REGISTRATION OF THE ‘ASSOCIATION OF ALLOTTEES’ UNDER RERA

BY Realty Plus

Arjun K Perikal, Partner & Vedashree Ravishankar, Sr Associate (Disputes & Real Estate), Shardul Amarchand Mangaldas & Co. discuss the registration of the ‘association of allottees’ under RERA

The Real Estate (Regulation and Development) Act, 2016 (“RERA”) was enacted to promote and regulate the real estate sector and also to safeguard the interests of the buyers in the real estate market. However, many important aspects under RERA remain ambiguous and one such aspect is the procedure for registration of the ‘association of allottees/owners’.

While Chapter III of RERA deals with the functions and duties of the Promoter, Chapter IV elucidates the rights and duties of the Allottees. The term ‘Allottee’ is defined under section 2(d) of RERA to include any person who acquires a plot, apartment or building (whether as freehold or leasehold) from the Promoter. The term ‘Promoter’ is extensively defined under section 2(zk) of RERA to include a builder, developer, development authorities formed by the government, co-operative housing societies, any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or a power of attorney holder of the owner of the land on which the building or apartment is constructed or plot is developed for sale. The Promoter under the provisions of RERA is obligated to enable formation of an association of owners or a society or a co-operative society under applicable laws.

What is an Association of Allottees?

Association of allottees is a group formed by the allottees or owners of the society or apartment. RERA does not define the term, ‘association of allottees’. However, the Karnataka Real Estate (Regulation and Development) Rules 2017, under section 2(b) defines the term ‘association of allottees’ as a collective of the allottees of a real estate project, by whatever name called, registered under any law for the time being in force, acting as a group to serve the cause of its members and shall include the authorised representatives of the allottees.

The Karnataka Apartment Ownership Act, 1972 also defines the ‘association of apartment owners’ to include all of the apartment owners acting as a group in accordance with the byelaws and declaration.

When can an association of allottees be formed?

Section 11(4)(e) of RERA provides that in the absence of any local laws, the association of allottees shall be formed within a period of three months of the majority of allottees having booked their plot/apartment/building.

At present, there are no specific rules/notifications issued by the Government of Karnataka with respect to formation of association of allottees. In general, there are four relevant Acts which deal with formation of association of allottees/owners in Karnataka – (i) Karnataka Apartment Ownership Act 1972 (KAOA), (ii) Karnataka Societies Registration Act 1960 (KSRA), (iii) Karnataka Cooperative Societies Act 1959, and (iv) Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972 (KOFA).

While, KAOA primarily deals with the provisions relating to registration of association of allottees, there are no prescribed timelines for formation of such association. KOFA which also deals with the provisions relating to the association of owners, bears out that a Promoter or a developer is required to form a co-operative society/association as soon as a minimum number of persons required to form a co-operative society/association have taken flats in the project. KAOA and KOFA both apply with respect to residential projects. While KAOA defines an ‘apartment’, KOFA defines ‘flat’. However, the definition of ‘flat’ in KOFA is wider to include an office unit, whereas the definition of an ‘apartment’ under KAOA relates only to a residential unit.

Procedure of formation of association of allottees/owners:

While KAOA is a local legislation governing the registrations and functions of the residential apartments’ association, KCSA deals with voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies and KSRA deals with any literary, scientific, charitable and other such organizations.

The association of allottees under KAOA is formed on registration of certain documents before the jurisdictional Sub-Registrar, including a deed of declaration, byelaws, sanctioned plan, copy of the first general body meeting minutes authorizing the managing committee of association for registration of the association and deed of flats.

Practically, in Karnataka, once the deed of declaration, deed of apartment and byelaws are registered under the provisions of KAOA, the owners association is considered as a legal entity. However, as per Sections 10 & 11 of KOFA and Section 10 & 17 of RERA, ‘association of allottees’ is required to be a co-operative society and has to be registered under the provisions of Karnataka Cooperative Societies Act, 1959 (KSCA).

The Hon’ble High Court of Karnataka in the case, Shantharam Prabhu vs. Mr. K. Dayanand Rai, has held that, ‘if association is formed under KOFA, registration of the association would be required under KSCA and/or the Companies Act, depending on whether it is a co-operative society or a company which is to be registered and in the event of a declaration, deed of apartment and byelaws being executed as per KAOA, the said documents would have to be registered before the jurisdictional Sub-Registrar and same be informed to the Registrar of the Co-operative Societies’.

When is common areas handed over to the association of allottees/owners in a residential project?

Section 11 of KOFA read with Section 17 of RERA provides that, within a period of 3 months from obtaining occupancy certificate, Developer is required to handover common areas to the association of owners along with physical possession of common areas. Further, within a period of 30 days from obtaining the completion certificate, the Developer is required to handover to the association of owners all necessary documents and plans pertaining to the development.

What are the rights of association of allottees?

Right to co-own common areas - A Promoter is required to convey undivided title in the common areas and hand over physical possession of common areas to the association of allottees as per local laws; in the absence of local laws, within three months from issue of occupancy certificate. The Promoter is further responsible for certain obligations which inter alia includes, handing over of the completion certificate and occupancy certificate to the association of allottees. In the event, development is made on a leasehold land, the Promoter is responsible to obtain and deliver the lease certificate to the association of allottees.

Wherefore, registration of the ‘association of allottees’ is mainstay for fulfilment of the objectives of RERA, as the association protects the allottees and vests in the allotees certain rights, which can be utilised against the Promoters in the event of any default and also fulfills one of the main objectives of RERA by safeguarding the interests of the home buyers.  

While a lot of clarity is required with respect to the registration of the association of the owners, as a latest development, the Under Secretary of the Legal Department, Government of Karnataka in his response to a right to information (RTI) query has clarified that the apartment owner associations have to be registered under the Karnataka Cooperative Societies Act or Companies Act, 2013 so as to enable the association to act as a corporate body which can receive the common areas as per the provisions of RERA.

The response is given by M. Mahesh Babu, the Under Secretary, Karnataka Law Department to the RTI query received from Dhananjaya of VS Cozy Apartment, J.P. Nagar.

Tags : Arjun K Perikal Mahesh Babu right to information occupancy certificate Karnataka Law Department RERA