Flat Purchase by way of Share Certificate Method

Co-operative Societies Acts of many states provide for formation of housing Cooperative 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 allots 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 fir, 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.
Here 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 called 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 person 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 are of more common. These societies are very
popular in Maharashtra, Gujarat and West Bengal and not so common in
Karnataka.
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 any one
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. The
managing committee on considering the notice of transfer will call for the
following documents:
Application of the transfer of shares along with share certificate.;
Membership application for the purpose of transfer;
Resignation letter from the original member.
Prescribed transfer fee, membership fee, price of the shares premium amount,
copy of the stamp duty paid agreement, declaration by both
transferor/transferee under urban land (ceiling and regulation) act, 1976, if
applicable; various reasons for transfer declaration to use the flat for the purpose
of which it is bought, undertaking to discharge all liabilities to the society, no
objection letter from the financing agency, if the seller has availed loan. No
objection letters from any other statutory agency, which has given land to the

society. On receipt of these requirements, the application of transfer will be

placed before managing committee. However, only general body has powers to
admit a new member.
The affairs of the Housing Society are managed by a managing committee,
elected by the member from out of the members.
Generally, the builders/owners sell the flats to the purchasers, but will not covey
the land to the societies formed by the purchasers. In such cases the title of the
purchasers is not perfect, since the land stands in the name of the builders
owners.
In such cases the owner will be entitled to further FSI if permitted.

Many states provide in their statutes that the builder/owner should take steps
for registration of the Housing Co-operative society and thereafter transfer the
land to the society within a time frame. As per the sections 10, 11 of the
Karnataka Flats ownership Act 1972 and Karnataka Flat ownership rules 1975,
Rule No. 10, 11, the promoter builder shall submit an application for registration
of the society within four months from the date of which minimum number of
persons require to form a society have taken flats - Thereafter the promoter shall
convey the land to the society within four months from the date of registration of
society.
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.
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.
Karnataka government is of the view that individual flats should be registered in
individual names by regular conveyance deed duly registered and tax
assessment should be done flat wise.
Tracing the title of the flat requires verification of the society records, its byelaws
and share certificates.

Conveyance : Essential for Co-operative Societies

The purchasers must not neglect to acquire the title of the property or flat he/she
purchases on a purchase of the flat by acquiring share certificate the purchaser
gets only the right to occupy which is not title to the property. It is observed that
the builders themselves do not acquire ownership of land from the landowners.
They enter into development agreement and GPA with the landowners to
develop and sell the flats, which is not a good practice. But some builders
acquire ownership from the land owners then start construction which is in a
way easier to convey title to the purchaser i.e., from the builders to the purchaser.

Housing societies to witness freedom

The Mumbai scenario of purchasing and acquiring the flat by share certificate is
slightly different. Nearly 60,000 flat owners are having only share certificates.
Maharashtra Govt. has made certain provisions easy for them.
By approving the self-reliant legislation by the cabinet, co-operative societies
have been made self reliant, so that there is no dual control on them. Self-reliant
legislature is on the pattern of Atma-Nirbhar legislation successfully
implemented by Madhya Pradesh. Under the new legislation the co-operative
society can opt to e administered or continue under the existing act. If they opt
the self-reliant or Atma-Nirbhar law, responsibility of the co-operative
department will be only to register such societies, while the rest of the affairs will
be managed by the society. Atma Nirbhar law provides for setting up
machinery for redressal of grievances. The societies or its members need not
approach the co-operative department.
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