you want. And then, you find that the co-operative society wants a 'fee' to allow you sell your own apartment.

Now, imagine yourself as the buyer. You just manage to cough up hard-earned money to buy that apartment and then you realise that the society wants a transfer fee. In both the instances, you are bound to be furious.

Welcome to the controversial issue of the legality of a transfer fee demanded by a co-operative housing society. This fee is an amount charged by the society to the person selling his apartment or the person buying an apartment in the society.

At the time of transfer, the transferor is requested to give a letter to the society stating that he is giving the donation as a voluntary contribution towards the common amenities fund, maintenance fund or major repairs fund, and that he has instructed his accountant to reflect the same as a voluntary contribution in his books of accounts.

So, is this fair?
If the society has adopted the Model Bye-Laws, it has to follow the provisions contained therein. Model Bye-Law No 40(d)(v) of co-operative housing societies as approved by the commissioner for co-operation under the Maharashtra Co-operative Societies Act, 1960 provides for payment of a transfer fee of just Rs 50 by the transferor-member to the society.

Also, sub-clause (vii) of the Model Bye-Law No 40(d) provides for a payment of premium at a rate to be fixed by the general body meeting not exceeding 2.5 per cent of the difference between the book value of the flat and the price realised by the transferor on a transfer of flat or Rs 25,000, whichever is less.

It also imposes restrictions on accepting an amount exceeding Rs 25,000, whether by way of donation or otherwise, unless it is paid voluntarily by the member.

However, today the transfer fees are not restricted to an amount of Rs 25,000. It fact, there are no guidelines for societies to follow. The amount is fixed by passing a resolution at a special general body meeting of the society. It is paid at a fixed rate per square foot or as a lump-sum. And, make no mistake, this amount could be huge.

Let's talk about legality
So, while it is legal to pay transfer fees, is it legal to demand huge amounts from a buyer or seller? Let's see what the law says on this issue.

In the case of The Poona Hindu Middle Class Co-operative Housing Society Ltd v/s Sudhakar Gopal Palsule before the Maharashtra State Co-operative Appellate Court, Bombay (Pune Bench), it was held that any donation demanded by the society in excess of what was permitted by the bye-laws, if such bye-laws are not amended, is illegal.

In another case of (1989) CTJ 319, Ramana Co-operative Housing Society Ltd v/s S D Chittar, Bombay, before the Maharashtra State Co- operative Appellate Court, Bombay, it was held that the society had no right to charge transfer fees in excess of the provision of Re 1 under the bye-laws and that the member had a right to demand the money back with damages in the form of interest. This is applicable in the case of a society which has not adopted the model bye-laws. Such a society can recover a maximum transfer fee of only Re 1 at the time of transfer of a flat. It should be clarified that this amount shall remain the same, regardless of the area of the flat transferred and it is not Re 1 per sq ft, but only Re 1 fixed.

It is clarified that The Maharashtra Co-operative Societies Act and Rules do not provide for any right to the society allowing it to charge transfer fees in addition to the Re 1 as prescribed by the bye-laws when the member intends to transfer his property in the society in favour of a third party.

In fact, The Bombay High Court went a step further in holding that the resolution fixing transfer fees, even if passed by the general body of the society, would have no over-riding effect and binding on the members, if it is not approved by the Registrar and, even if approved, it would be totally illegal.

What can you do?
Unfortunately, despite these rulings, today no transfer can be effected without conceding to the demand of transfer fees by various societies, which has become an accepted norm. Of course, if you want to protest, you are free to take this issue to court.

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