Non-Occupancy Charges – Rates, Calculation And When is it Not Applicable
It is quite common among property owners to purchase a house and rent it out to receive additional income. However, if that particular property is located in a housing society of Maharashtra, then the owner will have to pay non-occupancy charges.
If you have a property in a Maharashtra housing society that you have rented out, here’s everything you need to know about non-occupancy charges. Read on!
What Are Non-Occupancy Charges?
When a property in Maharashtra housing society is neither occupied by the owner nor occupied by any family member, the owner has to pay non-occupancy charges. This charge is also applicable when the property owner uses the property for commercial gain, i.e., through rent. This is included in the maintenance bill.
Typically, the property owner is the one liable to pay non-occupancy charges in housing society. However, through the tenancy agreement, the tenant can be made responsible for paying non-occupancy charges.
Rate of Non-Occupancy Charges
Before the Maharashtra government’s intervention, housing societies used to levy exorbitant fees for non-occupancy charges. This caused an increase in rent, burdening the property owners, especially the NRIs. Since there were no clear guidelines for these charges, it would often cause disputes between the society and its members.
To ease off the situation, in 1997, the state government appointed a committee to look into the matter concerning non-occupancy charges. Thus, as per the committee’s decision, the non-occupancy charges for vacant flat were capped at 10% of the society’s service charge. This particular decision later reached the Bombay High Court in 2007, and was approved by the Supreme Court.
How to Calculate Non-Occupancy Charges?
To calculate the non-occupancy charges, let’s take a look at the following example:
Suppose the service charge in your society is Rs. 10,000 per month. In such a situation, you will have to pay Rs. 1,000 i.e., 10% of Rs. 10,000 as non-occupancy charges.
Also Read: Stamp Duty And Registration Charges In Mumbai (2022)
When is Non-Occupancy Charges Not Applicable
According to non-occupancy charges rules, it is not applicable during the following situations:
- If you use the flat as your own residence
- A close family member stays in your flat
- If your property is not vacant or up for rent
What is the Government’s Resolution on Non-Occupancy Charges?
The Maharashtra Cooperative Housing Societies Act, 1960 (MCS Act 1960) governs all housing societies in Maharashtra. This Act also places a regulatory framework to administer and supervise the working of housing societies. That said, any dispute between the society and its members can also be addressed through this particular Act.
Moreover, Section 79A of this Act entitles the state government to issue circulars concerning the functioning of these societies. These circulars are binding in nature. This section also empowers the government to issue non-occupancy charges circular, in case of massive charges by housing societies.
What was the Court’s Judgement on Non-Occupancy Charges?
A division bench comprising Justice JH Bhatia and BH Marlapalle upheld the 79A circular that stated that housing societies could charge non-occupancy charges at just 10% of the service fee. This circular aimed at reducing the exploitation of society members who were forced to pay substantial non-occupancy charges.
Furthermore, this non-occupancy charges circular in Maharashtra represented a uniform charge across the entire state of Maharashtra.
However, the court’s judgement came with a modification. It altered the exemption of earlier exempted members from paying non-occupancy charges. The court’s judgement stated that exemption from paying non-occupancy charges would be applicable to only the flat owner and his/her immediate family members.
Also Read: Tax On Income From House Property: Conditions For Taxability Of Income From House Property
Final Word
The non-occupancy charges are levied on vacant or rented out flats in Maharashtra housing societies. The amount cannot exceed 10% of the service charge. As an owner, you must pay these charges or your tenant is liable to pay it. Moreover, if you are purchasing a resale flat, ensure to check whether there are any arrears on this charge. Request the previous owner(s) to clear the dues before occupying the property.
FAQs
Ans: If you forget to pay the non-occupancy charges, your society will send you a reminder notice. This notice can declare you as a defaulter. Further, if you do not pay non-occupancy charges, you will not receive your No Dues Certificate.
Ans: The service charge is a component of the maintenance bill. It includes costs of sitting fees to the society members. In addition, it also includes staff allowance, common electricity charges and society outgoings. Note that property tax, water charges or repair costs are not included in the service charge.
Ans: As per a judgement by the Supreme Court, transfer charges, non-occupancy charges, common amenity fund charges and various other charges that a society levies on its members are exempt from income tax. This is because the principle of mutuality is applicable to all these charges.
Ans: Your society can charge you with a 21% interest on the outstanding maintenance amount. In addition, the society must show the maintenance charges and interest amount in separate bills. Note that this interest should be chargeable on a simple interest basis.
Ans: A tenant might be asked to pay higher maintenance charges than what property owners pay. However, housing societies can only charge a 10% higher maintenance charge from tenants upon making a special case in front of the sub-registrar.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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